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Climate Action 2014-2015

CLIMATE FINANCE Robeco

CLIMATE FINANCE Robeco launched Asia Climate Partners, a US$400 million joint venture that will make private equity investments in environment- and climate-friendly companies and transactions. Our newly established Office of Public Private Partnership to provide governments with independent advice on shaping publicprivate partnerships (PPPs) will also be a key conduit for greater infrastructure investment in developing Asia. Designing PPPs to help finance low-carbon, climate-resilient infrastructure will be an ADB priority in the years to come. OPPORTUNITIES FOR DECARBONISATION Over the past decade, developing Asia’s greenhouse gas emissions have been rising about 5.4 per cent yearly, faster than the global average of 2.2 per cent. But energy demand is set to grow too. Recent figures from the Climate Policy Initiative indicate that Asia and the Pacific will require US$17 trillion in energy-related investment in upstream coal, gas and oil production, power generation, transport and buildings from 2015 to 2030. An additional US$4.8 trillion will have to be spent to deploy low-energy infrastructure options and stay within the 2°C limit. This is a huge challenge, but creates significant opportunities for green investment. There are many low-hanging fruits. In 2010, greenhouse gas intensity – tons of carbon dioxide equivalent per US$1,000 of gross domestic product – in Asia- Pacific was 1.2 compared with the world average of 0.8, suggesting there is considerable potential for efficiency gains and emissions reductions. Our mid-term strategy review will see ADB continue to invest at least US$2 billion annually in clean energy, including in energy efficiency, particularly in manufacturing plants, households, buildings and transport. In line with the multilateral development bank commitments made at the 2012 Rio+20 conference, ADB will invest US$30 billion in transport by 2021, thereby helping improve the sustainability of the transport sector in our developing member countries. Ensuring energy is used more efficiently may be difficult for some governments. Eliminating fossil fuel subsidies in particular may be tough even though ADB estimates show that the subsidies in just three countries – India, Indonesia, and Thailand – cost over US$91 billion in 2012 alone. Decarbonisation brings many other benefits such as an improvement in human health and the environment through reduced air pollution which outweigh most of the implementation costs. In other words, it makes economic sense to invest in climate action. This message was also at the heart of a landmark report – Better Growth, Better Climate: The New Climate Economy – issued earlier in 2014 by the Global Commission on the Economy and Climate. CATALYSING CLIMATE- RESILIENT INVESTMENTS Unmitigated climate change poses great risks to human security. Hurricane Sandy and Typhoon Haiyan (Yolanda) are two recent reminders of how windstorms, which may be exacerbated by climate change, can have devastating impacts. In the aftermath of Typhoon Haiyan (Yolanda), ADB stood side by side with the Philippine people and their government, committing over US$1 billion for immediate relief assistance, post-disaster rehabilitation and reconstruction, restoration of basic services, and other programmes. ADB’s STRENTHENING INSTITUTIONS TO BUILD RESILIENCE ADB is helping increase the climate resilience of societies and communities throughout the region by strengthening institutions, generating and disseminating knowledge, and building the climate resilience of vulnerable sectors by investing in infrastructure, governance, education, and health. In 2013 alone, ADB approved 19 technical assistance programmes and 23 projects focused on climate change adaptation or with significant adaptation components. Our total adaptation support was US$896 million in 2012 and around US$1 billion in 2013. We aim to double this by 2016. ADB is also implementing a systematic approach for climate risk screening and assessment so climate risks are identified and addressed in the early stage of project design. Typhoon Yolanda Response Team, including 40 senior staff members with expertise in post-disaster situations, continues to coordinate ADB assistance locally via our field office in Tacloban, the city hardest hit by the typhoon. We will certainly continue to help countries cope with disasters. But sustainable economic growth and human development cannot take place in Asia-Pacific without building climate resilience to safeguard all other development gains. "Decarbonisation brings many other benefits such as an improvement in human health and the environment." Governments have a key role in addressing climate risks. They can help by integrating climate resilience and adaptation objectives in development strategies, policies, and investment programmes. They also have a responsibility to help poor and vulnerable groups better cope by providing new livelihood opportunities, 46

CLIMATE FINANCE increasing awareness and participation, and improving health systems and basic education. The private sector is also intrinsic to overcoming the growing adaptation deficit. Our estimates suggest US$40 billion a year is necessary just to climateproof critical infrastructure in the region. With the right incentives, the private sector can help mobilise the required finance, as well as deploy the relevant technologies for adaptation. PROMOTING LIVEABLE CITIES FOR FUTURE COMPETITIVENESS Currently, more than 40 per cent of Asia’s population resides in urban areas – with over 520 million living in urban slums, with poor services – but by 2050, twothirds of Asia’s population will be urban. Urban areas also account for 60 to 80 per cent of the region’s energy consumption and 75 per cent of its carbon emissions. Many cities are also regular victims of climate-related hazards, such as floods and storm surges. Helping cities become more resilient to climate change is critical to protect lives and infrastructure, but would also boost investment and longterm economic growth. In urban development, ADB promotes integrated planning and development of cities through three interrelated approaches: ‘Green Cities’, focusing on mitigating, adapting, and building resilience to climate change ‘Inclusive Cities’, supporting improvements in urban housing, infrastructure such as water supply, sanitation, waste management and transport, and livelihood development, and; ‘Competitive Cities’, promoting economic clusters which contribute to inclusive economic development. With Asia-Pacific cities on the front line of climate change, ADB is putting a stronger focus on urban climate change mitigation and urban resilience. In 2013, we established a US$141 million Trust Fund for Urban Climate Change Resilience with the Rockefeller Foundation and the UK and US governments to strengthen resilience in secondary cities in Asia. Meanwhile, ADB’s Urban Financing Partnership Facility has provided US$53 million for 31 projects targeting better access to drinking water, sanitation, transport and solid waste management for about 200 million people. GOING FORWARD The UN Climate Summit in September created significant momentum for climate action which will hopefully carry over to COP21 in Paris, where a comprehensive international climate agreement for global climate action after 2020 must be reached. The summit again underlined that action by all – developed and developing country governments, the private sector, and civil society – is required. Delaying mitigation and adaptation efforts will substantially increase the cost and difficulty of transitioning to a lowcarbon and climate-resilient economy. Further delay risks irreversible and devastating climate change. We have a huge opportunity right now to benefit from a shift towards a lowcarbon, climate-resilient development trajectory. Many forward-looking private sector players and some public sector decision-makers are already seizing that opportunity. However, in order to mobilise the needed financing, governments need to put in place the right mix of policies and deploy their limited public funding in a way that encourages private investment. A smart partnership of the public and private sectors which draws from and leverages the strengths of both is needed. ADB stands ready to work with all our partners to ensure a cooperative and effective climate response in the developing countries in Asia and the Pacific. The region, and the world, will benefit from that. Bindu N Lohani is Vice-President for Knowledge Management and Sustainable Development at the Asian Development Bank. Mr. Lohani is responsible for ADB’s Economics and Research Department (Office of the Chief Economist), Office of Regional Economic Integration, Regional and Sustainable Development Department (RSDD), and the Office of Information Systems and Technology. Prior to this position, he was Vice-President for Finance and Administration. The Asian Development Bank (ADB), based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth and regional integration. Established in 1966, it is owned by 67 members – 48 from the region. climateactionprogramme.org 47