Webinar Series Multilevel Governance

"Ending Poverty and Building Shared Prosperity by

Tackling Climate Change"

Yale

# 4

Yale

2 1 1 Your Webinar in 2013

Yale

International Process since Rio Convention 1992

Many approaches at various levels from grass-roots to

international climate agreements

Complex interdependencies: subsidy schemes,

political objectives, development objectives

2 1 1 Multilevel Governance and Climate Change

Your scholar today:

DR. PATRICK VERKOOIJEN

Special Representative for Climate Change Office of the Vice President, SDN The World Bank Member Advisory Board GEM Initiative, Yale University

Yale

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Bold Action on Cl imate Change D r. P a t r i c k V e r k o o i j e n

S p e c i a l R e p r e s e n t a t i v e f o r C l i m a t e C h a n g e

A p r i l 1 1 t h , 2013

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Climate change could roll back decades of development; the poorest and most vulnerable would be hardest hit.

Bold Action on Climate Change is Needed to End Poverty

To achieve our mission we must work with others to prevent a 4°C world - and prepare our clients for a 2°C world.

What will it take? A package of bold actions to help get prices right,

get finance flowing, and work where it matters most.

Based on While the World Bank Group increases its work

with the poorest to build resilience.

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Bold Action On Climate Change

Catalyze a Globally -

Networked Carbon Market

Support the Removal of

Harmful Fossil Fuel Subsidies

Create Low-Carbon, Climate Resilient

Cities

Deliver Triple Wins of Climate

Smart Agriculture

WBG CL IMATE CHANGE ACTION PLAN

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Climate Change Action Plan: Building Resilience and Promoting Inclusive Green Growth

“With every investment we make and every action we take,

We should have in mind the threat of an even warmer world

And the opportunity of inclusive green growth” President Jim Kim

A new WBG Climate Action Plan will:

Enhance Resilience of Client Countries to Climate Change

Support a Low Carbon Transition in Client Countries

Scale Up Finance Flows and Instruments to Support Client Action

Integrate Climate Considerations in our Operational Policies and Investments

Manage our Footprint

Looking through a ‘Climate Lens’, we will work by sector and region to:

Develop common approaches to greenhouse gas accounting through ex-ante estimates of net GHG emissions using approaches consistent with other MFIs

Address short-lived climate pollutants in Bank activities to maximize local benefits (e.g. health) while also addressing climate impacts.

Integrate emissions reductions and climate risk in investment decisions to manage climate impacts and risks while enhancing the ability to deliver development benefits.

Continue to develop the methodologies, tracking and tools to ensure we know the impact of what we do.

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A robust carbon price at a global level is part of the answer to avoiding a 4°C world.

It will encourage low carbon investment and deliver emissions reductions at scale.

THE CHALLENGE

THE IDEA

Catalyze a Globally-Networked Carbon Market: Getting Prices Right and Finance Flowing

Catalyze the development of a globally-networked carbon market with size and price signal to direct investment to low carbon paths.

Catalyze increased support to countries developing carbon pricing mechanisms – encourage consistent approach on fundamentals (e.g. Measurement, Reporting, and Verification (MRV)) to facilitate trading.

Pricing and exchange rates across various carbon asset classes

Services and institutions to support a market of this scale and a strong pricing signal.

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Domestic cap-and-trade schemes gaining ground

From 2013 onward, 36 countries and 11 sub-national jurisdictions in the US and Canada, 7 cities and provinces in China, are participating or preparing to participate in Emissions Trading Schemes

China has put forward a comprehensive roadmap on design of a national Emissions Trading Scheme to be launched in 2015 or 2016

Many others considering: Brazil, Chile, Mexico, Turkey and Ukraine

BUT Markets are heterogeneous and fragmented

Many asset classes being created Forest carbon, Black carbon, Energy Efficiency, etc.

BUT not currently exchangeable

Scale and efficiency require trading across markets.

Catalyze a Globally -Networked Carbon Market: The Challenge

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Offsets worth ca. $30 billion through 2012 have supported additional investments of > $130 billion.

