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Climate change and ODA: Towards integration Presentation for the APPG on Debt, Aid and Trade June 17th 2009 Prof. Peter Newell School of International.

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Presentation on theme: "Climate change and ODA: Towards integration Presentation for the APPG on Debt, Aid and Trade June 17th 2009 Prof. Peter Newell School of International."— Presentation transcript:

1 Climate change and ODA: Towards integration Presentation for the APPG on Debt, Aid and Trade June 17th 2009 Prof. Peter Newell School of International Development UEA ESRC Climate Change Leadership Fellow

2 Introduction Focus on the issue of UK ODA to support clean energy development consistent with goal of tackling climate change. For public investment, the challenge is to shift more funds into less carbon-intensive, more climate-proof measures without sacrificing development priorities (UNFCCC 2008). In 2007 the UK reported £4,921 million as ODA, making the UK the third largest OECD-DAC donor.

3 Why climate aid? Important way of improving levels of access to energy for the poor and meeting UK government targets on climate change. Multiplier effects of aid: rather than what it will do in and of itself (e.g GEF Trust Fund & LDCF have demonstrated the ability to catalyse larger investments from elsewhere through co- financing) (UNFCCC 2008): levering private flows. Aid & additional finance as deal breaker in the climate negotiations- You pay we play

4 Proposals for Mitigation Aid The G77+ China proposal Developed countries provide funding of 0.5% GDP - mainly for mitigation Mexican Climate Change Fund proposal Countries obliged to contribute to the fund on the basis of emissions, population and income- mainly for mitigation. Middle income countries would contribute.

5 Profile of climate aid The UNFCCC estimated that additional investment and financial flows of US $ 200-210 billion a year will be necessary for mitigation by 2030 (UNFCCC 2007). IPCC (2007) suggests a (wide!) range of between 0.2 and 3.5% of global GDP for annual mitigation costs. Looking at costs in excess of the entire global aid budget today (Spratt 2009). Real need for public financing for innovation in mitigation technologies at R&D and demonstration stages. Currently very little public finance is available for these stages. GEF is typically aimed at the diffusion stage and the CDM is stimulating adoption of technologies. Energy Technologies Institute could play a role in enabling clean energies (projects on tidal, offshore wind etc).

6 Adaptation Range of estimates: US$4-37 billion annually (Stern review) Additional annual investment and financial flows for adaptation are estimated to be US $ 86 billion annually by 2015 according to the 2007/08 Human Development Report of the UNDP. Increase in donor aid to 1% GDP (Stern) Challenge of new, additional and predictable aid in a) context of financial crisis b) projected failure to even meet 0.7% on development assistance by 2015

7 Adaptation Funding Mechanisms Under UNFCCC: Least Developed Countries Fund Special Climate Change Fund GEF Trust Funds Strategic Priority for Adaptation All based on voluntary pledges and contributions from donors- receipt and dispersal rates low. Adaptation Fund paid for by 2% levy on CDM transactions

8 Why Integration? Real danger that action in one policy area undermines that in another: (i)climate change actions and investments miss important opportunities to tackle energy poverty and; (ii) attempts to tackle poverty are inconsistent with action to reduce GHGs, thereby further exacerbating poverty. Climate change is a massive threat to human development and in some places it is already undermining the international communitys efforts to reduce extreme poverty. (Human Development Report 2007-8)

9 Sustainable Development in a Changing Climate We are disappointed that DFID could not provide us with more evidence of progress it has made since 2002 towards fully integrating climate change into its poverty alleviation programmes, especially in Africa. Critical of emphasis on one-off projects rather than clear evidence of a mainstreamed approach. We believe that such initiatives should become the norm throughout DFID's country programmes. The Department should be able to demonstrate much more clearly that climate change is informing its policy decisions in all the countries in which it works. (IDC 2009)

10 Examples of integration failure: EIB Discrepancy between EIBs stated climate change awareness and its overall lending in the energy sector with an ongoing bias in financing fossil fuels. A Bankwatch analysis in 2007 of the EIBs investments in the energy sector from 2002 to 2006 shows that out of total EIB energy investments of 23.7 billion, 11.3 billion went for fossil fuels, while only 3.0 – 3.6 billion was for renewable energy Globally, over half of the EIBs transport investments have gone to roads and air transport

