Climate Change: Sector Results Profile
Reinforcing Synergies between Development and Climate Change
April 13, 2013
Climate change is a major threat to the achievement of the Millennium Development Goals in developing countries and to hard-earned development gains in all regions of the world.
The report Turn Down the Heat: Why a 4°C Warmer World Must Be Avoided, a snapshot of the latest climate science prepared for the World Bank by the Potsdam Institute for Climate Research in 2012, says we are on a path to a world 4 degrees Celsius warmer than pre-industrial times by the end of this century under current greenhouse gas emissions pledges. Following the Bank’s own Strategic Framework for Development and Climate Change in 2008 and the World Development Report on climate change in 2010, the report provides a clear picture of the planet in a 4°C warmer world and the disruptive impacts on agriculture, water resources, ecosystems and human health.
The report concludes that while every region will be affected, those least able to adapt - the poor and most vulnerable - would be hit hardest. International Development Association (IDA) countries are the most vulnerable to risks associated with droughts, floods, coastal storms, and changes in agricultural productivity.
Reports like Turn Down the Heat have shown that the world needs a global response equal to the scale of the global problem. Both adaptation and mitigation efforts are essential. The World 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.
To meet the climate challenge, the World Bank supports country-led development strategies and priorities aimed at adaptation and mitigation action. Climate change action has been integrated as a priority across the World Bank. All 12 of the country assistance and partnership strategies prepared in FY12 for IDA countries address country vulnerability to climate change.
There are increasing efforts to ensure synergies between adaptation and mitigation agendas when designing and planning climate actions and evaluating their impact. These efforts include examples of interventions in forestry, which help sequester carbon and increase resilience; “climate smart” agriculture, where the focus is on a triple-win—carbon sequestration, food security and climate resilient livelihoods; and water efficiency measures in urban municipalities that reduce water and energy consumption and emissions from water pumping and distribution.
The International Bank for Reconstruction and Development (IBRD) has been working with Mexico through the Efficient Lighting and Appliances Project (FY11) on providing a mix of financial and technical support to Mexico’s efforts to deal with climate change. The results can be seen in the creation of a national climate change strategy, and the passage of renewable energy and energy efficiency laws. More than 5.5 million Mexican families now use energy-saving lamps that consume 20 percent of the energy and last 10 times longer than traditional light bulbs. In the first stage of the program, partially financed by the World Bank, there were more than 1,110 points of exchange in the whole country, providing 22.9 million incandescent light bulbs, achieving 1297 gigawatt-hours saved (as of September 30, 2012).
The World Bank–China Montreal Protocol partnership has, over 20 years, phased-out over 219,000 tons of ozone-depleting substances from various sectors, including closing the production of chlorofluorocarbon (CFCs). The corresponding climate co-benefits associated with this phase-out, accounting for the impact of alternatives phased in, is 885 million tons of CO2-eq, equivalent to taking 227 coal-fired power plants offline.
A heavy reliance on fossil fuels, rising energy demands, and mounting greenhouse gas emissions are pushing Morocco to invest further in its abundant renewable energy resources. One project the Clean Technology Fund supported in Morocco is the 500 megawatt (MW) concentrated solar power plant—the biggest project of its kind in the world—located in Ouarzazate. Backed by the regional Middle East and North Africa Clean Technology Fund investment plan, the Ouarzazate plant will receive US$750 million in Clean Technology Fund financing and is expected to mobilize an additional US$4.8 billion for the project. The project is structured as a public private partnership between the Moroccan Solar Energy Agency and a private partner. The first 120-160 MW to come on line by 2014 will help Morocco avoid 240,000 tons of CO2 emissions a year—the same as removing 80,000 cars from the road annually. This project is in line with Morocco’s ambitious Solar Plan, launched in November 2009, which aims to produce 2,000 MW of solar energy by 2020.
Making development climate-resilient has emerged as a major theme in supporting poverty reduction and economic growth in Sub-Saharan Africa. The objective of the IDA-financed Productive Safety Net Program in Ethiopia (FY05) was to deliver timely livelihood protection to the chronically food insecure households in rural Ethiopia. A drought risk component was introduced in the Bank’s second phase of support (FY07) to provide immediate scaled-up financing in response to localized intermediate or severe drought. The projects are designed to increasingly provide cash rather than food support. In 2010, 7.8 million rural inhabitants received support under the program through paid work or grants. About 192 million paid workdays have been generated through community projects that address roots of food insecurity by rehabilitating severely degraded land and creating productive community assets, such as terraced fields, feeder roads and small scale irrigation systems.
