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    Briefing on Climate InvestmentFunds

    BangkokApril 1, 2008

    Warren Evans

    Director, EnvironmentSustainable Development Network

    The World Bank Group

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    Outline

    Progress since Gleneagles (CEIF)

    Towards Strategic Framework on ClimateChange and Development (SFCCD)

    Proposed Climate Investment Funds (CIF)

    Scaling up Carbon Finance

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    Meeting Financing Needs

    Progress since Gleneagles

    Update on the Clean Energy

    Investment Framework (CEIF)

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    Reporting on CEIF

    Sustainable Development @ The World Bank

    Progress Report to October 2007 Annual Meetingprovided details on progress on Action Plan for:

    Energy for growth, with a particular emphasis on accessto energy in Sub-Saharan Africa;

    Transition to a low-carbon development trajectory; and

    Adaptation to the impacts of climate change.

    Report also outlined an approach to scaling up actions on climatechange and provides a review of options to further reduce thefinancial barriers to support low-carbon and adaptive growth indeveloping countries.

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    WBG Key Progress Since Gleneagles Access and Low Carbon Energy (1)

    Cumulative energy commitments of over US$11billion for FY06FY08 to date are 57% higher than the

    energy lending in FY0305. Energy financing to IDA countries also increased

    significantly, from annual average of US$0.9 billionbetween FY03 and FY05 to an annual average ofUS$1.8 billion between FY06 and FY07. But energyaccess remains a policy and financing challenge in allregions, especially in SSA.

    Share of support for low-carbon energy projects upfrom 28% in FY0305 to 40% since Gleneagles.

    GEF and Carbon Finance contributed US$546 million,or 13 percent.

    Sustainable Development @ The World Bank

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    WBG Key Progress Since Gleneagles Access and Low Carbon Energy (2)

    RE and EE for the period FY05 to H1FY09 wasUS$2.3 billion, exceeding Bonn commitment 1.5years ahead of schedule

    CEIF low-carbon work extended to other sectors,such as transport and urban sectors, showing goodpotential.

    Two new Carbon FacilitiesCPF and FCPFapproved in September 2007

    Pilot program to begin measuring GHG emissions ofthe WBG lending portfolio is underway.

    Sustainable Development @ The World Bank

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    Adaptation IDA and Climate Changeresults and related work

    CEIF argued for the need for a shift in approach to

    adaptation from a largely stand alone, project by projectapproach to one where the management of climate risk,current and future, was regarded as an essential part ofdevelopment planning.

    IDA and Climate Change report (2007) shows that thepoorest countries are most vulnerable to climate changeimpacts and that such countries need to considerimmediate interventions that will increase their resilienceto climate change.

    Sustainable Development @ The World Bank

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    Adaptation

    Sustainable Development @ The World Bank

    Drought Flood Storm Coastal 1ma

    Coastal 5ma

    Agriculture

    Malawi Bangladesh PhilippinesAll low-lying Island

    StatesAll low-lying Island

    StatesSudan

    Ethiopia China Bangladesh Vietnam Netherlands Senegal

    Zimbabwe India Madagascar Egypt Japan Zimbabwe

    India Cambodia Viet Nam Tunisia Bangladesh MaliMozambique Mozambique Moldova

    bIndonesia Philippines Zambia

    Niger Laos Mongoliab

    Mauritania Egypt Morocco

    Mauritania Pakistan Haiti China Brazil Niger

    Eritrea Sri Lanka Samoa Mexico Venezuela India

    Sudan Thailand Tonga Myanmar Senegal Malawi

    Chad Viet Nam China Bangladesh Fiji Algeria

    Kenya Benin Honduras Senegal Vietnam Ethiopia

    Iran Rwanda Fiji Libya Denmark Pakistan

    Note: Bold and grey shaded = high income countries. Light green = IBRD. Non-shaded = IDA-only and blend

    countries. The typology is based on both absolute effects (e.g., total number of people affected) and relative effects

    (e.g., number affected as a share of GDP). See Annex C for more detail on the indices used.

    a. Meters above the seal level.

    b. Winter storms.

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    Adaptation- Progress since Gleneagles New analytical tools and guidance for assessing and

    managing climate risk are necessary. Resources made available through the GEF have been

    critical in promoting assessments, capacity building andinitial project by project action, but fall a long way shortof the resources required to support comprehensiveadaptation.

    Netherlands, UK, WB partnership on a GlobalEconomics of Adaptation study to understand how toidentify and prioritize adaptation measures and toestimate the financial costs of ensuring nationaldevelopment plans are climate resilient.

    JBIC, ADB, WB partnership on Adaptation in majorCoastal Cities.

