1 JOINT REPORT ON MDB CLIMATE FINANCE 2012 A report by a group of Multilateral Development Banks (MDBs) comprising the African Development Bank (AfDB), the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), the Inter-American Development Bank (IDB), the World Bank (WB) and the International Finance Corporation (IFC). November 2013 EXECUTIVE SUMMARY 1. The Joint MDB Report on Climate Finance is now in its second year, and the information provided has been expanded to include a better sectoral as well as a regional breakdown of MDB financing. This report presents basic data on which further analysis could be based. Multilateral Development Banks (MDBs) provided approximately USD27 billion in financing to address the challenges of climate change in 2012. 2. Of the total USD27 billion in climate finance, 78%, or USD21 billion was dedicated to mitigation and 22%, or nearly USD6 billion to adaptation. Of the total commitments, 8%, or USD2 billion came from external resources, such as bilateral or multilateral donors, including the Global Environment Facility and the Climate Investment Funds. 3. In terms of regional coverage, Latin America and the Caribbean received the highest total share of MDB climate finance, 18%, while the EU 13 countries received 11%. In regards to sector coverage, 36% of adaptation finance went to the infrastructure, energy, and built environment sector, while 33% went to support increasing the resilience to climate change of the agriculture sector. In mitigation finance, renewable energy took by far the largest share of finance, with 36% of the total. The difference between mitigation and adaptation finance is greatest in the EU 13 and Other Europe and Central Asia regions, where 95% and 93% of climate finance commitments from MDBs respectively is for mitigation measures. SECTION 1: INTRODUCTION 4. The international community recognizes the need to join forces to avert dangerous climate change. This requires mobilizing financial resources from a wide range of sources, public and private, bilateral and multilateral, including alternative sources. That makes it increasingly important to track and report financial flows that support climate change mitigation and adaptation, to build trust and accountability with regard to climate finance commitments and monitor trends and progress in climate-related investment. 5. The present report is based on the joint MDB approach for climate finance reporting, which was first defined in 2012 by the above group of MDBs to work towards better climate finance monitoring. It responds to the particular context of the activities that the MDBs carry out in developing and emerging economies and is built on the premise that climate finance and development are closely aligned. 6. The joint MDB approach differs in how it treats mitigation and adaptation. For mitigation, it is based on a common list of mitigation activities at the intersection of what all MDBs consider mitigation, while some 1 For any questions or comments, please email jointclimatefinancereport@ebrd.com 1 MDBs may consider additional activities not covered by the joint approach as mitigation. The total volume of each MDB’s climate finance calculated following internal methodologies is separately reported in Table 10. For adaptation, the MDBs report under the joint approach agreed in 2012 (see section 3.3 for the definition). Some MDBs may also have a different internal accounting approach, which is reported separately in this report. 7. The joint approach is also a work in progress aimed at assisting the MDBs, as well as other organizations that might want to join or more clearly understand their climate engagement. This will hopefully lead to gradual convergence towards a harmonized approach for climate finance monitoring. This report covers both mitigation and adaptation oriented climate finance, and provides substantially higher granularity in 2 regional and sector-level reporting, compared to the reports issued in 2012 with 2011 numbers . 