The Caribbean Catastrophic Risk Insurance Facility is designed to reduce the impact of natural disasters by providing member countries with insurance payouts sufficient to cover short-term liquidity needs in the aftermath of an earthquake or hurricane. Its 16 members pay risk-based insurance premiums to purchase a desired level of insurance coverage. The instrument is designed to cover only short-term needs, estimated to comprise at most 20 percent of losses. It is estimated that the premium was 68 percent lower than the cost of meeting similar risks through domestic reserve funds. The World Bank, through IDA, funded the participation fees, 100 percent of the first two years’ premiums, and 50 percent of the third year’s premium for Haiti, Dominica, Grenada, St. Lucia, and St. Vincent and the Grenadines. It also funded 50 percent of the fourth year’s premium for Dominica and St. Lucia. Payouts as of 2011 have totaled US$32 million across eight claims, with all payouts being made within three weeks of the event.
Bank Group Contribution
Nearly 40 percent of all World Bank (IBRD/IDA) lending projects approved in FY12 are expected to contribute to climate change adaptation, mitigation or both in over 50 countries. This amount represents almost a doubling from the 22 percent share of climate-related projects in World Bank lending since FY11.
IDA witnessed a tremendous increase in climate change co-benefits financing. In FY12, the financing of adaptation co-benefits grew to US$2.3 billion (61 percent increase over FY11) and to US$2.3 billion for mitigation (161 percent over FY11). The IBRD saw a major increase for adaptation financing to US$2.2 billion, up 158 percent from FY11.
The World Bank approved a total of US$2.2 billion in financing for renewable energy projects in fiscal year 2012, a record 40 percent share of its annual energy lending of US$5.6 billion. Looking only at power generation projects approved in 2012, renewables accounted for an even larger share – 84 percent.
Development policy operations are emerging as a major vehicle for supporting clients’ climate change policy and institutional developments needed to tackle climate change. The World Bank recently approved a US$100 million development policy loan to promote inclusive green growth and sustainable development in the state of Himachal Pradesh, India. The loan will support the government as it launches transformative actions across its key engines of economic growth—energy, watershed management, industry and tourism.
As part of its commitment to reduce its environmental footprint and to maintain carbon neutrality, the Bank measures, reduces, offsets, and reports on the greenhouse gas emissions associated with its facilities and travel. In FY 2012, the Bank met its own goal of reducing its greenhouse gas emissions 7 percent below its 2006 baseline and set a new target of 10 percent to be achieved by 2017.
The World Bank has successfully demonstrated innovative ways to mobilize additional resources to finance climate action by working with partners. The most notable success has been the US$7.2 billion Climate Investment Funds (CIFs), which are playing a key role in meeting international objectives regarding climate change. The CIFs currently support activities in 49 countries and are leveraging an additional US$43 billion in clean investment and climate resilience. The CIFs are channeled through the World Bank and other multilateral development banks (MDBs).
For over a decade, the World 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 finance initiatives. The Carbon Finance Unit supports more than 150 projects through purchase of about 220 million metric tons of carbon dioxide equivalents.
The World Bank has been pushing the frontiers of innovation in carbon markets and results-based finance of mitigation activities. Recent carbon initiatives include the Forest Carbon Partnership Facility, aiming 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 the emissions of greenhouse gases in developing countries.
The World Bank has also strengthened the operational links between climate adaptation and disaster risk management. The Global Facility for Disaster Risk Reduction and Recovery (GFDRR), a trust-funded global partnership hosted by the World Bank, serves as a disaster risk reduction knowledge hub and the Bank's rapid disaster response facility.
The World Bank has been part of the multilateral development banks’ effort in harmonizing their climate finance reporting systems. These banks have finalized a joint approach for mitigation finance reporting and released the Joint MDB Report on Mitigation Finance at the UN Conference on Sustainable Development in 2012. They have recently finalized a joint approach for adaptation finance reporting, and released the Joint MDB Report on Adaptation Finance at the 2012 Conference of the Parties to the United Nations Framework Convention on Climate Change.
In addition, the World Bank announced a harmonized approach to measurement and reporting of project-level greenhouse gas emissions along with other international financial institutions, including five MDBs.
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 emissions development. Resilience to climate impacts and low emissions development are both key pillars of the increasing emphasis by the United Nations and Bretton Woods Institutions on the economic, environmental and social merits of Inclusive Green Growth and could provide an opportunity to support actions with multiple benefits for climate and development. As part of the UN family, the World Bank will be increasingly working with other agencies on climate actions in the context of sustainable development.
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.