Presentation by Mr. Takayoshi KATO at COP22

1. Takayoshi KATO
Policy Analyst, Environment Directorate, OECD
COP22, Bab Ighli, Marrakech, Morocco
11 November 2016
Turning NDCs into investment plans:
Way forward in countries of
Eastern Europe, the Caucasus and
Central Asia

2. • The OECD has supported countries of Eastern Europe, the Caucasus
and Central Asia (EECCA) to reconcile their environment and
economic goals since 1990s.
• Rebranded this year from the EAP Task Force to the GREEN Action
Programme Task Force.
• Planned work areas for 2017-2018*
– National green economy dialogues and strategies
– Green finance and investment, and
– Integrating environmental, economic and sectoral policies for
green growth, and
– Strengthening water management
2
About GREEN Action Programme
(hosted by the OECD)
*subject to approval

3. • Objectives:
– Improve clarity on how 11
EECCA countries and their
development co-operation
partners are working together to
finance climate action in the
countries; and
– Explore how these countries
can assess readiness to access
various climate finance
sources.
3
OECD work on financing climate action in
countries of EECCA (Eastern Europe, Caucasus
and Central Asian)
NEW:
OECD(2016), Financing climate
action in Eastern Europe, the
Caucasus, and Central Asia, OECD
publishing, Paris, [LINK]

4. 4
Scope of analysis
Bilateral donors
(DAC Members)
Multilateral
Development Banks
Climate funds
(CIF, GEF etc)
Domestic budget
(Public)
Private sector
investment
EECCA
countries
Committed
in 2013-14
Co-financed with
international
public finance
INDC targets
Priority sectors
Institutional
arrangements
Country analysis
Climate policies
Analysis of finance flows

5. 5
Significant amount of (public) climate-related
development finance* committed to EECCA
(2013-2014)
EECCA
receives
USD3.3bln
/year)
Global:
USD 47.3bln/y
2013-2014
Mitigation vs Adaptation (USD bln/y)
Sources: OECD (forthcoming) Financing climate action in EECCA, based on OECD-DAC Creditor Reporting System
Note(*): The financial flows are delivered through bilateral (mainly DAC members) and
multilateral channels and calculated as a two-year average between 2013 and 2014.

6. 6
Comparison across the regions
(Finance committed vs GDP per capita)
Annualfinancecommitted(USDbln
peryear:averagein2013and2014)
Sources: OECD (forthcoming) Financing climate action in EECCA, based on OECD-DAC Creditor Reporting System
GDP per capita PPP (USD: 2014)

7. 7
Large difference in amount of finance
committed to each country
Annual climate-related development finance and GDP per capita PPP
(2-year average between 2013 and 2014)
Source:OECD(forthcoming)FinancingclimateactioninEECCA,basedonOECD-DAC
CreditorReportingSystem;WB(2016)WorldDevelopmentIndicators
0
10
20
30
40
50
60
70
0
200
400
600
800
1000
1200
Mitigation Adaptation Both Total per capita
(USD mln) (USD per capita)

8. 8
Largest amount committed to energy sector,
reflecting high infrastructure investment needs
Annual climate-related development finance by sector (2-year
average between 2013 and 2014) (USD Million, 2013-price)
Sources: OECD (forthcoming) Financing climate action in EECCA, based on OECD-DAC Creditor Reporting System
0 500 1000 1500
Energy generation and supply
Agriculture, Forestry and Fishing
Water Supply and Sanitation
Industry, Mining, Construction, Trade Policy…
Banking, financial and business services
Transport and storage
Multi sector

9. 9
Potential to mainstream climate-consideration
into development finance in some sectors
Climate-related development finance as a share of total bilateral and multilateral
development finance (2-year average between 2013 and 2014)
(%)
Sources: OECD (forthcoming) Financing climate action in EECCA, based on OECD-DAC Creditor Reporting System

10. 10
But, still large financing gap to achieve
EECCA’s climate targets

11. 11
Seizing opportunities in the evolving climate
finance landscape is a complex practice…
National
priorities
and needs
Updated info.
on sources of
support
In-country
coordination
Pipeline
development
Monitoring,
evaluation
and
learning
Clear picture of
finance flows within
the country

12. • They need to:
– Be stable and predictable
– Provide a strong price on carbon, so that low
carbon investments are competitive with carbon
intensive technologies (e.g. coal)
– Provide strong regulatory support in areas
where price signals are not efficient, such as in
energy efficiency measures
– Provide targeted support for low-carbon
technologies
12
Core climate policies are necessary for
mobilising finance…

13. Mitigation
(Un-
conditional)
Mitigation
(Condition-al)
Adaptation
Needs for
support
quantified
Armenia YES YES YES
Azerbaijan YES
Belarus YES YES
Georgia YES YES YES (Adaptation)
Kazakhstan YES YES
Kyrgyzstan YES YES YES YES
Moldova YES YES YES YES
Tajikistan YES YES YES
Turkmenistan YES YES
Ukraine YES 13
Most EECCA countries submitted INDCs
INDC elements

