Overview

The case for climate action has never been stronger. Current weather extremes, such as storms, floods and drought, are becoming more frequent and intense, affecting millions of people across the world. Climate change is threatening global water and food security, agricultural supply chains, and many coastal cities.

The poor are uniquely vulnerable to the impacts of climate change, and the need for action is urgent. According to the recently released World Bank report, Shock Waves: Managing the Impact of Climate Change on Poverty, without rapid action, climate change could push an additional 100 million people into poverty by 2030.

To address this, the World Bank Group (WBG) is integrating climate change across its work, in the recognition that climate change and development are inextricably linked, and that bold actions are required to set the world on the path of low carbon and resilient growth.

From Agreement to Action

On December 12, 2015, 195 nations reached a historic agreement at COP21 in Paris: to keep global warming to well below 2 degrees Celsius – the threshold scientists estimate would result in irreversible planetary alteration – by 2100.

As part of the Paris process, more than 180 countries submitted their pledges – the Nationally Determined Contributions, or NDCs – laying out the actions they will take to reduce emissions and increase resilience to climate change impacts. Of these countries, 140 are working with the WBG.

Investment needs embedded in the NDCs amount to more than $1 trillion per year over the next 15 years. The WBG is stepping up to help countries meet their immediate challenges and to deliver on their NDCs. Plans are currently being discussed which would help countries to meet specific demands, determine in which areas they would like support from the WBG, and to integrate these into partnership frameworks.

Since 2011, the WBG has committed $52 billion to more than 900 climate-related projects, an average of $10.3 billion per year. In FY2015 alone, the WBG made 188 climate-change related investments in 59 countries, ranging from helping farmers adapt to a changing climate with heat resistant seeds to new investments in renewable energy.

Funding Boost for Climate Action

In October 2015, President Kim announced that WBG climate financing could increase from the current 21 percent of the Institution’s portfolio to 28 percent by 2020, in response to client demand. At current levels of co-financing, that would mean a potential $29 billion a year for climate projects by 2020.

At the same time, the WBG recognizes that the financing required for the transition to a low-carbon, climate-resilient global economy is counted in the trillions, not billions. While public and international concessional finance has a critical catalytic role to play, this transition will ultimately be financed by the private sector. 

The WBG’s private-sector arm, the International Finance Corporation (IFC), mobilized a record $2.2 billion from other investors in FY2015 – demonstrating that there is strong global demand for investments in clean energy, resource efficiency, and climate adaptation. Since starting to track the climate-smart components of its investments and advisory services in 2005, IFC has provided more than $13 billion in long-term financing for renewable power, energy efficiency, sustainable agriculture, green buildings and private sector adaptation to climate change.

Setting a Price on Carbon Pollution

The transition to a low carbon global economy will also mean getting prices right, ending wasteful fossil fuel subsidies and putting a price on carbon pollution.

In this regard, to bolster the case for putting a price on carbon pollution, the WBG, in conjunction with national and sub-national governments, businesses, and civil society organizations, officially launched the Carbon Pricing Leadership Coalition during the Paris climate talks. 

More and more companies are realizing that creating a low-carbon business strategy can be beneficial for their bottom-line. For this reason, more than 400 businesses have set an internal price on carbon, and over 1000 companies – including from the oil and gas industry – are calling for widespread carbon pricing.

There has never been a global movement to put a price on carbon on this scale and with this degree of unanimity. In 2015, WBG President Jim Yong Kim and the International Monetary Fund’s Managing Director Christine Lagarde set up a high-level Carbon Pricing Panel composed of Heads of State, city and state leaders that was launched at Paris COP21. 

Last Updated: Mar 29, 2016

Catalyzing Climate Action

Climate change presents enormous challenges for development, making it essential that climate and development be tackled together. The world needs to feed 9 billion people by 2050, provide affordable energy access to all, and extend housing and services to 2 billion new urban dwellers—and do so while minimizing emissions and increasing resilience to climate shocks.

To address this challenge, the WBG recognizes the fundamental importance of integrating climate risks and opportunities into all of its development work. In this regard, it has developed a Climate Change Action Plan to integrate climate into all its work and better help countries achieve their Nationally Determined Contributions (NDCs). The plan outlines ambitious and concrete actions to help build up the resilience to the impacts of climate change and to scale up the WBG’s efforts where the potential benefits are huge – such as increasing the energy efficiency and resilience of cities, and expanding green transport. 

Transitioning to a low-carbon, climate-resilient global economy will require trillions of dollars in new investments and, while public and international concessional finance have a critical role to play, this transition will ultimately be financed by the private sector. 

