Climate Change: Sector Results Profile

Stepping up Climate Action: Development for a Stronger, Low-Carbon Future

April 9, 2014

The leaders of the World Bank, the IMF and the United Nations urged finance ministers around the world to tackle the issue of climate change to boost their economies and protect the planet.

The World Bank Group (WBG) continues to face unprecedented demand from countries and clients seeking support in their efforts to address development and climate change challenges. WBG is supporting action on the ground by financing projects that help nations build a more prosperous and sustainable future, as well as resilience against climate change.
190,000

hectares of degraded land have been rehabilitated in Ethiopia

Challenge

Climate change threatens the sustainability of poverty reduction and achievement of inclusive growth, and risks undermining hard-earned development gains in all regions of the world.

Turn Down the Heat, a snapshot of the latest climate science prepared for the Bank by the Potsdam Institute for Climate Impact Research in 2012, says we are on a path to a 4°C (7.2°F) warmer world by the end of this century under current greenhouse gas emissions pledges. The report provides a clear picture of the devastating impacts on agriculture, water resources, ecosystems, and human health.

A 2013 follow up report, which focused on impacts of climate change on Sub-Saharan Africa, South Asia, and South East Asia; tells us that if the world warms by 2°C (3.6°F) – warming which may be reached in 20 to 30 years – there will be widespread food shortages, unprecedented heat-waves, and more intense storms.

The Building Resilience report, released in November 2013, noted that between 1980 and 2012, disaster-related losses amounted to $3.8 trillion worldwide. Some 87 percent of these reported disasters (18,200 events), 74 percent of losses ($2.8 trillion) and 61 percent of lives lost (1.4 million in total) were caused by weather extremes. Extreme weather events have the greatest impact on the most marginalized populations, who commonly live in the highest-risk areas. For example, 72 percent of the African urban population lives in informal settlements. Such populations are also least able to recover from recurrent, low-intensity events that can have crippling and cumulative effects on livelihoods.

These reports illustrate the intrinsic link between climate and poverty, and show that while every region will be affected, those least able to adapt – the poor and most vulnerable – would be hit hardest.

They show that the world needs a global response equal to the scale of the problem. Both adaptation and mitigation efforts are essential. The Bank’s work on inclusive green growth has found that with more efficient and smarter use of energy and natural resources, opportunities exist to reduce drastically the climate impact of development without slowing poverty alleviation or economic growth.

Solution

Climate change is a strategic priority for the World Bank Group, as set out in the World Bank Group Corporate Strategy adopted in October 2013.

The Bank supports country-led development strategies and priorities aimed at integrating climate- and disaster-resilience in national development planning, while helping countries take advantage of new economic, capacity building, and financing opportunities that climate change presents. All country assistance and partnership strategies prepared for FY13 for the International Development Association (IDA) and International Bank for Reconstruction and Development (IBRD) countries include consideration of climate risk. In FY13, about 80 percent of approved WBG operations with climate adaptation co-benefits also included consideration of disaster risk.

Helping nations plan for a low-carbon future is a priority for the Bank. That includes a new focus on building greener and climate-resilient cities – through assistance with low-carbon planning, energy-efficiency assessments, and securing finance. Another focus area is climate-smart agriculture that improves yields to feed a growing global population, reduces emissions, and adds carbon storage. We are also accelerating energy efficiency and investment in renewable energy to help the world shift away from high-carbon fossil fuels.

Results

To help our client countries mitigate current and future greenhouse gas emissions while at the same time stimulating development, the Bank is using a variety of financial instruments and programs to target different sectors of the economy.

In partnership with Norway, the Bank is scaling up climate-smart agriculture in Ethiopia, a project that has already rehabilitated more than 190,000 hectares of degraded communal and individual farmland in this vulnerable nation since 2008. The funding will help Ethiopia address the causes of deforestation while also “promoting social benefits to local communities,” says Minister of Agriculture Sileshi Getahun,

In Kenya, 60,000 smallholder farmers are now getting carbon credits for improved agricultural land management practices such as land rehabilitation, mulching, and less tilling which trap carbon dioxide in soil. They sell the carbon credits to the BioCarbon fund, earning a total of $65,000 so far. The Kenya Agricultural Carbon project (FY11-present), the first of its kind, has already increased crop yields by up to 20 percent for more than 1,500 farmer groups over three years.

