Overview of Climate Finance mechanisms for Adaptation
1.
2. Transforming Transportation 2010
Next Steps after Copenhagen:
Opportunities and Challenges in
the Transport Sector
January 15, 2010
Overview of Climate
Finance mechanisms for
Adaptation
January 15, 2010
Washington, DC
4. Table of content
1. Investments and financial flows needed for adaptation
2. Additional investment and financial flows in 2030
in adaptation per sector
3. Sources of investment and financial flows
4. Funding for adaptation
4.1 Special Climate Change Fund
4.2 Least Developed Country Fund
4.3 Adaptation Fund
4.4 Climate Investment Funds SCF PPCR
4.5 Sustainable Energy and Climate Change Fund, SECCI
5. From Copenhagen to Mexico
6. Innovative sources of finance
7. Potential of Convention and Protocol funds
5. Adaptation measures will require additional I&F flows; several tens
of billion $ per year (estimates between 40 to 170 billion $)*
Amounts are large in absolute terms, but small relative to
global GDP and investment
Development patterns need to be changed now, because
investment decisions taken today will affect greenhouse gas
emissions of the future.
Existing climate change funds would need to be enhanced at a
greater scale
Creating climate change safe future will require:
Shifts in investment patterns,
Scaling up funding,
Optimizing the allocation of existing funds.
1. Investments and financial flows needed for adaptation
*Source: UNFCCC, Assessing the costs of adaptation to climate change;
a review of the UNFCC and other recent estimates, 2009
6. 2. Additional investment and financial flows for 2030 in
adaptation per sector (SRES A1B and B1)
Global: Overall needs identified in this study correspond to 0.2 – 0.8 % of
global investment flows or 0.06- 0.21 % of projected GDP in 2030.
Developing countries: USD 28 to 67 billion in 2030.
Amount large in absolute terms, but small relative to GDP and investment
Sector Global
(billion USD)
Share of developing
countries
Agriculture, forestry and
fisheries
14 50 %
Water supply 11 80 %
Human Health 5 100 %
Coastal zone 11 40 %
Infrastructure 8−130 25 %
Source: UNFCCC, Assessing the costs of adaptation to climate change;
a review of the UNFCC and other recent estimates, 2009
UNFCCC estimates of global investment costs for adaptation
7. • Private sources of funding can be expected to cover
a portion of the adaptation costs in several sectors. In
particular in the AFF and Infrastructure sector where
investment in privately own physical assets would be
needed.
• However, public resources are expected to play a
predominant role in all adaptation sectors.
• National measures will be needed to
encourage/support private sector adaptation and
additional sources of funding dedicated to adaptation
will be needed.
3. Sources of investment and financial flows
8. 4. Funding for adaptation
UNFCCC Funds:
GEF:
Enabling activities: adaptation in the context of national
communication
SPA (funding as part of the GEF trust fund – follow the
principle that projects shall have global benefit)
Special Funds under the Convention:
SCCF
LDCF
Adaptation Fund under the KP
Multilateral Funds: Climate Investment Funds (CIF), MDBs
(example of SECCI in IADB), etc.
Bilateral Funds
9. 4.1 Special Climate Change Fund (SCCF)
Eligibility and framework to allocate
funds
Governance
Support
services
Implementation Source and
levels of funds
All developing countries that are
Party to the Convention
SCCF priority is adaptation
planning and measures in
climate-sensitive sectors.
Co-financing required
Council
under the
GEF
GEF
secretariat /
GEF
implementing
and
executing
agencies
Through GEF
framework –
implementing
agencies
Voluntary
contributions
by donors
About $ 100
million
pledged
10. 4.2 Least Developed Country Fund (LDCF)
Eligibility and framework to allocate
funds
Governance
Support
services
Implementatio
n
Source and
levels of funds
Under LDCF, LDCs receive support
for the preparation of NAPAs as a
framework for further funding of
immediate needs
LDCs receive funding for some
portion of the urgent needs identified
in NAPAs
LDCF prioritizes “urgent and
immediate” adaptation needs
LDCF supports NAPA preparation,
and priority NAPA activity
implementation.
Council under
the GEF
GEF
secretariat
GEF
implementing
and executing
agencies
Through GEF
framework –
implementing
agencies
Voluntary
contributions
by donors
About $200
million
pledged
11. 4.3 The Adaptation Fund (AF)
Eligibility and framework to allocate
funds
Governance
Support
services
Implementation Source and
levels of funds
All developing countries that are Party to the
Kyoto Protocol
Concrete adaptation projects or programmes
Allocation of resources take into account:
• Level of vulnerability
• Level of urgency and risks arising from delay
• Ensuring access to the fund in a balanced and
equitable manner
• Lessons learned in project and programme
design and implementation to be captured
• Securing regional co-benefits to the extent
possible, where applicable
• Maximizing multi-sectoral or cross-sectoral
benefits
• Adaptive capacity to adverse effects of climate
change
Adaptation
Fund Board
GEF
secretariat
World Bank as
trustee
Through
“Accredited
executing
agencies”
“Direct access” to
National
Implementing
Entities (NIE)
2 % share of
proceeds of CDM
Voluntary
contributions by
donors
Depending on
quantity and price
of CERs (until
2012).