In this regard, the WBG has demonstrated innovative ways to mobilize additional resources by working with partners. These include the International Finance Corporation’s efforts, which, since FY10, have resulted in the deployment of $300 million in donor funds, supported over 40 climate-smart projects, and leveraged $1.2 billion of the IFC’s own investment plus $4 billion from other financiers, an almost 17-times leverage. The IFC Catalyst Fund has raised more than $418 million from institutional investors and sovereign funds interested in green growth opportunities.

Another successful example of partnership is the $8.3 billion Climate Investment Funds (CIFs), the world’s largest international climate fund providing financing to 72 countries for climate resilient and low-carbon development through the multilateral development banks. About $4.1 billion of CIF funding invested in WBG renewable energy and clean technology projects has leveraged $9.8 billion by IBRD/IFC, $10.8 billion from public funds and $14.4 billion from private investors.

The WBG is trustee of 18 carbon finance funds and initiatives that have supported more than 150 projects in 75 client countries. Since 2000, these initiatives have reduced carbon dioxide emissions by an equivalent of 196 million tons through the projects they support and raised $4.36 billion in concessional finance.

The IFC started tracking the climate-smart components of its investments and advisory services in 2005. Since then, it has provided about $13 billion in long-term financing for renewable power, energy efficiency, sustainable agriculture, green buildings and private sector adaptation to climate change. In FY2015, 22 percent of the IFC’s long-term financing was climate-smart, exceeding its publically stated target of 20 percent.

The World Bank Treasury and the IFC are also among the world's largest issuers of green bonds with $8.6 billion issued by the World Bank (IBRD) and $3.8 billion issued by the IFC Treasury.

Proceeds from IBRD Green Bonds are going to about 80 projects designed to increase resilience to climate change.

Examples include:

  • Two industrial energy efficiency projects in China are estimated to reduce carbon emissions equal to removing 2.7 million passenger cars from the road each year, according to a formula used by the U.S. Environmental Protection Agency.
  • A project in Mexico to improve forest management is expected reduce deforestation and forest degradation in 1.6 million hectares of forest – an area larger than the U.S. state of Connecticut.

The Global Facility for Disaster Reduction and Recovery (GFDRR) is a global partnership managed by the WBG and supported by 34 countries and 9 international institutions. It acts as a financing and technical body that supports disaster risk management (DRM) across the WBG. Over the past 10 years, the WBG has emerged as the global leader in DRM, supporting client countries to assess exposure to hazards and address disaster risks. The WBG’s DRM portfolio has increased by more than 50% in the past four years, from $3.7 billion in FY12 to $5.7 billion in FY15, and it now accounts for 12.3% of total Bank financing, up from 9.4% in FY12. In providing support for DRM, the WBG promotes a comprehensive, multi-sector approach to managing disaster risk.

Last Updated: Mar 29, 2016

Examples of the World Bank Group's work include:

Supporting access to off-grid solar-powered electricity for rural communities in Bangladesh.

This project became the first renewable energy program in Bangladesh to deliver 1.1 million carbon credits and the world's first program for solar home systems under the UNFCCC’s Clean Development Mechanism (CDM). The credits are sold to the World Bank’s Community Development Carbon Fund, generating a revenue stream to pay for more solar panels and expand the program. With access to electricity, people can benefit from the creation of new jobs and increase their income, children can study longer, and the safety of families is improved. Bangladesh has one of the fastest growing renewable energy programs in the world, with more than 3.5 million solar home systems installed, improving the lives and livelihoods of 9 million people.

With support from the Climate Investments Funds (CIF), Morocco made history in early 2016 when the first phase of the world’s largest concentrated solar power plant was officially inaugurated.  It will provide power to over a million Moroccan households by 2018 with extra energy to export, possibly to Europe and beyond. The four plant Noor CSP complex expects to achieve over 500 megawatts (MW) installed capacity and reduce carbon emissions by 760,000 tons per year. The CIF contributed $435 million in concessional funding channeled through the African Development Bank (AfDB) and the World Bank (IBRD).

Supported by the $125 million from CIF’s Clean Technology Fund, a geothermal plant in  Indonesia’s Ulubelu and Lehendong geothermal fields will be expanded, leading to a 150 MW increase in total generation capacity. Close to 1 million households will benefit from cleaner, more reliable electricity and over 1 million tons of CO2 emissions will be avoided annually.

In Vietnam, the adoption of climate-smart approaches to rice cultivation have helped up to 33,000 farmers produce more rice while cutting costs and reducing methane emissions. Switching from flood irrigation to alternative wetting and drying of plots has reduced input costs by 20 percent, raised productivity by 5–10 percent, and significantly cut methane emissions and water use.

In the Caribbean, the WBG is working with the US State Department to develop risk insurance for small fisheries affected by extreme weather events linked to climate change. About 90 percent of the jobs and 50 percent of the catch eaten by humans is produced by small fisheries globally; increasing fishers’ access to financial products such as climate-related insurance will increase the resilience of a vital economic sector.