Another carbon credit project focused on reforestation in Rio de Janeiro, Brazil, is helping to revitalize neighborhoods and improve public health, while capturing hundreds of tons of carbon dioxide emissions and generating credits for the city. The Rio Low Carbon City Program, launched by the Bank and the city at Rio+20 in 2012, will measure the climate impact and the carbon credits generated by the initiative. Dejair dos Santos, 66, is planting trees in the Morra da Formiga slum and tells the story of children who set fire to a local trail. “My colleagues and I replaced the grass with native fruit trees and organize a fun walk to raise awareness among the kids,” he says. “They loved it.” Santos hopes the children will grow up and carry on the reforestation work.

Projects supported by World Bank Green Bonds, meanwhile, include a multi-year, $500-million investment in Turkey designed to develop local and privately owned renewable energy sources. It also covers energy-efficiency improvements in Turkey’s iron and steel industries. As of May, 2013, the investment was already reducing nearly 1.5 million tons of carbon dioxide annually through 29 energy-efficiency and 44 renewable energy projects.

On the climate change adaptation side, the Bank is stepping up efforts to integrate disaster risk management work with longer-term efforts to make vulnerable nations more resilient to climate and disaster risks.

In the Caribbean, The Caribbean Catastrophic Risk Insurance Facility has since 2008 made payouts of $32 million across claims from eight countries following natural disasters, with all payouts being made within three weeks of the event.

Similarly, for the Pacific Islands, the Pacific Catastrophe Risk Facility was set up in 2013 to provide disaster risk assessment tools and practical technical and financial applications to reduce and mitigate countries’ vulnerability to natural disasters. In FY13, the Bank executed the first-ever capital markets insurance transaction covering tsunamis to help five Pacific Island countries (Marshall Islands, Samoa, Solomon Islands, Tonga, and Vanuatu) to insure themselves against natural disasters.

Bank Group Contribution

For FY13, nearly $3 billion in lending commitments at the World Bank are expected to provide adaptation co-benefits, of which just over $2 billion came from IDA and nearly $900 billion from IBRD. More than $4 billion in FY 13 will provide mitigation co-benefits; $1.8 billion from IBRD and $2.3 billion from IDA. The International Finance Corporation (IFC), the Bank’s private-sector arm, committed nearly $2.5 billion for mitigation, an increase of nearly $900 million.

Highlights from the World Bank Group’s contributions include:

  • 82 projects in 50 countries: 24 have adaptation co-benefits, 39 mitigation co-benefits and 19 have both.
  • At $2.3 billion, clean energy continued to account for the largest share of the Bank’s mitigation support in FY13.
  • At $910 million, Water, Sanitation and Flood Protection represented one-third of adaptation financing in FY13 and an increasing part of the sector’s commitment support adaptation (about 40 percent), demonstrating integration of adaptation and disaster-risk management.
  • The lion’s share of IFC’s $2.5-billion commitment was targeted at mitigation with renewable energy and energy-efficiency accounting for 89 percent of total commitment.

IBRD and the International Finance Corp. (IFC) are the world's largest issuers of green bonds, which support climate-related projects - with $5.3 billion issued by the World Bank Treasury in 61 bonds and 17 currencies, and $3.4 billion by the IFC Treasury, including two $1 billion benchmark offerings in 2013.

The Multilateral Investment Guarantee Agency (MIGA), another member of the World Bank Group, is working with financial institutions to help strengthen capital and financial markets and reach out to smaller clients. For FY13, MIGA issued $1 billion in guarantees, supporting eight projects that contribute to reductions in greenhouse gas emissions. These projects include a windfarm and a bamboo plantation in Nicaragua, power projects in Bangladesh, Angola, Cote d'Ivoire, and Uganda; ferry transportation in Turkey, and a wastewater treatment plant in Jordan.

Partners

The World Bank Group has successfully demonstrated innovative ways to mobilize additional resources to finance climate action by working with partners.

The $8 billion Climate Investment Funds (CIF), established in 2008, are playing a key role in meeting international objectives regarding climate change. Designed to scale up climate knowledge and finance, the CIF are attracting significant co-financing—an expected $55 billion—to support its activities in 48 middle and low-income countries in clean technology, renewable energy, sustainable management of forests, and climate-resilient development. Financing from the CIF is channeled through the Bank and other multilateral development banks, with approximately 25 percent of its financing allocated to the private sector to stimulate markets, increase investment potential, and enable financial gain in climate-friendly enterprises and businesses.

