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Takayoshi KATO Policy Analyst, Environment Directorate, OECD
COP22, Bab Ighli, Marrakech, Morocco11 November 2016
Turning NDCs into investment plans: Way forward in countries of Eastern Europe, the Caucasus and Central Asia
2
• The OECD has supported countries of Eastern Europe, the Caucasus and Central Asia (EECCA) to reconcile their environment and economic goals since 1990s.
• Rebranded this year from the EAP Task Force to the GREEN Action Programme Task Force.
• Planned work areas for 2017-2018*– National green economy dialogues and strategies – Green finance and investment, and– Integrating environmental, economic and sectoral
policies for green growth, and– Strengthening water management
About GREEN Action Programme(hosted by the OECD)
*subject to approval
3
• Objectives: – Improve clarity on how 11
EECCA countries and their development co-operation partners are working together to finance climate action in the countries; and
– Explore how these countries can assess readiness to access various climate finance sources.
OECD work on financing climate action in countries of EECCA (Eastern Europe, Caucasus and Central Asian)
NEW:OECD(2016), Financing climate action in Eastern Europe, the Caucasus, and Central Asia, OECD publishing, Paris, [LINK]
4
Scope of analysis
Bilateral donors (DAC Members)
MultilateralDevelopment Banks
Climate funds (CIF, GEF etc)
Domestic budget (Public)
Private sector investment
EECCA countries
Committed in 2013-14
Co-financed with international public finance
INDC targets
Priority sectors
Institutional arrangements
Country analysis
Climate policies
Analysis of finance flows
5
Significant amount of (public) climate-related development finance* committed to EECCA (2013-2014)
EECCA receives USD3.3bln/year)
Global: USD 47.3bln/y
2013-2014
Mitigation vs Adaptation (USD bln/y)
Sources: OECD (forthcoming) Financing climate action in EECCA, based on OECD-DAC Creditor Reporting SystemNote(*): The financial flows are delivered through bilateral (mainly DAC members) and multilateral channels and calculated as a two-year average between 2013 and 2014.
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Comparison across the regions(Finance committed vs GDP per capita)
Ann
ual f
inan
ce c
omm
itted
(U
SD
bln
pe
r yea
r: av
erag
e in
201
3 an
d 20
14)
Sources: OECD (forthcoming) Financing climate action in EECCA, based on OECD-DAC Creditor Reporting System
GDP per capita PPP (USD: 2014)
7
Large difference in amount of finance committed to each countryAnnual climate-related development finance and GDP per
capita PPP (2-year average between 2013 and 2014)
Sour
ce: O
EC
D (f
orth
com
ing)
Fin
anci
ng c
limat
e ac
tion
in E
ECC
A, b
ased
on
OEC
D-D
AC C
redi
tor
Rep
ortin
g Sy
stem
; WB
(201
6) W
orld
Dev
elop
men
t In
dica
tors
Armen
ia
Azerba
ijan
Belarus
Georgi
a
Kazak
hstan
Kyrgyz
stan
Moldov
a
Tajikis
tan
Turkmen
istan
Ukraine
Uzbek
istan
AVERAGE0
200
400
600
800
1000
1200
0
10
20
30
40
50
60
70
Mitigation Adaptation Both Total per capita
(USD mln) (USD per capita)
8
Largest amount committed to energy sector, reflecting high infrastructure investment needs
Annual climate-related development finance by sector (2-year average between 2013 and 2014) (USD Million, 2013-price)
Sources: OECD (forthcoming) Financing climate action in EECCA, based on OECD-DAC Creditor Reporting System
Energy generation and supply
Agriculture, Forestry and Fishing
Water Supply and Sanitation
Industry, Mining, Construction, Trade Policy and Tourism
Banking, financial and business services
Transport and storage
Multi sector
0 500000 1000000 1500000
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Potential to mainstream climate-consideration into development finance in some sectors
Climate-related development finance as a share of total bilateral and multilateraldevelopment finance (2-year average between 2013 and 2014)
(%)
Sources: OECD (forthcoming) Financing climate action in EECCA, based on OECD-DAC Creditor Reporting System
10
But, still large financing gap to achieve EECCA’s climate targets
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Seizing opportunities in the evolving climate finance landscape is a complex practice…
National priorities and needs
Updated info. on sources of support
In-country coordination
Pipeline development
Monitoring, evaluation and learning
Clear picture of finance flows within the country
12
• They need to: – Be stable and predictable– Provide a strong price on carbon, so that
low carbon investments are competitive with carbon intensive technologies (e.g. coal)
– Provide strong regulatory support in areas where price signals are not efficient, such as in energy efficiency measures
– Provide targeted support for low-carbon technologies
Core climate policies are necessary for mobilising finance…
13
Mitigation (Un-
conditional)
Mitigation (Condition-al) Adaptation
Needs for support
quantifiedArmenia YES YES YES
Azerbaijan YES
Belarus YES YES
Georgia YES YES YES (Adaptation)
Kazakhstan YES YES
Kyrgyzstan YES YES YES YES
Moldova YES YES YES YES
Tajikistan YES YES YES
Turkmenistan YES YES
Ukraine YES
Most EECCA countries submitted INDCs
INDC elements
Intended Nationally Determined Contributions
Nationally Appropriate Mitigation Actions
Low Emission Development Strategy
National-level adaptation strategy
National-level climate strategy
ARMAZEBLRGEOKGZKYGMDATJKTKMUKRUZB
14
Good deal of national-level climate policy documents already exist/planned in EECCA
Intended Nationally Determined Contributions
Nationally Appropriate Mitigation Actions
Low Emission Development Strategy
National-level adaptation strategy
National-level climate strategy
ARMAZEBLRGEOKGZKYGMDATJKTKMUKRUZB
Approved/submitted Being developed
Sour
ces:
OEC
D (f
orth
com
ing)
Clim
ate-
rela
ted
deve
lopm
ent
finan
ce in
EEC
CA,
bas
ed o
n th
e co
untr
ies’
IND
Cs
• “Rushed” process of developing INDCs and other climate policies often undermined translation of targets into implementation strategies over the years.
