The financing required for an orderly transition to a low carbon, climate resilient global economy can be counted in the trillions, not billions.
Over the next 15 years, the world will require about $90 trillion in new infrastructure – most of it in developing and middle-income countries. Making the right choices in favor of infrastructure that is climate resilient and locks in low carbon development is critical and urgent. Action now will avoid huge costs later.
The IEA estimates that limiting the rise in global temperature to below 2 Celsius by the end of the century will require an average of $3.5 trillion a year in energy sector investments until 2050.
Climate action makes good business sense
The IFC estimates that the NDCs of 21 emerging market economies alone represent $23 trillion in investment opportunities. This includes:
$16 trillion in new green buildings in China, Indonesia, the Philippines and Vietnam
$2.6 trillion in sustainable transport in Argentina, Brazil, Colombia and Mexico.
$665 billion in energy efficiency and green buildings in Russia, Serbia, Turkey and Ukraine.
The amount of solar power added worldwide soared by 50 percent in 2016, with 76 gigawatts of new solar PV capacity, compared to 50GW installed the year before.
To unlock these opportunities, we need a greener financial sector that systematically assesses climate risks and opportunities.
Greening the financial sector will require greater transparency about climate risks, factoring climate opportunities and risks into decision making, and expanding the use of approaches such as green bonds, risk management instruments (for example, guarantees), and blended finance.
The World Bank and IFC are among the world’s largest issuers of green bonds. As of April 2017, the World Bank had issued a total of 130 green bonds worth over $10 billion. As of April 2017, IFC had issued 77 green bonds worth $5.8 billion across 12 currencies.
Carbon pricing is one of the strongest policy levers available to shift financing flows. It delivers a triple dividend – it protects the environment, raises revenue, and drives investments to clean technologies.
Currently, some 40 governments and 23 cities, states and regions put a price on carbon pollution, accounting for 13 percent of annual global greenhouse gas emissions. This marks a three-fold increase over the past decade.
Countries and states are seeing the benefits of carbon pricing. For example, Sweden has had a carbon tax in place since 1991; during that time, its GDP has grown 60 percent and CO2 emissions have fallen 25 percent.
In 2016, governments across the world generated $26 billion in revenues from carbon taxes - an increase by 60 percent over the year before.
The World Bank Group is the convener of the Carbon Pricing Leadership Coalition, which mobilizes political leadership and business support for carbon pricing. The initiative supports analytical work to build the evidence base for carbon pricing to policymakers and to the public.
Concessional climate finance is essential to catalyzing private sector climate investment and introducing new technologies, as well as to boosting resilience and stability.
The $8.3 billion Climate Investment Funds (CIF) have helped 72 developing countries pilot low emission and climate resilient development through country-led programs and investments.
Financing of $917 million from the CIF’s Clean Technology Fund (CTF) is driving global investments in concentrated solar power that are expected to contribute more than a fifth of current global capacity.
Climate-smart finance is critical to fighting poverty and meeting development goals.
Without urgent action to reduce vulnerability, provide access to basic services, and build resilience, climate change impacts could push an additional 100 million people into poverty by 2030.
The impact of extreme natural disasters is equivalent to a $520 billion loss in annual consumption, and forces some 26 million people into poverty each year.
The World Bank Group (WBG) is more committed than ever to helping countries meet the climate challenge.
Between FY2011 and FY2016, the WBG committed $63 billion dollars, an average of more than $10 billion a year, to more than 1,000 climate-related projects that help countries adapt to a changing climate and mitigate the impacts of climate change. In FY2016 alone, the WBG provided $10.4 billion in financing to 177 climate-related projects.
In FY2016, the International Finance Corporation (IFC) made close to $2 billion in climate-related long-term investments from its own account and mobilized an additional $1.3 billion, for a total of $3.3 billion invested in climate-smart projects.
In 2016-17, the WBG undertook renewable energy projects representing 10 gigawatts of generation capacity, which are expected to mobilize $6.5 billion in funding.
During the same period, the WBG approved 10 new operations that will improve the climate resilience of 4.5 million people, in addition to the 38 million people covered through existing operations.
Last Updated: Apr 18, 2017