Multi-trillion $ market is possible by 2025 if we have a price that supports ambitious emission reduction targets commensurate with avoiding 4°C world

Building on a decade of WBG experience in carbon markets and Leveraging Partnership for Market Readiness (with 28 major economies and market players are already participating in the Partnership for Market Readiness)

Next Steps:

Consult, discuss and develop the concept of a globally-networked carbon market. Possible components include:

Carbon asset rating system(s)

International Carbon Reserve System

Cross-border settlement platform

Catalyze a coalition of government, private sector and other stakeholders to develop the approach and begin piloting.

Catalyze the development of a carbon market with size and price signal to direct investment to low carbon paths

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Fossil fuel subsidy reform is complex and politically challenging; requires managing potential losers and protecting the poor. Fossil Fuel subsidies are inefficient and highly inequitable; estimated at $1.9 trillion p.a.

Removing harmful subsidies has the potential to free fiscal resources for essential socio-economic priorities.

A number of emerging economies have attempted reform but implementation is complex, takes time and has high risk of being reversed.

Progress on fossil fuel subsidies is critical to “getting the prices right”, leveling playing field for scaling up clean energy and resource/energy efficiency investments.

WBG can play key role in facilitating, catalyzing and accelerating action on this issue

THE CHALLENGE

THE IDEA

Support the Removal of Harmful Fossil Fuel Subsidies: Efforts to Address Climate Change in a Transformational Way Will be Challenged Without also Addressing Fossil Fuel Subsidies

*Figures from IMF report, “Energy Subsidy Reform: Lessons and Implications”, January 2013

Two main activities of the Task Force: Client Country Alignment & Support: Ensuring well coordinated action to accelerate fossil

subsidy reform efforts of willing client countries. Bridge PREM, HD, SDN, IMF at country level, understand gaps, ensure resources available (particularly on political economy and communications). Doing what would otherwise take 2-3+ years in 18 months.

TA/Global Fossil Fuel Subsidies Facility (ESMAP): provide funds to clients to address political economy, distributional impact, communication needs for reform programs.

Advocating for Removal of Fossil Subsidies: Engagement, collaboration and partnership with key external bodies (eg: G20/G8, others) to advocate removal of harmful fossil fuel subsidies as part of WBG vision for bold action on Climate Change. 2013-2015 key period, renewed leadership and willingness to address climate issues evident among key stakeholders.

Fiscal costs of fossil subsidies significant • Reduced Growth • Strain on Balance of Payments • Significant Environmental Impact • Disproportionately benefits mid/upper income

Reforms challenging, implementation complex, due to: • Low public trust • Weak institutions, weak coalitions • Entrenched interests • High risk of reversal; extreme political sensitivity • Requires significant time, needs to ensure safety net and other benefits not impacted

Important for “Getting Prices Right” • Significant barrier for wide-scale clean energy/energy efficiency investment • Incentives for clean energy investments compete with subsidies for fossils = not level playing field

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Support the Removal of Harmful Fossil Fuel Subsidies: Fossil Fuel Subsidies Costly, Impede Scales-Up Clean Energy Investment

Global Pre- and Post-Tax Subsidies, 2011, Source: IMF 2013

Advanced

CEE-CIS

E.D. Asia

LAC

MENA

S.S. Africa

Advanced

CEE-CIS

E.D. Asia

LAC

MENA

S.S. Africa

Pre-tax subsidies $480 billion

(0.7% GDP, 2.1% revenues)

Post-tax subsidies $1.90 trillion

(2.7% GDP, 8.1% revenues)

WBG is uniquely positioned to accelerate efforts that address this barrier to transformational change.

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Support the Removal of Harmful Fossil Fuel Subsidies: The Idea

Better Aligned Client Country Support

WBG Leadership: Advocating For Removal of FF Subsidies

• Lots of work already happening across WBG and IMF; unclear how well coordinated it is • PREM, HD, Treasury, ESMAP, SDN all have levels of engagement, things to offer

• Work with preliminary set of countries to “kick start” /dramatically accelerate FFS reform efforts • Initial countries based on (i) willingness, (ii) potential impacts, (iii) potential for successful implementation • Ensure cross-bank Teams well coordinated at country level – PREM, HD, SDN, IMF and others • Accelerate work otherwise done in 3+ years in much shorter timeframe (18 mo)

