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Investment Framework For Clean Energy For Development

World Bank

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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

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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.

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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.

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Emissions Paths to StabilizationSource: Stern Review on the Economics of Climate Change

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Projected Impacts of Climate ChangeSource: Stern Review on the Economics of Climate Change

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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

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Global Emissions by Sector

Source: Stern Review on the Economics of Climate Change

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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

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The Proposed Investment Framework: Three Pillars – Key Conclusions

Pillar 1: Existing financial instruments are adequate, but energy Existing financial instruments are adequate, but energy sector reform is needed to attract the required substantial sector reform is needed to attract the required substantial increase in grants and concessional funding and private increase in grants and concessional funding and private investments for access for the poor and electricity generationinvestments for access for the poor and electricity generation

Pillar 2: Existing financial instruments are not sufficient. A long-Existing financial instruments are not sufficient. A long-term global regulatory framework, with differentiated term global regulatory framework, with differentiated responsibilities is needed; new financial mechanisms are needed responsibilities is needed; new financial mechanisms are needed to buy down incremental costs and to mitigate regulatory risks to buy down incremental costs and to mitigate regulatory risks post-2012post-2012

Pillar 3: Existing financial instruments are adequate; but there is Existing financial instruments are adequate; but there is a need to increase funding levelsa need to increase funding levels

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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.

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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