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Climate Action 2010-2011

Finance and Markets Box

Finance and Markets Box 2: North Africa solar power could prove ‘transformational’ Several countries in the Middle East and North Africa are moving swiftly to tap an energy source more abundant than the region’s vast oil reserves – the sun. Morocco, Egypt, Tunisia, Algeria and Jordan plan to build concentrated solar power plants to supply their own energy needs and help meet demand for renewable energy in Europe. By 2020, solar power capacity in the countries could reach five gigawatts, according to a progress report to be presented to the Clean Technology Fund (CTF) Board. Since last December, the countries have scaled up an already “ambitious” program to be “something more transformational,” says Jonathan Walters, director of regional strategy and programs for the World Bank’s Middle East and North Africa region. The first project in the program to go online in 2014 will be the first phase of Morocco’s 500 MW Ouarzazate plant, expected to be largest concentrated solar power plant in the world. Other such solar plants will be clustered in the region, helping to drive down technology costs and launch a globally important climate change mitigation technology. The Ain Beni Mathar solar plant in Morocco is already supplying electricity to the grid. The CTF Board endorsed a plan that would allow these Middle East and North African countries to reduce carbon dioxide emissions by millions of tons a year, while enhancing energy security and forming closer economic ties with Europe through renewable energy exports. Learning lessons As the international climate finance architecture is being developed, experience by the multilateral development banks in delivering and leveraging finance and supporting implementation is worth looking at to clarify what works, when, and why. The experience gained by the Climate Investment Funds offers unique lessons in both innovative governance and flexible financing at scale. Whatever future climate finance structure emerges, it should support recipient country priorities. It should channel resources quickly and efficiently, focus on results, tailor financial products to project needs, and maximize synergies between development and climate finance. Dedicated climate funds are not the full solution to the problem of financing climate change mitigation, but an important way of filling gaps, supporting the overall development efforts of developing countries towards lower emission paths and catalyzing finance from public and private sources. Last, it is vital to share lessons of successful innovations for wider replication adjusting to national and sector circumstances. The Climate Finance Knowledge Platform, being launched in Cancun jointly by the UN Development Program (UNDP) and the World Bank Group, in close collaboration with the UNFCCC Secretariat, is such an example: the platform seeks to provide comprehensive information, knowledge and guidance to investment planners and project managers in developing countries on enabling policies, examples of successful combination of different instruments, information on such funds and tools to improve the quality of decisions. Consequently, as of today, we are actively engaged with well over 100 countries, supporting their efforts on adaptation and mitigation. Recently, for example, the World Bank launched a US$6.1 billion strategy to support antipoverty efforts in Bangladesh through 2014, and reducing vulnerability to climate change is one of the four pillars of the strategy. But that is just one country. The collective mitigation and adaptation needs of the developing world over the next several decades add up to a hefty number. Action on mitigation is also proceeding apace. With support from the Clean Technology Fund, Algeria, Egypt, Indonesia, Jordan, Kazakhstan, Mexico, Morocco, Philippines, South Africa, Thailand, Tunisia, Turkey, Ukraine, and Vietnam plan to radically rebalance their national energy portfolios by investing in renewables at a large scale. In addition to the CTF, six low income countries – Ethiopia, Honduras, Kenya, Maldives, Mali, and Nepal – intend to invest in renewable energy services as a means to grow their citizens’ often badly-needed energy access and leapfrog into climate-friendly development, with support from the CIF. The solar power program in North Africa, described in Box 2, illustrates the scale of ambition of some of the projects underway in developing countries. Importantly, this once again illustrates the need to be able to bring together financiers from public and private sources, grants, loans and carbon markets if the scale of the challenge is to be met. | 112 | Dr. Steer became Special Envoy for Climate Change at the World Bank in July 2010. As such, he is responsible for guiding the Bank Group’s work on climate change and further advancing its internal capabilities in this area. In his post, which ranks at the level of Vice President, he will also oversee the multi-billion dollar Climate Investment Funds and help mobilise climate financing. Prior to his appointment, Dr. Steer served for three years as Director General, Policy and Research at the UK Department of International Development (DFID) in London. The World Bank is a vital source of financial and technical assistance to developing countries around the world. It’s mission is to fight poverty with passion and professionalism for lasting results and to help people help themselves and their environment by providing resources, sharing knowledge, building capacity and forging partnerships in the public and private sectors. The World Bank 1818 H Street, NW Washington, DC 20433 USA Tel: +1 (202) 473 1000 Website: www.worldbank.org www.climateactionprogramme.org

Finance and Markets There is projected to be a third more people on the planet by 2050, mostly located in urban areas. © iStockphoto The ‘green race’ is on Matthew Bateson Director of Energy & Climate for the World Business Council for Sustainable Development (WBCSD) Disappointment over the lack of an international deal for reducing global emissions at Copenhagen has perhaps obscured a trend with tremendous growth potential: companies and countries have entered a ‘green race’ to become world leaders in developing clean energy and climate-friendly industries. This has begun not a moment too soon. Explosive population growth expected in the next 40 years will lead to a world that is increasingly carbon and resource constrained. The developing world is expanding, creating an enormous demand for resources to build infrastructure. The wise use of resources today is critical: tomorrow it will be too late. The best and quickest way to decarbonise our economies will be for governments to put in place measures to unleash private investment. There have been ambitious national-level efforts to attract clean energy investment. The list of countries is lengthening and the rankings are changing fast. According to an Ernst & Young index that assesses country attractiveness for renewable energy investment, the US has lost its top slot to China – a position it has held since 2006 – while Japan, New Zealand and Australia have all moved up a few places. Companies and countries are also starting to value their water, one of the single most important engines of economic growth and stability. The race to decarbonise The current global economic downturn has mostly hit developed countries yet the world is expected to see tremendous growth over the next 40 years to 2050, mostly in developing countries. There is projected to be at least a third more people on the planet by then, most of them located in urban centres in emerging markets. Therefore the focus will be on improving the quality of life – to deliver clean energy, clean water, paved roads and more and better schools. This enormous expansion – and consequent faster economic growth – will push up demand for resources which, if poorly managed, will lead to greater pollution. In short, the massive wave of infrastructure necessary to improve the livelihoods of literally billions of new citizens, mostly in developing countries, will lead to a world that is resource constrained. Running parallel, meanwhile, there will be the challenge to decarbonise the energy systems and economies of developed countries. Business is the main partner for governments in building a low carbon future. In developing countries, private sector investment in clean energy in 2009 was treble that of public finance. The twin challenges in the developed and developing worlds will put tremendous pressure on increasingly limited resources. www.climateactionprogramme.org | 113 |