8. Section 1 of this report is an introduction. Section 2 contains the detailed numbers for 2012, while Section 3 contains the definitions of terms, regional coverage, and the adaptation and mitigation methodologies. SECTION 2: MDB CLIMATE FINANCE, 2012 2.1 TOTAL MDB CLIMATE FINANCE, 2012 9. The tables below present total climate finance provided by the MDBs for fiscal year 2012 in developing, emerging, and transition economies. Data reported correspond to the financing of those components and/or sub-components or elements within projects that provide mitigation and/or adaptation co- benefits (rather than the entire project cost). 10. Table 1 reports total climate finance for mitigation and adaptation using the joint MDB approach for reporting that is based on the principles set out in the first reports published in 2012 (see also Section 3). Table 2 shows the same data with a regional breakdown developed for the purposes of this report. 11. The MDBs recognize that some projects contribute to both mitigation and adaptation. The numbers reported here assign the corresponding finance to either mitigation or adaptation, or divide it into mitigation and adaptation, so that there is no double-counting. The total volume of climate finance through the MDBs in 2012 can therefore be derived by adding mitigation and adaptation. While the MDBs are working towards identifying the overlap separately, this remains a work in progress due to data- tracking and reporting format issues. 2 Mitigation report 2011: http://climatechange.worldbank.org/sites/default/files/MMF_2011_version_21.pdf Adaptation Report 2011: http://www.afdb.org/fileadmin/uploads/afdb/Documents/Generic- Documents/Joint%20MDB%20Report%20on%20Adaptation%20Finance%202011.pdf 2 3 4 Table 1: MDB Climate Finance, 2012 (USD millions ) MDB resources External resources Investments Investments MDB Policy-based Policy-based Total and technical and technical instruments instruments assistance assistance AfDB 1,908 0 312 0 2,220 ADB 2,822 0 462 0 3,284 EBRD 3,000 0 132 0 3,131 EIB 3,663 0 0 0 3,663 IDB 1,581 177 111 0 1,870 IFC 1,552 0 36 0 1,588 WB 7,584 2,398 1,086 0 11,068 Total 22,109 2,576 2,138 0 26,823 Figure 1: MDB Climate Finance, 2012 3 For geographic coverage of the climate finance totals, see section 3.2. 4 Currency conversions from MDB reports were carried out at the average 2012 rate of 1.32 EUR/USD. 3 5 Table 2: MDB Climate Finance by Region , 2012 (USD millions) MDB Resources External Resources Investments Investments Country/Region and Policy-based and Policy-based Total technical instruments technical instruments assistance assistance South Asia 3,609 0 118 0 3,727 East Asia and the Pacific 2,855 735 735 0 4,324 Sub-Saharan Africa 3,141 32 477 0 3,651 Middle East and North 1,702 0 326 0 2,028 Africa Latin America and the 3,786 918 226 0 4,930 Caribbean (Other) Europe and 3,561 452 115 0 4,127 Central Asia EU 13 2,479 440 76 0 2,994 Regional 978 0 65 0 1,043 Total 22,109 2,576 2,138 0 26,823 Figure 2: MDB Climate Finance by Region, 2012 5 See Section 3.2 for definitions of the regions as listed below. 4 2.2. MDB Adaptation Finance, 2012 12. The tables below present adaptation finance provided by the MDBs for fiscal year 2012. Data reported correspond to the financing of adaptation projects or of those components, sub-components or elements within projects that provide adaptation co-benefits (rather than the entire project cost). 6 Table 4: MDB Adaptation Finance, 2012 (USD millions) MDB resources External resources Investments Investments MDB Policy-based Policy-based Total and technical and technical instruments instruments assistance assistance AfDB 445 0 67 0 512 ADB 821 0 75 0 896 EBRD 188 0 32 0 219 EIB 179 0 0 0 179 IDB 7 132 9 0 148 7 IFC - - - - - WB 2,604 1,209 188 0 4,002 Total 4,244 1,342 370 0 5,956 Figure 4: MDB Adaptation Finance, 2012 6 Unlike for mitigation, most MDBs do not report adaptation volumes outside the joint approach. The exception is IDB, which has a different internal climate finance tracking approach. Its numbers are as follows: MDB resources, investment and technical assistance: USD95 M; MDB resources, policy-based instruments: USD393 M; external resources, investment and technical assistance: USD9 M. 7 IFC started tracking adaptation finance in FY13 and will provide these amounts in the next reporting period. 