Curso sobre financiamiento para el cambio climático

Module 01Climate Finance EssentialsLesson 1Key Concepts and Examples of Climate Finances in Practice

Presentation Script

Climate Finance Essentials

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Lesson 1 Key Concepts and Examples of Climate Finances in Practice Presentation Script

1. Home

Welcome to this e-course on Climate Finance. A large part of solving the climate

change challenge is using climate finance in a transformative way to enable the

transition to low-carbon and climate-resilient growth. In this course, you will

learn key concepts and draw from illustrative examples to build a working

knowledge of climate finance.

Click Next to begin.

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2. Introduction

In this first module of the course, you will become familiar with the key concepts

of climate finance, investment needs and financial flows. You will cover this

material in three lessons, shown here.

Take a moment to become familiar with the key questions addressed in Module

1.

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3. Key Concepts of Climate Finance

In this lesson, you will learn key concepts such as the need for climate finance to

help countries achieve low-carbon and climate-resilient growth in addressing the

climate change challenge. You will also learn the evolving global finance

architecture in the context of the United Nations Framework Convention on

Climate Change negotiations, and the magnitude of the investment challenge. By

the end of this lesson, you will also be able to identify how climate finance can

support low-carbon and climate-resilient growth.

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4. The climate change challenge

First, let us look at what is currently happening with emissions and surface

temperature - to fully understand the climate change challenge. According to the

recently published report by the Intergovernmental Panel on Climate Change

(IPCC), the atmospheric concentrations of three major greenhouse gases -

carbon dioxide, methane, and nitrous oxide - have increased to levels

unprecedented in the last 800,000 years. Carbon dioxide concentrations have

increased by 40% since pre-industrial times, primarily from fossil fuel emissions,

and secondarily from net land use change emissions. As for global mean surface

temperature, each of the last three decades has been successively warmer at the

Earth's surface than any preceding decade since 1850, and models show that we

are on our way to 3 and 4 degrees warming by 2100 with no additional

mitigation efforts. As stated in the World Bank report Turn Down the Heat, Why

a 4 Degree world must be avoided, emissions must reduce by 50% from 1990

levels by 2050 to limit warming to 2 degrees.

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5. The climate change challenge

Climate finance is necessary to combat this climate change challenge. We know

that, left unchecked, climate change threatens the health, homes, and

livelihoods of millions of people around the globe, with the poorest and most

vulnerable hit the hardest. Developing countries are particularly vulnerable to

climate change and are already suffering from severe flooding, longer droughts,

crop damage and biodiversity loss. Addressing the causes and impacts of climate

change, and planning for a resilient future, while maintaining development

priorities, all requires additional financial resources. Climate finance is therefore

vitally important to solving the global climate change challenge.

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6. The critical need for climate finance

While there is no internationally agreed definition at present for climate finance,

it is generally thought to refer to financial resources invested in mitigation and

adaptation measures. How much climate finance is required to achieve low-

carbon and climate-resilient growth, depends on the mitigation and adaptation

activities desired. Take a moment to review the various ranges of additional

resources required for addressing climate change. You can see that mitigation, as

well as adaptation interventions, require significant additional investments

compared to business as usual. Investment needs vary by country and the size,

nature and timeline of mitigation and adaptation interventions. These ranges

also illustrate that the overall dollar amount for climate finance needed to

combat climate change will be evolving as the world continues to grapple with

how it plans to respond to the challenge.

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7. Climate Finance Architecture under the UNFCCC

The international community is taking action on climate finance and the

investment challenge under the United Nations Framework Convention on

Climate Change (or UNFCCC). At the 13th Conference of the Parties in Bali in

2007, the Parties identified finance as a critical issue, pursuing enhanced action

with a financial architecture under the UNFCCC, to which we will turn to now.

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7.1. UNFCCC - 15th COP 2009, Copenhagen

One main aspect of the finance architecture is the commitment to mobilize

resources. This emerged at the 15th Conference of the Parties in Copenhagen in

2009. Industrialized countries party to the Convention agreed to a goal of

mobilizing jointly USD 100 billion dollars a year by 2020 to address the needs of

developing countries. At the same time, parties agreed to what is known as Fast

Start Financing' or initial funds approaching USD 30 billion dollars to concrete

actions in developing countries, leading to the USD 100 billion dollar goal.

Click on the button to learn more.

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7.2 UNFCCC - 16th COP 2009, Cancun

Another main aspect of the finance architecture under the Convention is the

delivery of finance. In order to scale up the provision of long-term financing for

developing countries, Governments at the 16th COP in 2010 in Cancun decided

to establish a Green Climate Fund (or GCF) as an operating entity of the

financial mechanism of the Convention. Click on the button to learn more about

the GCF.

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7.3. UNFCCC - 17th COP 2011, Durban

The 17th COP in 2011 in Durban launched the work of the Green Climate Fund,

and decisions were made around the governing instrument for the GCF.

