Financing for climate change –
meeting the challenge
Mirey Atallah
Cairo, November 2010
The Global Climate Change Financial Architecture
Government
Cooperation
Budgets
National
Implementin
g entities
Bilateral
Cooperatio
n
Multilatera
l
Cooperatio
n
Private Cooperation
Finance
Official
Development
Assistance
Industrialise
d countries
ODA
commitmen
t
Bilateral
Finance
Institution
s
National
Financial
Institution
s
‘New and
additional’
climate finance
Industrialised
countries
commitments
to ‘new and
additional’
finance for
climate change
Capital Markets
Multilater
al Finance
Institution
s
Innovative Climate
Finance
(sources and
governance under
negotiation
Domestic Budget
UNFCCC
Private
Sector
CSOs/NGO
s
Carbon Markets
Industrialised
countries
emission
reduction
obligations
Foreign
Direct
Investment
CDM Levy
funding the
Adaptation Fund
Total finance available for climate change mitigation and adaptation initiatives
Source: Adapted from SEI 2009
2
New Financial Investment by Region, 2002-2008,$ billions
Global Trends in Sustainable Energy Investment 2009
New investment volume adjusts for re-invested equity.
Total values include estimates for undisclosed deals
Source: New Energy Finance, UNEP SEFI
3
Mitigation and Adaptation:
Complementary Risk Management Strategies or Two Sides of the Same
Coins?
Cost of abatement
(marginal cost) rises
Benefit of abatement
(marginal benefit) falls
Optimal abatement
path necessary
Economically optimal timing
4
Estimated costs of adapting to climate change
Assessment by
Annual cost $ bn
In
86
2015
UNFCCC (2007)
28-67
2030
World Bank (2006)
9-41
2008
Oxfam (2007)
>50
2008
Stern Review (2006)
4-37
2008
UNDP (2007)
• 20-40% of ODA and concessional finance are subject to CC risks;
• Cost of addressing this risk would be $1-8billion/year
Source: World Resources Institute, 2007
5
Catalyzing Environmental Finance
Global Environment Trust Funds
• GEF Trust Fund
•Montreal Protocol Multilateral Fund
•SCCF, LDCF, Adaptation Fund
Multi/bi lateral funds
•WB: CIF, FCPF, CPF
•Japan CEP, Norway CFI, Germany ICI, Australia IFCI
$ Amounts available in developing
countries (2010-2014)
$6 - 8
billion
$15
billion
UN/UNDP E&E Trust Funds (TF)
•MDG Spanish Fund, E&E TF
$200500
million
Foundations/Private Coorperation
• UNF, Packard, Gates, Rockefeller
$4
billion
New UNFCC Related Funds
•REDD fund (s)
•Fast Start Funds (s)
•COP green climate fund (M/A , REDD, TT, CD)
•Technology mechanisms
$80
billion
Market based & Innovative
Sources of Financing
•Carbon Finance (CDM/JI, VC, sectoral credit + financing)
•Insurance + other risk financing
•Innovative mechanisms (e.g. IFIs, air levies etc…)
Institutional & Corporate Finance
• Private equity funds
•Green bonds
$75-150
billion
$400
billion
6
Potential Sources of Climate Change Financing
Public finance from climate sources
• Phase out of regressive fossil fuel subsidies
• AAU auction proceeds
• Emission Trading Schemes (ETS) auction proceeds
• Carbon taxes
• Marine and aviation/bunker fuel levies
• Offset levies
Public finance from non-climate sources
• ‘Tobin’ tax, taxing revenues from financial transactions
• Leveraging of IMF Special Drawing Rights
Carbon markets
Other international financing proposals
• Debt for clean energy swap
• International Lottery
7
GEF CLIMATE CHANGE MITIGATION
- more transformational impact, programmatic approaches and sectoral issues
GOAL:
support developing countries and economies in transition toward a lowcarbon development path
OBJECTIVES
Promote
demonstration,
deployment,
and transfer of
advanced lowcarbon
technologies
Promote market
transformation
for energy
efficiency in
industry and
buildings
Promote
investment
in renewable
energy
technologies
Promote
energy
efficient,
low-carbon
transport
and urban
systems
Enabling
Activities and
Capacity Building
Direct access
Conserve and
enhance carbon
stocks through
sustainable
management of
land use, landuse change, and
forestry
(LULUCF)
8
Under the convention
Nationally Appropriate Mitigation Action
National Adaptation Plans
Sectoral approaches:
REDD and REDD+
Energy
Transport
Insurances
9
THANK YOU
10