5 Table 5: MDB Adaptation Finance by Region, 2012 (USD millions) MDB Resources External Resources 8 Investments Investments Country/Region Policy-based Policy-based Total and technical and technical instruments instruments assistance assistance South Asia 1,195 0 71 0 1,266 East Asia and the Pacific 484 562 51 0 1,098 Sub-Saharan Africa 1,645 12 179 0 1,836 Middle East and North 197 0 0 0 197 Africa Latin America and the 374 730 15 0 1,118 Caribbean (Other) Europe and Central 192 38 43 0 273 Asia EU 13 132 0 0 0 132 Regional 25 0 11 0 36 Total 4,244 1,342 370 0 5,956 Figure 5: MDB Adaptation Finance by Region, 2012 8 See Section 3.2 for definitions of the regions as listed below. 6 9 Table 6: MDB Adaptation Finance by Sectors, 2012 (USD millions) MDB resources External resources Investments Investments Sectors Policy-based Policy-based Total and technical and technical instruments instruments assistance assistance Water & wastewater 385 62 29 0 477 systems Agricultural & ecological 1,759 26 209 0 1,995 resources Industry, extractive 4 0 2 0 6 industries, manufacturing & trade Infrastructure, energy & 1,490 585 75 0 2,150 built environment Other 605 669 55 0 1,328 Total 4,244 1,342 370 0 5,956 Figure 6: MDB Adaptation Finance by Sectors, 2012 9 Typical subsectors for adaptation finance are given in section 3.3. 7 2.3. MDB Mitigation Finance, 2012 13. Tables 7-9 report mitigation finance in total, by region, and by sector, using the joint MDB approach for reporting that is based on a common list of mitigation activities at the intersection of what all MDBs consider mitigation. Data reported correspond to the financing of those components and/or sub- components within projects that provide mitigation co-benefits (rather than the entire project cost). Details of the approach are given below. Table 10 shows data on mitigation finance reported by each MDB following their own methodologies. Table 7: MDB Mitigation Finance According to the Joint Approach, 2012 (USD millions) MDB resources External resources Investments Investments MDB Policy-based Policy-based Total and technical and technical instruments instruments assistance assistance AfDB 1,463 0 245 0 1,708 ADB 2,001 0 386 0 2,388 EBRD 2,812 0 100 0 2,912 EIB 3,484 0 0 0 3,484 IDB 1,574 45 102 0 1,722 IFC 1,552 0 36 0 1,588 WB 4,979 1,189 898 0 7,066 Total 17,866 1,234 1,768 0 20,867 Figure 7: MDB Mitigation Finance According to the Joint Approach, 2012 8 Table 8: MDB Mitigation Finance by Region, 2012 (USD millions) MDB Resources External Resources 10 Investments Investments Country/Region Policy-based Policy-based Total and technical and technical instruments instruments assistance assistance South Asia 2,414 0 47 0 2,460 East Asia and the Pacific 2,371 172 684 0 3,227 Sub-Saharan Africa 1,496 20 299 0 1,814 Middle East and North 1,505 0 326 0 1,831 Africa Latin America and the 3,413 188 212 0 3,813 Caribbean (Other) Europe and Central 3,369 414 72 0 3,854 Asia EU 13 2,347 440 76 0 2,862 Regional 953 0 54 0 1,007 Total 17,866 1,234 1,768 0 20,867 Figure 8: MDB Mitigation Finance by Region, 2012 10 See Section 3.2 for definitions of the regions as listed below. 9 Table 9: MDB Mitigation Finance by Sectors, 2012 (USD millions) MDB resources External resources 11 Investments Investments Sectors Policy-based Policy-based Total and technical and technical instruments instruments assistance assistance Energy efficiency 2,889 482 89 0 3,460 Renewable energy 6,669 95 751 0 7,515 Sustainable transport 4,646 0 97 0 4,743 Agriculture, forestry and 940 103 141 0 1,184 land use Waste and waste water 309 0 210 0 519 Cross-sector activities and 2,412 554 479 0 3,446 others Total 17,866 1,234 1,768 0 20,867 Figure 9: MDB Mitigation Finance by Sectors, 2012 11 Please see section 3.4.3 for a mapping of these sectors against the typology. 10 Table 10: MDB Mitigation Finance According to MDB Own Methodologies and Differences from MDB Mitigation Finance According to the Joint Approach, 2012 (USD millions) MDB resources External resources Investments Investments MDB Policy-based Policy-based Total and technical and technical instruments instruments assistance assistance AfDB 1,463 0 245 0 1,708 (Difference from Joint Approach) 0 0 0 0 0 ADB 2,109 0 386 0 2,495 (Difference from Joint Approach) +107 0 0 0 +107 EBRD 3,012 0 100 0 3,112 (Difference from Joint Approach) +200 0 0 0 +200 EIB 3,484 0 0 0 3,484 (Difference from Joint Approach) 0 0 0 0 0 IDB 1,641 45 110 0 1,796 (Difference from Joint Approach) +67 0 +8 0 +75 IFC 1,624 0 36 0 1,660 (Difference from Joint