For more than a decade, the Bank has supported carbon finance. When established in 1999, the role of the Prototype Carbon Fund was to catalyze the global market for greenhouse gas emission reductions. Today, the World Bank is Trustee of 15 carbon funds and facilities, and the Carbon Finance Unit is supporting more than 140 projects in 50+ countries. Since 2000, these initiatives have reduced the equivalent of 187 million tons of carbon dioxide emissions through the projects they support.

Next-generation carbon initiatives include the Forest Carbon Partnership Facility, working to reduce emissions from deforestation and forest degradation (REDD+); the Carbon Partnership Facility; the Partnership for Market Readiness; the Carbon Initiative for Development; and the Bio Carbon Fund Tranche 3. These innovative instruments seek to support a variety of market-based mechanisms that reduce greenhouse gas emissions in developing countries.

Responding to client priorities, the Bank has also worked with partners to strengthen the operational links between climate adaptation and disaster risk management. The Global Facility for Disaster Reduction and Recovery (GFDRR) helps high-risk, low-income developing countries better understand and reduce their vulnerabilities to natural hazards, and adapt to climate change. The GFDRR’s Open Data for Resilience (OpenDRI) was launched in 2010 to support such efforts. In the wake of the November 2013 Typhoon Yolanda in the Philippines, the Yolanda GeoNode team used the collected more than 72 layers of geospatial data, including damage assessments and situation reports by local and international agencies. GFDRR is managed by the World Bank Group and funded by 21 donor partners.

The Bank continues to actively channel funds to clients under the climate change focal area of the Global Environment Facility. So far, nearly $2 billion has been invested. Channeling funds from the facility, the Bank supported Tunisia's bid to achieve greater energy-efficiency.

Since 1991, the World Bank–China Montreal Protocol Partnership has phased out the consumption and production of more than 219,000 tons of ozone-depleting substances from sectors as diverse as refrigeration, air-conditioning, foam manufacturing, aerosol production and fire extinguishing. This also avoided the equivalent of 885 million tons of carbon dioxide, akin to taking more than 184 million cars off the roads.

Increasingly, the Bank is also engaging in strategic partnerships to address short-lived climate pollutants (SLCPs). To tackle these heat-trapping pollutants – which include methane, black carbon, tropospheric ozone, and some hydrofluorocarbons – the Bank launched a review of its own project portfolio to identify ways to reduce such emissions. The report, found that 7.7 percent of World Bank commitments, or about $18 billion, went into "SLCP-relevant" activities between 2007 and 2012.

Moving Forward

With the prospect of a warmer world, the imperative to adapt to a changing climate further emphasizes the need to scale up support for climate-resilient, low-carbon development. The Bank’s Climate Change Group is helping developing countries build capacity to address climate change, mobilize resources and support changes in strategies, policies and investments that enable a shift to a low-emissions development path and increase resilience to climate change. Specifically, it provides capacity-building services, knowledge exchange, learning products, and platforms for innovative solutions in three program areas: Sustainable Energy and Cities, Climate-Smart Agriculture, and Low Emissions Development Policy and Finance.

Further attention will be given in IDA countries to help clients and partners understand and manage the adaptation-development linkages in different contexts. IBRD resources can be expected to be called for supporting transformational programs with lower emissions catalyzed by dedicated climate resources. It is also anticipated that there will be growing demand for IBRD capital for guarantees and insurance products to attract private sector investments in new technologies and in climate-vulnerable areas. Contributions to existing and emerging climate funds are expected to leverage considerable underlying financing from public and private sources. As part of the United Nations family, the World Bank Group will be increasingly working with other agencies on climate actions in the context of sustainable development.

Beneficiaries

A rural electrification program in Bangladesh has been installing more than 50,000 solar homes systems every month since 2002. The program provides clean, emissions-free energy that will not contribute to climate change, while promoting development. The fastest-growing solar homes systems program in the world, this IDA-supported initiative has delivered off-gird solar power to 2.8 million households. “We can study much better now,” says 10-year-old Kusum Koli Roy. “The solar lights have helped us a lot with our education.”

Another climate-friendly energy project, in Nepal, has been delivering more than 1,000 micro hydropower plants since 2007 to communities in 52 districts across the country. The new source of clean, renewable electricity helped 27-year-old Laxmi Rasalli open a poultry farm with 300 chickens that bring a new source of income to her family. “I could not have started raising these chickens if we didn’t have electricity,” Rasalli says.