11 Integration failure: World Bank World Bank: During its 2008 fiscal year the WB and IFC increased funding for fossil fuels by 102% compared with only 11% for new renewable energy (solar, wind, biomass, geothermal, small hydro) (Bank Information Center 2009) Less than 30% of the World Banks lending to the energy sector has integrated climate considerations into project decision-making. As late as 2007, more than 50% of the World Banks energy-sector portfolio did not include climate change considerations at all (WRI 2008)

12 Extractive Industries Review Its own 2004 Extractive Industries Review called for the Bank to phase out investments in fossil fuels. "phase out investments in oil production by 2008 and devote its scarce resources to investments in renewable energy resource development, emissions- reducing projects, clean energy technology, energy efficiency and conservation, and other efforts that delink energy use from greenhouse gas emissions. During this phasing out period, WBG investments in oil should be exceptional, limited only to poor countries with few alternatives.

13 Towards a coherent aid strategy Integrating climate concerns into aid and state support related to trade and investment: Export Credit Agencies. No project has ever been denied ECGD support on environmental grounds. The combined annual emissions of hydrocarbons from 2 ECGD supported projects, the Baku-Tbilisi-Ceyhan (BTC) pipeline and the Bonny Island liquefied-natural-gas plant in Nigeria –will result in the emission of 660m tonnes of carbon dioxide, more than the entire annual output from the whole of the UK (WWF 2007). Guidelines as recommended by EAC (2008) & amendment to Climate Change Act requiring reporting of carbon emissions for large-scale projects. ECGD prefers voluntary response. Need to climate-proof infrastructural lending & mainstreaming climate change & clean development considerations into general environmental & non-environmental lending.

14 UK leverage in a global context Recipients of DFID multilateral assistance (over 40% of DfiDs total budget): The European Commissions development programme (£991m) World Bank (£493m) United Nations (£250m) (Figures for 2007/08: DFID 2008).

15 Making the most of UK influence: In Europe In Europe: The European Union as a whole provides over half (57%) of the worlds Official Development Assistance (ODA), £36 billion. The European Commission alone manages 17% of this figure directly, making it the second largest aid donor in the world (after the US). In 2008 EIB approved 60 billion in loans- over twice that of the World Bank including 9 billion in the energy sector.

16 Some positive developments 3 billion Energy Sustainability and Security of Supply Facility, authorised in June 2007 by the Governors of the Bank EU Global Energy Efficiency and Renewable Energy Fund (GEEREF) was designed in 2006 to support small and medium sized energy projects in order to support sustainable development in developing economies and economies in transition. It offers loans in order to mobilise private investments in energy technologies 5 million Climate Change Technical Assistance Facility (CCTAF) provides advance funding for activities associated with the development of project-based carbon credits under the Joint Implementation (JI) and Clean Development (CDM) mechanisms of the Kyoto Protocol on a conditional loan basis.Climate Change Technical Assistance Facility (CCTAF)

17 Making the most of UK Influence: In the world UK providing £800 million over three years for international work on climate change through the International Environmental Transformation Fund, administered by DFID/DEFRA. Most of this money is to be channeled into the WB Climate Investment Funds (£60 million of first £100 million tranche for the Clean Technology Fund) Issue of ensuring WB financing does not undermine or overshadow UN processes for mitigation funding- sensitivities of developing countries about access & control. IDC (2008) has noted UK government (DfiD) should make use of all positions available to it to in the WB to advance a reform agenda- does now have full-time executive director to WB. Rt. Hon. D. Alexander MP, has acknowledged that: … as well as providing extra resources, we should aim to exert more influence over the policy choices made by institutions.

18 Leadership starts at home Mixed messages: In 2002, EIB approved a loan of EUR 390 million to BAA for the Terminal Five development at Heathrow airport. Whats good enough for you: Kingsnorth & Malawi In Malawi the market has been coal but 80% of people are without electricity; are we going to turn around to them and say You cannot have this or By the way, we can but you cannot? (DfiD Minister 2008)

19 Future challenges Demand-driven: Working with and through NGOs to identify pro-poor interventions where aid can make a big difference in tackling poverty & climate change simultaneously. Improving donor coordination to ensure those that need aid most receive it, reduce duplication and ensure value for money. Improving policy integration within government and among international institutions to maximise impact and enhance credibility Not just about what UK can do alone, but how it can use its regional and global influence to shape aid, trade and investment flows. Support IDC (2008) call for an audit of current bilateral and multilateral funds for available for climate change work that should raise many of these issues.

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