Approach) +72 0 0 0 +72 WB 5,124 1,189 898 0 7,211 (Difference from Joint Approach) +145 0 0 0 +145 11 SECTION 3: DEFINITIONS 3.1 GENERAL 14. Definitions: • Reporting period: Data cover fiscal year 2012. Even though MDBs do not follow the same reporting cycle, data remain comparable across MDBs as they all correspond to a 12-month period. • Point of reporting: Data correspond to commitments at time of Board approval or financial agreement signature, and are therefore based on ex-ante estimation. All due efforts have been taken to prevent double-counting. No corrections will be issued in cases where a project’s scope has changed to either increase or decrease climate financing. • Sources covered: MDBs’ own resources as well as a range of external resources managed by the MDBs. • Financing instruments: All instruments associated with the resources covered (grant, loan, guarantee, equity, performance-based instrument). • Comparability: The numbers in this report cover a different group of countries compared to the 2011 numbers, and are therefore not directly comparable. In 2011 EIB did not include the EU 13 in its reporting, thereby understating the volume of its climate finance for the year, while other MDBs covering this region did include all or some of them. In 2012 the EU 13 are included. • Extrapolation of data: Given that the MDBs’ climate finance numbers are for only one year and data are not comparable to the 2011 numbers, they should not be used to make any extrapolations about the MDBs’ level of engagement in climate finance. • External resources: refers to trust-funded operations (including dedicated climate finance facilities) which might be reported to the OECD’s Development Assistance Committee by the contributor countries as well. • Policy-based instruments: fast-disbursing financing instruments provided to the national budget in the form of loans or grants together with associated policy dialogue and economic and sector work in support of nationally driven policy and institutional reforms. • Investments and technical assistance: relates to all vehicles used by MDB clients to support specific investments covering a mix of capital and recurrent expenditures as well as advisory services and capacity building. • Granularity: Finance reported covers only those components (and/or sub-components to the extent data is available) or elements with activities that directly contribute to (or promote) adaptation and/or mitigation. • Reporting: Reporting is complete for all fields and all tables, i.e. if a value in a table is ‘0’ or ‘-‘, this means nothing was reported. It does not mean that no data was available and the field was therefore left blank. 12 3.2 GEOGRAPHICAL COVERAGE OF THE REPORT, AND REGIONAL BREAKDOWNS Countries included in this list are all countries covered by at least one of the MDBs reporting. Inclusion of countries in this list does not imply any recognition of country names, borders, etc. by any of the MDBs in question. REGIONAL Any operation by an MDB that implemented across 2 or more countries including activities with a global focus. SOUTH ASIA Afghanistan India Pakistan Bangladesh Maldives Sri Lanka Bhutan Nepal EAST ASIA AND THE PACIFIC Cambodia Marshall Islands Samoa China, People’s Republic of Micronesia, Federated States of Solomon Islands Cook Islands Mongolia Thailand Fiji Myanmar Timor-Leste Indonesia Nauru Tonga Kiribati Palau Tuvalu Lao People’s Democratic Republic Papua New Guinea Vanuatu Malaysia Philippines Viet Nam MIDDLE EAST AND NORTH AFRICA Algeria Jordan West Bank and Gaza Strip Egypt Lebanon Tunisia Iran, Islamic Republic of Libya Western Sahara Iraq Morocco Yemen Israel SUB-SAHARAN AFRICA Angola Gabon Réunion Benin Gambia Rwanda Botswana Ghana Sao Tome and Principe Burkina Faso Guinea Saint Helena Burundi Guinea-Bissau Senegal Cameroon Kenya Seychelles Cape Verde Lesotho Sierra Leone Central African Republic Liberia South Africa Chad Madagascar Somalia Comoros Malawi South Sudan Congo Mali Sudan Cote d’Ivoire Mauritania Swaziland Democratic Republic of the Mauritius Togo Congo Mayotte Uganda Djibouti Mozambique United Republic of Tanzania Equatorial Guinea Namibia Zambia Eritrea Niger Zimbabwe Ethiopia Nigeria 13 LATIN AMERICA AND THE CARIBBEAN Anguilla Dominica Paraguay Antigua and Barbuda Dominican