• Policy targets are set, but often lack secondary legislations/ by-laws/ technical specifications.
• Limited capacity in implementation and access to finance from domestic and international sources.
• An INDC does not necessarily line up with the country’s infrastructure investment plans.
15
Challenges in implementation of climate policies: cases from EECCA
e.g. Renewable energy• Stability of government support• Price level of feed-in-tariff and indexing to foreign exchange rates• Transparency in power purchase agreements• Conflict with energy-sector development that focuses more on fossil fuels
FUEL and ENERGY
Also, it’s NOT just climate policies that affect climate targets…
TECHNOLOGY
COMPETITIONFISCAL
SOCIAL
TRANSPORT
INVESTMENTCLIMATE
16
17
• Fiscal policies: • Environmentally harmful subsidies and incentives• Existing budgeting rules not allowing public agencies
to benefit from energy savings achieved
• Investment promotion policies: • Difference in the ease of accessing finance between
small and medium sized entities and larger enterprises such as state-owned entities (SOEs).
• Overly strict requirement for collaterals • Lack of regulatory stability on financial markets• “Shallow” financial markets • High political risks that limit investors interests
Misalignments between policies exist in EECCA (and most countries across the world)
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• Energy sector policies: • Competition between renewable energy and
development of offshore oil and gas fields.• Enhancing energy access through coal fire power
plants.
• Transport sector policies: • Well connected transport network, coming with heavy
reliance on fossil fuels and internal combustion engines.
• Competition policies: • A lack of fair and transparent competition between the
state-owned enterprises producing or using fossil fuels and independent producers of clean energy.
Misalignments between policies exist in EECCA (and most countries across the world)
19
Experiences from the EU’s Eastern Partnership countries (i.e. ARM, AZE, BLR, GEO, MDA and UKR)• All major subsidy types exist in the countries (direct budget
transfers, tax expenditure, transfer of risk to government and induced transfers), but the scales vary across the countries.
• Most of the (quantified) fossil fuel subsidies in the region aim to benefit residential consumers. Often, such subsidies are seen as social measures.
• Under-taxing certain fuels, and reduced VAT and excise taxes (or tax exemptions) on energy carriers: leading to substantial drain on government budgets.
• Government support to energy efficiency measures and renewables is still limited and largely incomparable to the subsidies conferred to fossil fuels.
Energy subsidies negatively affecting both public budget and low-carbon development
Source: OECD (forthcoming), Energy Subsidies in the Eastern Partnership countries
20
Planned OECD work for enhancing climate finance readiness of EECCA countries
OECD work on policy assessment
Others’ work on climate finance readiness
Climate policies
Non- Climate policies
Targets
Natl’ strategies
Policy instruments
Energy
Transport
Water
Agriculture
Effectiveness, coherence and misalignments
Fiscal/Investment
Country programmingPipeline development
Analytical input to identify constraints
Feasibility studiesProposal development
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The report accompanied by 11 country reports
22
• Greening finance– Reforming energy subsidies– Facilitating access to private-sector finance for green
investments (e.g. environmental lending)– Better financial planning in the public sector
• Greening industry• Water resource management and green growth• Measuring green growth
More work under the GREEN Action Programme
See also our latest Brochurehttps://issuu.com/oecd.publishing/docs/from_eap_to_green_action_programme_?e=3055080/36192948
See website http://www.green-economies-eap.org/
Thank you.
Contact: Takayoshi [email protected]
http://www.oecd.org/env/outreach/eap-tf.htm http://www.oecd.org/environment/