    Sustainable Development @ The World Bank

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    Key Lesson since Gleneagles-Thinking of climate change differently Beyond environmentcomplex and overaching problem Affects all aspects of societieseconomy, technology, trade, equity, ethics,

    security, relations within and among countries

    Financial aspects inceasingly important, both in regard of national budgetsand international transfers- and financing needs are enormous and notbeing met.

    Progress on implementing widespread adaptation has been hindered bythe lack of sound estimates of the scope of the task and the financialimplications.

    Requires to run on two legs: mitigationto avoid the unmanageable, adaptationto manage the unavoidable

    Sustainable Development @ The World Bank

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    Call forMDB Suppport on Climate Change

    UNFCCC recognizes the need for financial resources- in addition to thefinancial mechanism defined under article 11 of the UNFCCC,paragraph 11(5) stipulates that developed country parties may also

    provide and developing country Parties avail themselves of, financialresources related to the implementation of the Convention throughbilateral, regional and other multilateral channels.

    Bali Action Plan- launch a comprehensive process to enable the full,effective and sustained implementation of the Convention through long-term cooperative action, now, up to and beyond 2012.

    Under Paragraph 1 of Bali Action Plan, Parties decided to address waysto strengthen the catalytic role of the Convention in encouragingmultilateral bodies, the public and private sectors and civil society,building on synergies among activities and processes, as a means tosupport mitigation in a coherent and integrated manner.

    Sustainable Development @ The World Bank

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    Towards a WBG Strategic Framework onClimate Change and Development(SFCCD)

    Sustainable Development @ The World Bank

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    Towards a WBG Strategic Framework onClimate Change and Development (SFCCD)

    WBG will maintain the momentum forimplementing the CEIF action plan andexpand its strategic thinking on climatechange, in a more comprehensive, cross-

    sectoral manner and in alignment with thegrowing needs of developing countries.

    Sustainable Development @ The World Bank

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    SFCCD Milestones

    Requested by Annual Meetings 2007 as an evolutionof the Clean Energy investment Framework (CEIF)

    Concepts and Issues development, earlyconsultations through March 2008

    Full-scale Consultations April-June

    Draft Final Paper July

    Web-based consultations, select meetings perdemand August-September

    Final paper Annual Meetings in October 2008

    Sustainable Development @ The World Bank

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    SFCCD is about developmentin thecontext of climate change

    Priority of growth, povertyreduction and MDGs

    Importance of meetingenergy needs ofdeveloping countries

    Development imperativeof helping to adapt to

    climate risks Resource mobilization in

    addition to the currentODA levels

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    Relation to UNFCCC Negotiations

    Neutral to any party position

    Helping countries understand the impacts of

    alternative policies within the UNFCCC Piloting innovative instruments and

    approaches that help inform the developmentof a future regime (e.g. Carbon Finance,

    IDA15 as a platform for mainstreamingadaptation)

    Advocacy and capacity building

    Sustainable Development @ The World Bank

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    SFCCD Objective

    To integrate climate change and development

    challenges, without compromising and rather

    enhancing growth and poverty reductionefforts through:

    Country, regional, and global operationsA multi-sectoral, multi-dimensional approach

    The use of a strong and balanced resultsframework

    Working with other development partners

    Sustainable Development @ The World Bank

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    Working With Multiple Partners UN agencies, UNFCCC Secretariat, GEF

    A common UN-system approach to CC

    Building blocks: mitigation, adaptation, technology, finance

    Other MDBs Clean Energy Investment Framework

    Bi-lateral donors

    Initiatives by countries, sub-national (city) governments,

    private sector, NGOs Scaling up WBG engagement based on its specific

    comparative advantages

    Sustainable Development @ The World Bank

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    SFCCD Pillars1. Make effective climate action both adaptation and

    mitigation - part of core development efforts2. Address the resource gap through existing and

    innovative instruments for concessional finance3. Facilitate the development of innovative market

    mechanisms4. Create enabling environment for and leveraging private

    sector finance5. Accelerate the deployment of existing and development

    of new climate-friendly technologies6. Step-up policy research, knowledge management and

    capacity building

    Sustainable Development @ The World Bank

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    Dual approach to integrating climateaction into development by :

    Focusing on multiple

    benefits and businessopportunities

    Mobilizing

    concessional financeto cover additionalcost

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    WB lending: in sectors with largestpotential for adaptation and /or mitigation

    Sustainable Development @ The World Bank

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    Numerous opportunities to make a difference; similar situation in Fand MIGA: GHGEmissions and IBRD/IDA Portfolio, FY07

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    Mobilizing Finance to CoverAdditionalCosts

    Sustainable Development @ The World Bank

    Progress to date: Strong replenishment of

    IDA15

    Adaptation Fund underspecial arrangement withGEF Secretariat

    CIEF: Increased volumeand share of low carbonenergy lending, inpartnership with GEF