• Climate change an urgent global issue, not just development issue; • WBG ability to address poverty & prosperity at risk if climate change not addressed; precipitous reversal in development gains possible • Current constellation of leadership on climate change best in many years • Opportunity to advocate for action with many different stakeholders

• As part of WBG vision for bold action on Climate Change, increased engagement with key stakeholders, including the G20/G8, OECD, EU, UN GA/UNFCC, and key shareholders willing to engage on this topic, such as US, UK, Australia, China to reinforce need to address fossil subsidies • Build Coalitions and work closely with G20 ESWG on fossil subsidies, strengthen part-nerships to build on complementary work (eg: IMF, OECD, IEA) to promote FF subsidy removal

•TA/Global Fossil Fuel Subsidies Facility (ESMAP): provide funds to clients to finance gaps in analysis (eg: safety net, distributional impact, transition program strategies) , and political economy and communication needs for reform programs

Context Context

Idea

Additional Support

Idea

Scale up technical assistance and finance uniting currently dispersed efforts to curb city-based carbon emissions and increase resilience at a transformational scale.

Address design, planning and financing barriers through :

An innovative approach to deliver and finance city infrastructure such as green buildings, cleaner energy sources etc.

Coordination and deployment of design and planning tools

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As climate change and rapid urbanization coincide, the challenge is to help design and finance cities that deliver emissions reductions while addressing increasing service needs of their residents.

THE CHALLENGE

THE IDEA

Create Low-Carbon, Climate Resilient Cities: Financing Livable Cities

Energy Consumption

CO2 Emissions

Cities’ share of global:

Population in 2050

$ 1 Trillion/Year

Infrastructure Financing Gap in Low- & Middle

Income Countries

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Create Low-Carbon, Climate Resilient Cities: The Challenge

The global population is urbanizing at an unprecedented rate, contributing the majority of global GHG emissions, and will be seriously impacted by climate change. → Infrastructure built now will lock-in a city’s emissions- and

resiliency-profile for decades to come.

Concerted action across large and fast-growing cities is required to cut emission levels without adversely affecting their competitiveness. → To do this, cities need technical assistance and direct

access to finance at scale.

Responding to climate change in cities must emphasize growth and job creation, improved access to and quality of services, resilience, and livability and therefore ultimately urban poverty reduction.

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Create Low-Carbon, Climate Resilient Cities: The Idea

1. Explore Innovative Approaches to Delivering and Financing Infrastructure including design and launch of a Cities Low Carbon Infrastructure Exchange.

Foster a supply of investment grade low carbon infrastructure assets across cities, i.e. an investment-grade infrastructure pipeline through standardized delivery approaches that ultimately allow pooling.

Address Sovereign Wealth Funds’ and the 13 largest Pension funds’ demand for large scale, ‘real’ asset classes that can deliver steady, inflation-adjusted income streams with a low correlation to the returns of other asset classes.

Engineer and deploy collective low carbon investment instruments at scale.

Explore and implement innovative ways to mobilize public sector funding at sub-national, sub-sovereign / municipal level for purposes of risk-sharing in order to secure the necessary equity and debt for large-scale low carbon infrastructure investments.

2. Prepare Financing Packages and Investment Plans

Work with cities to prepare financing packages and develop investment plans through a phased approach.

Start working directly with 6 cities through customized TA offerings and expand +6 +8 cities over 18-24 months.

Catalyze Regional Centers of Excellence provide decentralized, longer term technical assistance for cities.

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The combination of a growing and more prosperous world population and climate change pose a multidimensional challenge: Need to increase nutritious Food Production to feed 9 billion people in 2050

Need to reduce the Volatility that is impacting poverty and prosperity by Building Resilience, especially given that that 75% of the world’s poor are rural and most are involved in farming

Need to cut emissions to avoid a 4°C World – Currently agriculture is a big part of the problem (30% of GHG emissions – including forestry and land use change), HOWEVER, it could be a big part of the solution - it is the only sector that sucks

carbon from the atmosphere.

