Chris DodwellKnowledge Leader – International Climate & Energy

UKELA – Climate Change and Energy Working Group Climate Change and Energy – Science, Law and Politics 24 April 2012

The Golden Age of Global Low Carbon Policy Making?

Leading Global Environmental Consultancy

AEA delivers over $120 million annually of energy, environmental, transportation, and climate policy support and program implementation services to:

UK Government

US Government

European Commission

International Institutions

.

…. energy efficiency, clean energy, transport, GHG inventories, air quality, carbon management, climate change strategies, adaptation, resource management ….

OUTLINE

• Global challenges: climate, energy, investment

• Policy responses: economic signals & risk reduction mechanisms

• Role of international climate regime

• UK policy response

• Application of lessons learned

Inaction is not an option

2020 action: significant but not enough

1. Implementing 2020 pledges is vital2. Action before 2020 must be strengthened 3. Policy and investment groundwork for post-2020 reductions must be laid

UNEP Bridging the Gap 2011

IEA World Energy Outlook 2011

Investment challenge: redirecting “investment as usual”

• IEA ETP Baseline scenario requires investment between 2010 and 2050 of US$270 trillion

• Total investment requirements under ambitious scenario increase by 17% to US$317 trillion

• IEA: Annual investment in low carbon $750b by 2030, to £1.6t by 2050• Bloomberg NEF: clean energy investment $263b in 2010 ($52b in 2004)

but Q1 2012 lowest since 2009

Policies for supporting low carbon technologies

Combining policy and financial instruments effectively

Economic signals – (a lot of) work in progress

Reducing risks – international perspective

Country riskMake country risk guarantees more

explicit to institutional investors

Low carbon policy risk Offer low carbon risk cover

Currency riskEstablish currency

funds offering foreign exchange hedging

products

Deal flow problemsCreate low carbon

project development companies

Difficulty evaluating multiple, overlapping

risks

Public sector takes “first loss equity position in

funds

Adapted from UNEP & partners/Vivid Economics 2009

Reducing risks - blooming of many flowers

Tracking climate finance & learning lessons

oWhat contributions should be counted as “climate finance”?

oHow to tackle private sector flows?M

easure

oDistribution: where is climate finance going?

oWhat forms of finance, data, format, methodologies, etc ?

Repo

rto Scale of supporto Effectiveness of supporto Cost-benefits of activities or

wider benefits of investments

Verify

International negotiations: not all or nothing

The Durban endgame: “the huddle to save the world”

“a protocol, another legal instrument or an agreed outcome with legal force”

Lessons learned: UK policy response

Long term perspective - both policy and investment

Economic signals Reducing investment risk

Lessons learned: DECC 2050 Calculator – balancing energy and climate goals

Lessons learned: UK Low Carbon Institutions

• Climate Change Programme 2001 to deliver voluntary target 20% CO2 reductions by 2010 (tougher than UK’s Kyoto target)

• Climate Change Program Review (CCPR) initiated in 2004 to put UK back on track but failed to achieve objectives

• Political opportunity to strengthen low carbon institutions • NGO campaign + business community traction on climate change• Political competition – parties taking a strong stance on climate

change• Reframing of climate change as an economic issue - Stern’s

review for HMT of the Economics of Climate Change• Engaged political owner within government

• Outcome: Office of Climate Change (2006) →Committee on Climate Change (2008) →formation of DECC (2008)

Why a golden age for policy makers?

1. Countries across the world now facing up to the challenge of implementing their Copenhagen pledges

2. Loud, long, legal economic signals needed ... alongside new ways to crowd in private finance

3. Tailored to national circumstances ... supported by international sources

4. No need to wait for a global agreement – international action is already under way

5. Real potential to build effective policies using lessons learned from successes and failures to date

AEAChris DodwellKnowledge Leader – International Climate Change & Energy

AEA6 New Street Square London EC4A 3BFUnited Kingdom

E: chris.dodwell@aeat.co.uk W: www.aeat.com