    IFC leveraged privatefinance by 1 to 5 Robust increase in

    Carbon Finance Forest Carbon

    Partnership Facility

    New initiatives: WBG+RDBs - Climate

    Investment Funds (CIF)

    Carbon Partnership Facility MIGA carbon credit delivery

    guarantee IFC- Structured financing

    packages blending CF withloans and guarantees

    WB Treasury - bonds atreduced rates to advance toprojects with climate benefits

    Climate Risk Insuranceproducts customized todifferent needs

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    Addressing the Resource Gap:proposedClimate Investment Funds

    Sustainable Development @ The World Bank

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    Addressing the Resource Gap:proposed Climate Investment Funds

    Sustainable Development @ The World Bank

    Scale of action- need to translate lessons from CEIF andlonger-term GEF pilot and prototype projects andcapacity building, into broader programs which will help

    transform economies so that the objective of alleviatingpoverty and fostering growth can be met through newways of approaching low-carbon growth and enhancingresilience.

    In consultation with interested parties, the WBG andRegional Development Banks (RDBs) are joining effortsto establish a portfolio of strategic CIF.

    CIF to complement, build upon and enhance theactivities of other existing instruments, like the GEF, IDA,International Bank for Reconstruction and Development(IBRD) and the IFC.

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    Climate Investment Funds: Principles Financing needs for climate change are enormous widespread recognition that all multilateral institutions mustwork with their clients to address this agenda in support ofthe Bali Action Plan.

    Climate Change is a development issue, and thereforeMDBs have an essential role to play. The central role of theGEF and UN agencies in the financial architecture toaddress climate change is fully recognized.

    The CIF aims to fill a critical gap: scaling up investmentswhile transforming development paths of the countries.This will contribute to promoting an internationalenvironment supportive of a global agreement to addressclimate change.

    Sustainable Development @ The World Bank

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    Building on New Initiatives

    UK Environmental Transformation Fund

    US Clean Technology Fund

    Japan Cool Earth 50

    Strategic Climate Fund

    Clean Technology Fund

    Sustainable Development @ The World Bank

    ADB, AfDB, EBRD, IDB and the WBG joined forces toestablish a portfolio of Climate Investment Funds

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    Where We Are

    Sustainable Development @ The World Bank

    Current status:

    Strong interest from several donors

    Support from MDBs

    Demand from countries

    Agreement with GEF and preliminary discussions with UNagencies and UNFCCC

    Ongoing Actions:

    Consultations with recipient countries

    Expand donor base Broader and deeper consultations with others (UNFCCC, GEF,

    UN partners, private sector)

    Advance design of funds and financial instruments

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    Proposed Funds

    Clean Technology Fund

    Strategic Climate Fund

    Sustainable Development @ The World Bank

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    The Gap in Mitigation Financing

    Sustainable Development @ The World Bank

    Absolute financing gap is ~ $100 billion per year

    In long-term, could be filled by combination of:

    growing market for carbon trading (could reach$100 billion after 2012), and

    policy instruments such as carbon taxes

    In the interim, concessional financing is criticalto catalyze increased flow of commercial capitalin this area

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    Proposed Clean Technology Fund

    Sustainable Development @ The World Bank

    Accelerates transformation to low carbon economies

    Finances cost-effective mitigation of greenhouse gasemissions

    Focus on investments that reduce GHGs at scale orhave demonstration impact that will lead to scale

    Speed and nimbleness essential, given urgency

    Scales-up and replicates lessons of GEF

    Focuses on engaging private sector

    Complements existing financing

    Utilizes the right blend/suite of instruments (concessionalloans, grants, guarantees)

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    Proposed Funds

    Clean Technology Fund

    Strategic Climate Fund

    Sustainable Development @ The World Bank

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    Sustainable Development @ The World Bank

    Proposed Strategic Climate Fund

    Composed of Partnerships for targeted

    initiatives Pilot Program for Climate Resilience Ecosystem Services

    Pre-commercial Technologies

    Forest Investment

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    Pilot Program for Climate Resilience

    Sustainable Development @ The World Bank

    IDA is strong platform to promote climate-resilientdevelopment. The successful IDA-15 replenishment was

    partly testament to that(+42%)

    MDBs have already begun incorporating adaptation concerns

    into their programs GEF Voluntary Funds:

    Special Climate Change Fund east Developed Countries Fund

    GEF Trust Fund Strategic Priority on Adaptation

    Adaptation Fund (GEF-administered) could reach: ~ $100-500 million through 2012, can increase to

    $2 billion per yearafter2012.