Assumingly
$ 80−300 million
per year
12. 4.4 Climate Investment Funds: Structure of the Funds
Clean Technology Fund (CTF)
(US 5.1 Billion)
Objective: To promote investment in clean
energies
Clean Technology Fund (CTF)
(US 5.1 Billion)
Objective: To promote investment in clean
energies
Strategic Climate Fund (SCF)
(US 1.0 Billion)
Objective: to support targeted programs
aimed at providing financing to pilot new
approaches at a specific climate change
challenge or sectoral response.
Strategic Climate Fund (SCF)
(US 1.0 Billion)
Objective: to support targeted programs
aimed at providing financing to pilot new
approaches at a specific climate change
challenge or sectoral response.
Climate Investment Funds (US$ 6.1 Billion)
Pilot Program for Climate
Resilience (PPCR)
Forest Investment Program
(FIP)
Program for scaling-up
renewable energy in low
income countries (SREP)
13. 4.4.1 Climate Investment Fund – Objectives
• Demonstrate potential for transformational change – at country / sectoral level
• Scale-up investments moving from project to programs - accelerate public and
private investments
• Seeks to maximize co-benefits of poverty reduction and sustainable
development
• Utilize and leverage skills and capabilities of Multilateral Development Banks
• Ensure public and private sector activities compliment and leverage each other
• Foster learning-by-doing and effective knowledge management to ensure
sharing of lessons at national, regional and international levels
• Support and inform UNFCCC >2012 financial architecture discussions
14. • Pilot and demonstrate approaches for integration of climate risk and
resilience into national and sector planning
• Strengthen capacities required to integrate climate resilience into
development / vulnerable sectors
• Scale-up and leverage climate resilient investment, building on other
ongoing initiatives
• Enable learning-by-doing and sharing of lessons at country, regional and
global levels
• Regional PPCR pilots to also strengthen cooperation and capacity at the
regional level – to support national and regional development planning and
processes.
4.4.2 Objectives of the Pilot Program for Climate
Resilience, PPCR
15. 4.4.3 Bolivia – Water resources pilots & PPCR
IDB Support with SECCI funds (under
preparation):
Design and implement demonstrative
adaptation measures on water sector in
the Altiplano:
• drought: water collection, small dams,
micro-irrigation, water usage efficiency,
etc.
• flooding: riverbed protection with
retaining walls, water flow deviation, etc.
• disaster risk prevention: protection of
watershed heads, recuperation of micro-
watersheds with active erosion, slope
stabilization, early warning systems, etc.
Pilot Program on Climate Resilience (PPCR)
Objectives
• Pilot and demonstrate approaches for
integration of climate risk and resilience into
national and sector planning
• Strengthen capacities required to integrate
climate resilience into development / vulnerable
sectors
• Scale-up and leverage climate resilient
investment, building on other ongoing initiatives
• Enable learning-by-doing and sharing of lessons
at country, regional and global levels
Preliminary identification
of Priority sectors:
• Water resources
• Food Security
• Health
- DRM – as cross sectoral
Lessons learned from pilots will
serve as bases for:
• Development of PPCR’s Strategic
Program for Climate Resilience
• Scale-up adaptation measures in
priority sectors
16. 4.4.4 PPCR – Caribbean Pilot
Jamaica
program
Haiti
program
Regional
program
Dominica
program
St. Lucia
program
St. Vincent &
Grenadines
program
Grenada
program
Activities will proceed along two tracks:
• Country-based investments in highly vulnerable countries:
- Haiti
- Jamaica
- 4 small island states from the Organization of Eastern Caribbean States (Dominica, St. Lucia,
St. Vincent and the Grenadines, and Grenada)
Thematic approach towards
Integrated Coastal Zone Management (ICZM)
with emphasis placed on coastal development
(includes vulnerable coastal settlements,
infrastructure and ecosystems)
• Region-wide activities: focused on:
- climate monitoring,
- institutional strengthening
- capacity building and knowledge sharing
17. 4.5 IDB-SECCI
SECCI Products 2007 - 2008
Financial Products Non-Financial Products
Technical
Cooperation
Projects
53 Conferences 12
Investment Grant
Projects*
0
Memorandums Of
Understanding
6
Policy Based Loans 1 KCPs 2
CIF Investment
Plan
1
Full Time Expert
Advise on CC
4
SECCI Products:
1. Operation Related Activities: involve the
use of financial products in the areas of
Climate Change and Sustainable Energy
such as:
- Technical Cooperation
- Investment Grants
Activities are aimed at mainstreaming CC into
the Bank’s operations by including climate
change dimensions into new or ongoing
projects
2. Institutional Strengthening Activities:
involve activities for institutional
strengthening in CC and SE Policies of
borrowing countries. Includes:
- Knowledge and Capacity Building Products
- Climate Change Dissemination Activities (i.e.