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7.3.1 SC - 17th COP 2011, Durban

Another main aspect of the finance architecture under the Convention that

evolved in Durban is the institutional arrangements to provide oversight to the

planned, mobilized and delivered finance. Parties decided to establish a Standing

Committee on Finance (or SC) to assist the Conference of the Parties in

exercising its functions in relation to the financial mechanism of the Convention.

At the 17th COP, the SC launched its work, further defining the roles and

functions, as well as composition and working modalities.

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7.4 UNFCCC - 18th COP 2012, Doha

At the 18th COP in Doha in 2012, the standing committee agreed to establish

clarity in the delivery of climate finance, particularly through preparing an

assessment of climate finance flows starting in 2014 and to organize a forum for

climate finance communication, focusing on adaptation finance in 2014.

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7.5 UNFCCC - 19th COP 2013, Warsaw

The finance architecture further evolved at the 19th COP in 2013 in Warsaw,

where Parties welcomed the establishment of the independent GCF secretariat

and the selection of the Executive Director of the GCF by the GCF Board. The

general message from Warsaw was to gain clarity on the delivery of climate

finance, with a large emphasis on the need to finalize as soon as possible, the

essential requirements to receive, manage, program and disburse financial

resources from the Green Climate Fund.

7.6 UNFCCC 20th COP 2014, Lima

The 20th COP in 2014 in Lima, Peru, generated much conversation around climate finance, including a call for developed countries to enhance the quantitative and qualitative elements of a pathway for 2016 through 2020. Governments also noted that urgent support was required for developing countries to build institutional capacities and enable private sector participation, particularly in Least Developed Countries, or LDCs, Small Island Developing States, or SIDS, and African countries.

Ultimately, the Lima Call for Climate Action reiterated the global objective of holding global temperature increase limits below 1.5 or 2 degrees Celsius compared to pre-industrial levels, and set new levels of ambition for the Intended Nationally Determined Contributions (or INDC's), which should go beyond current targets. It also requested Parties continue enhancing enabling environments, policy frameworks, and methodologies that improve the transparency of climate finance projects. Click on the button to learn more.



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7.6.1 Finance architecture under the UNFCCC

Another major topic in Lima was the readiness and preparatory support for the GCF. Governments welcomed the 10.2 billion dollars in pledges to date and noted that the GCF will be able to make funding decisions no later than April 2015, or when 50% of all pledges are received. Once operationalized, the GCF will enhance climate finance deployment. Governments also urged the GCF to accelerate the start of its Private Sector Facility. Click on each button to learn more.

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Ministerial Dialogue

For the first time, the Conference of the Parties decided to convene a biennial High-level Ministerial Dialogue on Climate Finance, which launched at COP 20 in Lima. This Dialogue provides a unique opportunity for Ministers to engage with each other to reflect on the current institutional arrangements and the information tools for climate finance under the UNFCCC, and to further discuss their potential for scaling up funding.

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7.6.2 Finance architecture under the UNFCCC (cont.)

The next international climate negotiations are the 21st COP in Paris in 2015. This is a landmark date for reaching agreement on new ways forward in scaling up climate finance and overall efforts in tackling climate change. Leading up to Paris, Parties to the Convention worldwide will be making efforts in preparation for this critical climate negotiations meeting, where securing a universal climate change agreement in 2015 will be discussed. For the latest information, visit the UNFCCC website, which you can do by clicking the logo on-screen.

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7.6.3 The magnitude of the investment challenge

While there has been great momentum at the international level in climate

finance, nevertheless, the investment challenge is significant. The most recently

released Global Landscape of Climate Finance 2013 report by Climate Policy

Initiative (CPI) finds that global climate finance flows have plateaued at USD 359

billion. This is far below the UNFCCC goal to mobilize a 100 billion dollars a year

by 2020, or in other words, 1 trillion dollars in total. The gap between actual and

needed funds for mitigation and adaptation is large.

Click on the button to see how this amount compares to other global expenses.



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Other Global Expenses

The magnitude of the climate finance investment challenge may appear daunting

at first. But, it is dwarfed when compared to other global expenses, like fossil

fuel subsidies. In 2012, national governments poured USD 544 billion into fossil-

fuel subsidies. These subsidies are used by governments to keep the price of

fossil energy artificially low. By removing subsidies for fossil energy,

governments can create favorable conditions for alternative energy, and at the

same time free-up resources for climate finance. Also, according to the IPCC,

reduction of subsidies for GHG-related activities in various sectors can achieve

emission reductions as well.

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8. Participant Question

Lets take a moment to reflect on your own experience with climate finance.

How can climate finance help to advance low-carbon and climate-resilient

growth in your country?

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9. How can climate finance support low-carbon and climate-resilient growth?

More and more countries are integrating low-carbon and climate-resilient

growth into sustainable development plans and investment decisions. With

support from developed countries, development institutions, the private sector

and civil society, many developing countries have begun to integrate climate

change considerations into national development plans, focusing on different

priorities according to their national circumstances and capacities, as well as

international support.