    Bilateral donors providing additional resources

    ca. $300 million

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    Financing gap: UNFCCC estimates that in 2030,$2867 billion/year required to help developingcountries adapt

    Knowledge gaps are impediments to integratingclimate risks into development

    Until large-scale funds are operational, interimfinancing is necessary to proceed with adaptationmainstreaming in development and to buildknowledge base

    Sustainable Development @ The World Bank

    Gaps in Adaptation Financing

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    Sustainable Development @ The World Bank

    Proposed Climate Resilience Pilot Program

    Pilot and demonstrate ways to mainstreamclimate risk management and climate resilienceinto core development planning and budgeting

    Pilots will be country-led and build on NationalAdaptation Programs of Action (NAPAs)

    Report lessons learned to the Board of theAdaptation Fund, and share them widely with

    IDA and similar programs in MDBs and UN Explore how to support country efforts throughinternational finance, consistent with ParisDeclaration on Aid Effectiveness

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    Sustainable Development @ The World Bank

    Proposed Climate Resilience Pilot Program

    Board of Adaptation Fund will be invited to participate indesign and governance

    Primary decision making at country level

    Oversight Committee: developing countries + allrecipient countries, donors, the developing country Co-Chair of the Adaptation Fund Board, MDBs, UNDP,UNEP, GEF, civil society

    5-10 pilot countries to receive scaled-up support

    Pilot countries will be IDA eligible or SIDS 3-5 year time frame

    Technical assistance ($1-2 million)

    Additional financial resources to fund investments (up to $100million per country)

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    Summary: Key Common Features ofClimate Investment Funds

    Support investments based on country-led strategies, and

    Be flexible and efficient to respond to country demand andprovide innovative solutions to mobilize private sector

    Maximize co-benefits, particularly in relation to povertyreduction and sustainable management of natural resourcesand ecosystem services

    Encourage fast-tracking of early action (both mitigation and

    adaptation) and market-based solutions to climate change Utilize skills and capabilities of international financial

    institutions to raise and deliver concessional climatefinancing at a significant scale

    Sustainable Development @ The World Bank

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    CIF Issues and Opportunities

    Sustainable Development @ The World Bank

    In further developing the proposal for climate investmentfunds, the MDBs are engaged in extensive consultationswith key stakeholders, particularly potential recipient

    countries and other interested parties and advance thedesign of funds and financial instruments. The final proposal will focus on:

    Supporting UNFCCC Bali Action Plan and consistency with ParisDeclaration

    Country ownership- low carbon growth strategies and NAPAs to

    support national sustainable development earning by doing- for example enhancing knowledge base for

    Adaptation Fund operations through pilots Inclusive, effective and efficient governance Optimizing impact

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    Sustainable Development @ The World Bank

    Scaling up Carbon Finance

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    Sustainable Development @ The World Bank

    Pioneering Carbon Finance

    World Banks experience

    A global pioneer and catalyst in the carbon market US$180 million Prototype Carbon Fund (PCF)initiated in 1999, before the Kyoto Protocol became

    effectiveBioCarbon Fund: U UCF ( and use, and use

    Change and Forestry) pioneer since 2004, includingfor Reducing Emissions from Deforestation andDegradation (REDD) at the project level

    Now managing 10 carbon funds, and over US$2billion

    16 countries and 66 private sector companies havemade contributions to funds

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    Sustainable Development @ The World Bank

    Scaling up Carbon Finance

    New! Carbon Partnership Facility (CPF)

    Objectives Target long-term emissions

    Scale up

    Support strategic, transformational interventions in power sectordevelopment, energy efficiency, gas flaring, transport, urbandevelopment, etc.

    Features Programs, away from individual projects

    Partnership between buyers and sellers Fostering both demand and supply in uncertain market

    Target size: 5 billion over5 years; first tranche: 350 million

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    Sustainable Development @ The World Bank

    Scaling up Carbon Finance

    New! Forest Carbon Partnership Facility (FCPF)

    Objectives Pilot system of positive incentives for post-2012 that includes

    REDD

    Remain neutral to UNFCCC negotiations Catalyze / leverage private sector investment to enable scaling

    up: $300 million will not save worlds forests

    Features Balanced governance structure (developing countries,

    industrialized countries and carbon fund participants havebalanced voting rights on Participants Committee)

    Voluntary participation

    Two mechanisms $100 million readiness fund for capacity building

    $200 million carbon fund for purchase of emission reductions

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    Sustainable Development @ The World Bank

    Forest Carbon Partnership Facility (FCPF) Argentina Bolivia Cameroon Central African Republic Colombia Costa Rica Dem. Republic of Congo Ecuador El Salvador Gabon Ghana Guatemala

    Guyana Indonesia Kenya aos iberia Madagascar

    Malaysia Mexico Nicaragua Pakistan Panama

    Papua New Guinea Paraguay Peru Philippines Republic of Congo Senegal Sierra eone Sudan Thailand Uganda Vanuatu

    34 Requests

    forParticipation/Cooperation

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    Sustainable Development @ The World Bank

    Thank You

    if you want a copy of thispresentation or the next CIF designdocument, then email me at

    [email protected]