14. Intended
Nationally
Determined
Contributions
Nationally
Appropriate
Mitigation
Actions
Low Emission
Development
Strategy
National-level
adaptation
strategy
National-
level
climate
strategy
ARM
AZE
BLR
GEO
KGZ
KYG
MDA
TJK
TKM
UKR
UZB
14
Good deal of national-level climate policy
documents already exist/planned in EECCA
Intended
Nationally
Determined
Contributions
Nationally
Appropriate
Mitigation
Actions
Low Emission
Development
Strategy
National-level
adaptation
strategy
National-
level
climate
strategy
ARM
AZE
BLR
GEO
KGZ
KYG
MDA
TJK
TKM
UKR
UZB
Approved/submitted Being developed
Sources:OECD(forthcoming)Climate-relateddevelopmentfinancein
EECCA,basedonthecountries’INDCs

15. • “Rushed” process of developing INDCs and other
climate policies often undermined translation of targets
into implementation strategies over the years.
• Policy targets are set, but often lack secondary
legislations/ by-laws/ technical specifications.
• Limited capacity in implementation and access to
finance from domestic and international sources.
• An INDC does not necessarily line up with the
country’s infrastructure investment plans.
15
Challenges in implementation of climate
policies: cases from EECCA
e.g. Renewable energy
• Stability of government support
• Price level of feed-in-tariff and indexing to foreign exchange rates
• Transparency in power purchase agreements
• Conflict with energy-sector development that focuses more on fossil fuels

16. FUEL and ENERGY
Also, it’s NOT just climate policies that
affect climate targets…
TECHNOLOGY
COMPETITION
FISCAL
SOCIAL
TRANSPORT
INVESTMENT
CLIMATE
16

17. • Fiscal policies:
• Environmentally harmful subsidies and incentives
• Existing budgeting rules not allowing public agencies to benefit
from energy savings achieved
• Investment promotion policies:
• Difference in the ease of accessing finance between small and
medium sized entities and larger enterprises such as state-
owned entities (SOEs).
• Overly strict requirement for collaterals
• Lack of regulatory stability on financial markets
• “Shallow” financial markets
• High political risks that limit investors interests
17
Misalignments between policies exist in
EECCA (and most countries across the world)

18. • Energy sector policies:
• Competition between renewable energy and development of
offshore oil and gas fields.
• Enhancing energy access through coal fire power plants.
• Transport sector policies:
• Well connected transport network, coming with heavy reliance
on fossil fuels and internal combustion engines.
• Competition policies:
• A lack of fair and transparent competition between the state-
owned enterprises producing or using fossil fuels and
independent producers of clean energy.
18
Misalignments between policies exist in
EECCA (and most countries across the world)

19. Experiences from the EU’s Eastern Partnership countries
(i.e. ARM, AZE, BLR, GEO, MDA and UKR)
• All major subsidy types exist in the countries (direct budget
transfers, tax expenditure, transfer of risk to government and
induced transfers), but the scales vary across the countries.
• Most of the (quantified) fossil fuel subsidies in the region aim to
benefit residential consumers. Often, such subsidies are seen
as social measures.
• Under-taxing certain fuels, and reduced VAT and excise taxes (or
tax exemptions) on energy carriers: leading to substantial drain
on government budgets.
• Government support to energy efficiency measures and renewables
is still limited and largely incomparable to the subsidies
conferred to fossil fuels.
19
Energy subsidies negatively affecting both
public budget and low-carbon development
Source: OECD (forthcoming), Energy Subsidies in the Eastern Partnership countries

20. 20
Planned OECD work for enhancing climate
finance readiness of EECCA countries
OECD work on
policy assessment
Others’ work on
climate finance
readiness
Climate
policies
Non-
Climate
policies
Targets
Natl’
strategies
Policy
instruments
Energy
Transport
Water
Agriculture
Effectiveness,
coherence and
misalignments
Fiscal/Investment
Country
programming
Pipeline
development
Analytical
input to
identify
constraints
Feasibility
studies
Proposal
development

21. 21
The report accompanied by 11 country
reports

22. • Greening finance
– Reforming energy subsidies
– Facilitating access to private-sector finance for green
investments (e.g. environmental lending)
– Better financial planning in the public sector
• Greening industry
• Water resource management and green growth
• Measuring green growth
22
More work under
the GREEN Action Programme
See also our
latest Brochure
https://issuu.com/oecd.publis
hing/docs/from_eap_to_gree
n_action_programme_?e=30
55080/36192948
See website
http://www.green-economies-eap.org/

23. Thank you.
Contact: Takayoshi Kato
Takayoshi.KATO@oecd.org
http://www.oecd.org/env/outreach/eap-tf.htmhttp://www.oecd.org/environment/