Conferences and Workshops on CC), and
Partnership Development and Trainings.
2 funds:
• SECCI-IDB
• SECCI-Multi-donor Fund
* New guidelines for the implementation of Investment
Grants were approved in early 2009
18. 4.5.1 IDB’s Strategic lines of action in Climate
Change
Mitigation
Adaptation
i. Knowledge Development
ii. Institutional Strengthening
iii. Sector Guidelines/Climate Proofing
iv. Sectoral Lending in Key Areas
v. Scaling-up Investment
19. 4.5.2 SECCI Adaptation activities by country
Source: Mainstreaming climate change adaptation into development sectors;
Review of work in progress and work plan for 2010-2012, IDB 2009
20. 4.5.3 SECCI Adaptation activities by activity-
type
Source: Mainstreaming climate change adaptation into development sectors;
Review of work in progress and work plan for 2010-2012, IDB 2009
21. Parties “took note” of the Copenhagen agreement - a pledge by
developed countries to provide 30 billion $ a year for climate change
till 2012 and 100 billion $ by 2012 and of the establishment of a “Green
Climate Fund”
Funds are to be distributed through mitigation, adaptation, technology
and REDD
Still to be decided / clarified:
Legal status of the “Copenhagen agreement” will become formally
applicable and how
Under which form / finance will the 30 $ billion be pledged for
What will be the share of finance for adaptation
What will be the governance of the new fund and how will this be
linked to existing mechanisms (such as CIF, GEF, Adaptation Fund,
etc.)
Detailed disbursement modalities
5. From Copenhagen to Mexico
22. 6. Innovative sources of finance
Proposals Estimated revenues
Extension of the 2% levy on CDM to other Market
Mechanisms
Depends on size of carbon markets – based on current size: $ 10 –
50 million a year
Auction of allowances for international aviation and
marine emissions
$ 20 – 30 bio a year for both marine and aviation, if applied globally.
Access to renewable programmes in developed
countries
5% share of renewable energy programmes in developed countries
= $ 500 million a year
Auction of Assigned Amount Units Auction of 2% of AAUs for 25-40% reduction by 2020 at USD 25
price could bring about $ 5 bio a year.
International air travel levy Levy of 5 euro on first and business class tickets – about $ 13 bio a
year.
International Maritime Emission Reduction Scheme: Fee of $ 10 per tonne of CO2 globally = $ 3bio a year
Funds to invest foreign exchange reserves Voluntary allocation of up to 5 per cent of foreign exchange
reserves to a fund – about $ 100 billion a year
“Carbon taxes” applied globally Levy of $ 2/tCO2. Applied globally could generate $ 48 billion a
year.
Debt-for-clean-energy Swap No estimation available.
Nationally Appropriate Mitigation Actions No estimation available.
Source: United Nations Framework Convention for Climate Change, UNFCCC
23. • The funds that are currently available under the Convention
and the Protocol are small compared to the magnitude of
the needs identified in this study.
• The funds that are managed by the GEF (SPA, LDCF and
SCCF) that are available for adaptation projects currently
are about USD 275 million worldwide.
• The Adaptation Fund could receive USD 80 300 million per‑
year for the period 2008–2012.
• Assuming a share of proceeds for adaptation of 2 per cent
continues to apply post 2012, the level of funding could be:
– USD 100–500 million per year for a low demand;
– USD 1–5 billion per year for a high demand.
• New sources of funding need to be identified!
7. Potential of Convention and Protocol funds
Summarizing……
Clean Technology Fund (CTF) and Strategic Climate Fund (SCF) to promote low carbon and climate resilient growth and development
Amount: US$ 6.1 billion pledged for 2009/10 UK, US, Australia, Germany, Japan, Netherlands, Norway, Switzerland, Sweden, France
More detail
Strategic Climate Fund (SCF) 7 Donor countries contributing around $1 billion:
» Australia, Germany, Japan, Netherlands, Norway, Switzerland, and the UK
Clean Technology Fund (CTF) 7 Donor countries contributing around $5 billion:
» Australia, France, Germany, Japan, Sweden, the UK, and the US
Climate Resilience:
Ecosystems perspective
Climate resilience could be understood as “the capacity of a system to tolerate climate disturbances without collapsing into a qualitatively different state”
Social-systems perspective
Climate resilience could be understood as “ the capacity to anticipate climate impacts and plan for the future
Important to highlight that: In order achieve the objectives of the ‘regional pilot’ it is crucial to maintain constant interaction and sharing of processes, activities and lessons learned among the tracks (regional and countries)