The $100 Billion Question on Climate Starts to Find an Answer

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Industrial nations are starting to answer the question of how they will scale up aid for projects that curb global warming, unleashing development banks to help catalyze investment.

The board of the European Bank for Reconstruction and Development said it will increase investment for climate projects to 18 billion euros ($20 billion) by 2020, a boost of about 1 billion euros a year according to a statement from the bank in London. The announcement followed similar decisions over the past week by the European Investment Bank and Asian Development Bank.

The funds involved are only a fraction of the $100 billion commitment that rich countries have repeated every year since 2009 to inject life into the international effort on climate change.

Even so, support from the development banks is crucial for drawing in more capital because it makes commercial lenders confident in untested projects.

“We will increase our current areas such as energy efficiency, renewable energy and recycling while also expanding into new areas in adaptation to climate change, particularly for water,” Josue Tanaka, managing director for energy efficiency and climate change at the London-based EBRD, said by phone.

Coordinated Action

The development banks are moving in unison ahead of a landmark agreement on climate involving more than 190 countries that the United Nations is pushing to tie up in December. The deal would salvage the international fight against global warming, which ran aground in Copenhagen in 2009, with rich countries and poorer ones debating about who will move first to rein in fossil-fuel pollution.

U.S. President Barack Obama led industrial countries at the time in pledging to scale up aid to $100 billion a year by the end of this decade, more than 10 times what was flowing at the time. And since then, details on where that money would come from have been sparse, leaving developing nations reluctant to join in slashing emissions.

A Group of Seven nations summit in Germany in June started to spur action. Development banks were asked to see what they could do in boosting climate finance. Leaders asked the institutions to “use to the fullest extent possible their balance sheets and their capacity to mobilize other partners in support of country-led programs to meet this goal,” according to a statement issued at the meeting.

Last week the Asian Development Bank, owned by 67 countries including China and the U.S., said it will double its lending to $6 billion a year. The European Investment Bank, owned by European Union nations, also indicated that it is preparing to increase funds to green projects, though it was less specific about the amount of new funds available.

“It is connected to the $100 billion,” Tanaka said, whose institution is controlled by 64 nations. “We all have the same subsets of shareholders.”

Missing Americans

Absent from the initiative are U.S. institutions such as the Export Import Bank of the U.S. and the Overseas Private Investment Corp., which are fighting for their lives as Republicans in Congress say their mandates should be allowed to lapse.

In Germany, the nation’s KfW development bank is poised to remain one of the biggest all-time lenders for renewable energy. Norbert Kloppenburg, a board member of the institution, said KfW will remain “out in front” on climate.

“For all multilateral development banks, the issue of climate investment is gaining in importance,” Kloppenburg said. “The issue has become central to society, and the banks have to take that into account.”

KfW will “definitely co-finance a big part of the $100 billion” pledge, he said.

The EBRD, a London-based development bank, will spend about 40 percent of its annual investments over the next five years on climate action financing, up from a previous target of 25 percent. By 2020, Tanaka estimates that it will be around 4 billion euros per year, rising from approximately 3 billion euros in 2014.

‘Climate Proof’

Adaptation activities are projects that “climate-proof” businesses and infrastructure to the rising temperatures of the planet and make them more resilient to changes in weather. The EBRD will have a focus on water efficiency, particularly in countries in the southeastern Mediterranean such as Jordan and Turkey that are drying up.

“This is the next frontier of climate finance,” Tanaka said.

The ADB will spent about $2 billion per year on adaptation measures. “Nowhere is tackling climate change more critical than in Asia and the Pacific, where rising sea levels, melting glaciers and weather extremes like floods and droughts are damaging livelihoods and taking far too many lives,” said the ADB’s president, Takehiko Nakao, last week in a statement.

About 90 percent of the EBRD’s financing today goes to projects in energy efficiency and renewable energy, with 10 percent for climate adaptation. “I think that looking forward, that share will move in the direction of an increase in adaptation funding,” Tanaka said.

SOURCE: www.bloomberg.com - http://www.bloomberg.com/news/articles/2015-09-30/the-100-billion-question-on-climate-starts-to-find-an-answer

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This segment is brought to you through a partnership between the UNDP Climate Change Team at the Ministry of Environment in Lebanon and the NAHARNET team. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of any party/institution.

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