At COP21, the WBG joined with the seven other leading multilateral development banks (MDBs) to pledge to increase financial and technical assistance to countries implementing sustainable transport solutions under their NDCs. The MDBs will increase their focus on low-carbon transport solutions, continue to harmonize tools and metrics to assess transport-related greenhouse gas emissions and work towards building a more systematic approach to mainstreaming climate resilience in transport.

The impacts of climate change will be channeled primarily through its effects on water and by 2025, 1.8 billion people will live in areas with absolute water scarcity.

The WBG is promoting cooperation and improved river basin management in Brazil, Niger River Basin, India and Bangladesh, West Balkans, Egypt, Sudan and Ethiopia, as well as promoting water efficient futures in cities.

In Morocco, the WBG is supporting the government’s National Irrigation Saving Program, with a new $150 million commitment, which builds on $500 million of prior commitments. It will help poor and vulnerable farmers with more efficient irrigation technologies so they can cope with increasingly less available water and greater variability in water supplies.

In Mombasa, the coastal region of Kenya, water demands largely exceed supply, with climate variability, droughts and floods taking its toll on poor people. The WBG is funding a significant portion of the cost of a US$500 million government program to boost water security and build climate resilience.

Cites are responsible for two-thirds of the world’s overall energy consumption and an estimated 70 percent of all greenhouse gas emissions.  If just 100 of the world’s cities embark on a low-carbon development path, global greenhouse gas emissions would decrease by an estimated 10 percent a year. In 2015, the WBG provided over $3 billion in urban climate finance and technical assistance to help our clients build climate smart cities.

The WBG is currently working on a new generation of city resilience projects in several regions of the world. For example, in the city of Can Tho in Vietnam, the WBG is supporting the city’s resilience through improved management of urbanization processes and flood risk reduction. The WBG has also pioneered use of the TRACE model, a combined land use, transport, and energy model that allows users to project energy use and emissions that result from different scenarios of spatial development, transport infrastructure, building stock, and energy supply. It has been deployed in Romania where the team found that more compact city development in the Bucharest region could achieve a 39 percent decrease in local GHG emissions.

Between 2007 and 2014, over 400 micro run-of-the-river hydropower plants were built by the Nepali government, with help from the WBG, as part of the Nepal Micro-hydro Promotion project. These new micro-hydros provide almost 150,000 rural households with access to reliable and clean power. For the first time in Nepal and South Asia, a micro-hydro project has issued carbon credits by displacing diesel fuel with renewable energy. 

Building people’s resilience to help them prepare for and respond to climate disasters is a critical part of managing climate impacts and eradicating poverty. The WBG is stepping up efforts to integrate disaster risk management with longer-term efforts to make vulnerable nations more resilient to climate and disaster risks.

During FY2012-15, the WBG deployed teams to more than 36 countries affected by natural disasters, mobilizing almost $4.5 billion for resilient recovery and reconstruction. As of January 2016, the WBG has been providing advisory support to more than 44 countries to help them develop national-level risk financing strategies. It has also been involved in strengthening regional collaboration in disaster risk financing and insurance in Sub-Saharan Africa, the Caribbean, the Pacific Islands, the southwest Indian Ocean, and East Asia.

The Bank is providing cutting-edge country-capacity building and technical-assistance initiatives for disaster risk reduction and climate change adaptation. In the Philippines, for instance, these efforts led the government to approve the $9 billion Metro Manila Flood Management Master Plan. In Vietnam, as part of national DRM project disaster management, activities are being implemented at the community level. The success of a pilot WBG community-based DRM project launched in 2006 has led the Vietnamese government to scale up its approach in 6,000 additional communities through a national $500 million program.

The IFC’s biggest impact comes from its ability to mobilize external capital to climate sectors, as global financial institutions pledge to invest hundreds of billions of dollars in clean energy and other climate investments. In Jordan, the IFC helped fund the construction of seven solar PV projects. These will boost renewables use and transform the country’s energy sector through an investment of $79.66 million, while mobilizing an additional $107 million. The project is the largest private-sector led solar initiative in the Middle East and North Africa.

In late 2014, the IFC completed a $300 million financing package to Penonome wind power plant in Panama, the largest wind farm in Central America. The 337.5 megawatt power plant is expected to generate roughly the equivalent of 5 percent of Panama’s total energy demand and cut about 400,000 tons of carbon emissions per year, the equivalent of taking 84,000 cars off the road.

In China, IFC financing helped China Wind Power Group develop its 201-MW Xiehe plant in Gansu province, China’s first wind power deal financed entirely through international bank syndication.

Last Updated: Mar 29, 2016


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