THE CHALLENGE

THE IDEA

Delivering on the Triple Win of Climate Smart Agriculture Key Messages

To drive systemic change in management of productive landscapes and enable them to produce more, reduce vulnerability and contribute to a positive impact on climate change. To achieve this a global action network will be established that:

Takes to scale existing pilots and drives new interventions

Enables joint action by governments, private sector, science community, development institutions and NGOs/CSO in partnership with farmers

Targets the scientific research needed for the productive systems of tomorrow

Directs existing and future resources towards the triple win across landscapes

Delivering on the Triple Win of Climate Smart Agriculture: The Impacts of Climate Related Shocks are Already Being Felt

China: Wheat 2011 - Drought impacting 36% of winter wheat area in eight provinces.

2011 - yields reduced by ca. 10 MMT

Brazil: Soybeans 2008 - Drought reduced production by 3.2 MMT, ca. 5.25 % relative to previous year.

Brazil: Corn 2008 Drought reduced production by 7.6 MMT, ca. 13 %

Mexico : White Corn 2011 - Freeze reduced national production by 4 MMT , ca. 18 % of projected national production) 2009 Drought reduced corn yields by 3.85 MMT or 15.9 % relative to previous year.

Paraguay: Soybean 2008 Drought reduced production by 2.9 MMT ~ 42 %

Russia, Kazakhstan, Ukraine: Wheat 2010 Drought and Heat Wave reduced production by 20.2, 9.7, and 4.0 MMT respectively,

Colombia: Crops & Livestock 2010 - ca. 380,000 ha of crop lands and pastures flooded, ca. 30,000 livestock died.

MMT = Million Metric Tons | Reference: In 2010 South Africa consumed 0.5 MMT Soybean, 3 MMT wheat and 10.7 MMT Corn (Data Source: USDA) 15

USA: Corn, Soybeans, Wheat 2012/2013 - Predicted to reduce the gross domestic product by 0.5-1%, equating to a loss of $75 to $150 billion and is on track to exceed a previous drought as the costliest natural disaster in US history.

Argentina: Soybeans 2008 Drought reduced yields by 14.2 MMT, ca. 30.7 %

Argentina: Corn 2008 Drought reduced yields by 6.52 MMT, ca. 29.6 %

Southern Africa: Crop & Livestock 2011 - Floods in January in southern Africa caused significant crop and livestock losses (Lesotho, Zambia, Zimbabwe, Mozambique). *No reliable loss data available

Sri Lanka & Madagascar: Rice 2011 - Cyclones destroyed 30% (1 MMT) of Sri Lanka’s rice crop and reported to have badly damaged most of Madagascar’s rice crop *No reliable loss data available

Australia: Wheat 2006 - Drought reduced yields by 14.3 MMT, or ca. 57 %

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Delivering on the Triple Win of Climate Smart Agriculture: What are the essential elements of action?

Governments

Private sector

Development Institutions

Academia

NGOs/CSOs

Action Network

Opt-in first movers -

Triple win focus -

Common operational matrix

- Agreed results

framework -

Collective action at scale

- Small secretariat,

streamlined governance

Tools for action

Unilateral

(Farm Bill, EU CAP etc) -

Bilateral (USAID, DFID etc)

-

Multilateral (e.g. WB, IADB)

-

Private sector (purchasing and

investments) -

Mechanisms (e.g. CGIAR, GAFSP)

-

Existing Initiatives (e.g. REDD+, ASAP)

AC T I ON

AND

RE SUL T S

Food Security + Reduced Poverty

Resilience + Sustainable Prosperity

Reduced Emissions + Increased

Carbon Sinks

Communicating Climate Change: Moving Beyond “Green”

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“Climate change is not just an environmental challenge. It is a fundamental threat to economic development and the fight against poverty.”

- Jim Yong Kim

I. Develop and focus-test messaging

II. Identify, consult and build linkages with influencers

III. Build tools to communicate messages and evidence and make them available to influencers

Catalyze Climate Action

US, Europe, MICs, and selected developing countries

“War Rooms” in US (April 12) and globally in all regions

WBG Advisory Council of Global Foundation Leaders (May 17)

Videos, Info-graphics, PPTs, Twitter and Facebook campaigns

Data and research

Thank you and be there on May 7

Yale

Webinar Series Multilevel Governance

"Ending Poverty and Building Shared Prosperity by

Tackling Climate Change"

Yale

# 4