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9.1 How can climate finance support low-carbon and climate-resilient growth?

Countries require diverse climate finance investments to carry forth such climate

change considerations in their national development plans. Resources are

required to build national capacities, cover costs and risks, help enable national

climate-friendly investing and catalyze more climate finance in order to

transition to low-carbon and climate-resilient growth, as depicted in the

framework displayed.

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9.2 How can climate finance support low-carbon and climate-resilient growth?

With climate finance support available, countries can pursue any combination of

national-level interventions that support low-carbon and climate-resilient

growth. Take a moment to read and consider this list. After reviewing, we see

the range of interventions that are made possible by climate finance, which can

help address climate change and shift countries toward a low-carbon and

climate-resilient growth pathway. The next challenge is how to mobilize climate

finance investments, particularly in developing countries, to make these types of

interventions possible.

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10. Typology of investments that climate finance can cover

According to common practitioner use, climate finance can usually be used to

refer to different investments. We will now review a typology of investments

that climate finance is used to cover.

Click on each of the buttons to learn more.

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Incremental Costs

The incremental cost is the present value of the extra capital and operating costs

associated with a mitigation or adaptation measure over its lifetime; for

example, the present value of the capital and operating costs of a solar power

plant less the present value of the capital and operating costs of the natural gas

unit displaced. Climate finance is provided to incentivize the shift to mitigation or

adaptation technologies by compensating for the increase in cost associated

with these options. Incremental costs often make the difference in the final

investment decision, influencing where investors decide to put their money, and

are generally funded by public climate finance resources.

Click on the button to view a graph displaying the annual investment flows for

mitigation activities over the next two decades.

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This graph shows the change in annual investment flows for mitigation activities

from the average baseline level over the next two decades. What is interesting

here is that such investment changes based on model studies and model

comparisons reflect a significant shift in investment behavior - increasing

resources dedicated to low-carbon technologies, and decreasing investment in

the two high emitting technologies represented: fossil fuel power plants without

carbon capture and storage, and extraction of fossil fuels. This underscores that

investment needs are evolving in the direction of addressing climate change.

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Incremental Investment

The incremental investment is the extra capital cost required to implement a

mitigation or adaptation measure; for example, the investment in wind turbines

less the investment that would have been required for the coal generating unit

displaced. Incremental investment is generally covered by private sources of

funding.

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Cost to Remove Barriers

Climate finance also helps cover the costs to remove barriers - both domestic

and foreign - to technology introduction and create an enabling environment

that promotes low emissions and climate resilient development plans.

Click on each of the highlighted icons to learn more about the types of potential

barriers and then click on the button for additional considerations.

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11. Climate finance funds under UNFCCC

To help manage delivery and deploy climate finance to cover the types of costs

just mentioned, parties to the UNFCCC Convention have established four special

funds: Special Climate Change Fund (or SCCF), the Least Developed Countries

Fund (or LDCF) - both managed by the Global Environment Facility (or GEF) - the

Green Climate Fund (or GCF) under the Convention, and the Adaptation Fund (or

AF) under the Kyoto Protocol. These special funds help developing countries in

addressing the climate change challenge. The UNFCCC Finance portal provides

updated information on these funds. Click on the button to learn more.

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12. World Bank Examples of Climate Finance Funds and Facilities

Outside of the UNFCCC, a number of other bilateral and multilateral funds were

created in past years. The World Bank has established or housed a number of

funds and facilities that are also helping developing countries with climate

finance.

Click on each of the logos to learn more.

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13. Climate finance supporting Colombias sustainable transport and energy goals

A concrete example of climate finance helping countries transition to low-carbon

and climate-resilient growth, is funding from the Clean Technology Fund (or CTF)

which is supporting Colombia's implementation of abatement measures in two

key sectors -- urban transport and energy efficiency. Both sectors are identified

as ready for scaling-up of investment, through use of CTF resources, and as

exhibiting high potential for transformation change in terms of shifting

investment patterns onto a lower carbon path. Through the specific

interventions in the targeted three consuming sectors (industrial, commercial

and residential), it is estimated that the CTF Efficiency Program would save 4.9

Mt CO2e over a 20-year period, with a total program cost of US$147.2 million.

Click on the button to learn more.

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14. Summary

In summary, you have seen how climate finance is in critical need, in order to

help countries address the climate change. The finance architecture under the

UNFCCC Convention has evolved to encompass mobilization, delivery and

oversight of climate finance to developing countries now and for the future.

While the magnitude of the investment challenge seems large, if mobilized,

climate finance makes it possible for countries to implement interventions for

low-carbon and climate-resilient growth. In the next lesson, you will become

more familiar with the current landscape of climate finance and what

instruments are critical to mobilizing more climate finance to fill the resource

gap.

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15. References and Resources

You have reached the end of Lesson 1. Displayed are some links that you may

visit for additional information.

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Curso sobre financiamiento para el cambio climático