Investment Framework For Clean Energy For Development World Bank

Recent Events The Stern Report Issued October 30 Focuses on the Economic Issues Builds on IEA, IPCC and World Bank Important Conclusions on Impact and Urgency International Energy Agency Issued WEO Focuses on Energy-Climate Change Nexus Agrees with Stern Report on Need and Urgency Identifies Energy Efficiency and Nuclear as Important Options

Key Messages Worst impacts of climate change can be avoided, if we take strong action now Strong and early action far outweigh the costs of not acting Climate change could have very serious impacts on growth and development Adaptation to climate change is essential.

Economic Costs from Stern Report Global temperature rises appear to be headed 1-2 degrees C higher than expected Cost of inaction would result in long-term losses of global GDP of at least 5% p.a. The cost of an aggressive greenhouse gas mitigation scenario would result in GDP growth decrease of 1% p.a.

Emissions Paths to Stabilization Source: Stern Review on the Economics of Climate Change Shows the commitment to warming from stabilizing at different levels of greenhouse gases. Red lines show ranges corresponding to two studies IPCC (2001) and Hadley (2004) which have formed the basis of the risk analysis. Grey Bars give the range of existing studies.

Projected Impacts of Climate Change Source: Stern Review on the Economics of Climate Change Relation between temperature and impacts: The risks intensify as temperature rises. A BAU scenario implies a rise of 4-5 degrees-equivalent to the change in average temperatures from the last ice age to today.

Impacts on growth and development The impacts of climate change are not uniform: low income countries will be harder hit than developed countries Low income countries generally rely more on agriculture which is susceptible to climate variation Low levels of income/wealth limit opportunities to adapt Geographic circumstances imply that impacts are likely to be greater in poorer countries

Global Emissions by Sector Global Emissions by Sector: Emissions come from every economic activity and every country. The global breakdown is presented in the slide. Action is needed across all sectors if significant reductions are to be achieved. Source: Stern Review on the Economics of Climate Change

The Proposed Investment Framework: Three Pillars Pillar 1 focuses on Energy for Development and Access for the Poor: the Role of Energy in Economic Growth and Poverty Reduction Pillar 2 focuses on the cost-effective transition to a low carbon economy Pillar 3 focuses how to enhance resiliency to climate variability and change, especially for the poor who are the most vulnerable

The Proposed Investment Framework: Three Pillars – Key Conclusions Pillar 1: Existing financial instruments are adequate, but energy sector reform is needed to attract the required substantial increase in grants and concessional funding and private investments for access for the poor and electricity generation Pillar 2: Existing financial instruments are not sufficient. A long-term global regulatory framework, with differentiated responsibilities is needed; new financial mechanisms are needed to buy down incremental costs and to mitigate regulatory risks post-2012 Pillar 3: Existing financial instruments are adequate; but there is a need to increase funding levels

Conclusions Action on climate change is required across all countries A range of options exists to cut emissions; but strong, deliberate policy action is required Climate change demands an international response, understanding of long-term goals and agreement on frameworks for action.

Next steps from the World Bank’s perspective Initiate the climate-proofing of our own portfolio of projects Develop tools to design climate-proof projects (common process and methodology) Implement adaptation-focused country case studies