Republic Peru Argentina Ecuador Puerto Rico Aruba El Salvador Saint-Barthélemy Bahamas Falkland Islands (Malvinas) Saint Kitts and Nevis Barbados French Guiana Saint Lucia Belize Grenada Saint Martin (French part) Bolivia, Plurinational State of Guadeloupe Saint Vincent and the Bonaire, Saint Eustatius and Guatemala Grenadines Saba Guyana Sint Maarten (Dutch part) Brazil Haiti Suriname British Virgin Islands Honduras Trinidad and Tobago Cayman Islands Jamaica Turks and Caicos Islands Chile Martinique United States Virgin Islands Colombia Mexico Uruguay Costa Rica Montserrat Venezuela (Bolivarian Republic Cuba Nicaragua of) Curaçao Panama EU 13 Bulgaria Hungary Romania Croatia Latvia Slovakia Cyprus Lithuania Slovenia Czech Republic Malta Estonia Poland (OTHER) EUROPE AND CENTRAL ASIA Albania Kyrgyz Republic Macedonia Armenia Kosovo Turkey Azerbaijan Montenegro Tajikistan Belarus Republic of Moldova Turkmenistan Bosnia and Herzegovina Russian Federation Ukraine Georgia Serbia Uzbekistan Kazakhstan The former Yugoslav Republic of 14 3.3 GUIDANCE SECTION ON THE ADAPTATION FINANCE TRACKING METHODOLOGY 15. Background and guiding principles The MDB climate adaptation finance tracking methodology uses a context- and location-specific, conservative and granular approach that is intended to reflect the specific focus of adaptation activities, and reduce the scope for over-reporting of adaptation finance against projects. The approach drills down into the ‘sub-project' or 'project element' level as appropriate, in line with the overall MDB climate finance tracking methodology. It also employs a clear process in order to ensure that project activities address specific climate vulnerabilities identified as being relevant to the project and its context/location. 16. Overview of the adaptation finance tracking methodology The methodology comprises of the following key steps: • Setting out the context of climate vulnerability of the project • Making an explicit statement of intent to address climate vulnerability as part of the project • Articulating a clear and direct link between the climate vulnerability context and the specific project activities Furthermore, when applying the methodology, the reporting of adaptation finance is limited solely to those activities (i.e. projects, project components, or proportions of projects) that are clearly linked to the climate vulnerability context. 17. Context of vulnerability to climate variability and change For a project to be considered as contributing to adaptation, the context of climate vulnerability needs to be set out clearly using a robust evidence base. This could take a variety of forms, including the use of material from existing analyses and reports, or original, bespoke vulnerability assessment analysis carried out as part of the preparation of a project. Examples of good practice in the use of existing analyses or reports include using sources that are authoritative and preferably peer-reviewed, such as academic journals, National Communications to the UNFCCC, IPCC reports, Strategic Programmes for Climate Resilience, etc. Examples of good practice in conducting original, bespoke analysis include using records from trusted sources showing recent climate trends including any departures from historic means. These may be combined with climate change projections drawn from a wide range of climate change models, with high and low GHG emissions scenarios, in order to explore the full envelope of projected outcomes and uncertainties. Climate projection uncertainties should be presented and interpreted in a transparent way. The timescale of the projected climate change impacts should match the intended lifespan of the assets, systems or institutions being financed through the project (e.g. time horizon of 2030, 2050, 2080, etc.). 18. Statement of purpose or intent The project should set out how it intends to address the context- and location-specific climate change vulnerabilities, as set out in existing analyses, reports or in the project’s climate vulnerability assessment. This is important for making the distinction between a project contributing to climate change adaptation and a standard ‘good development’ project. The methodology is flexible about exactly where/how the statement of intent/purpose is documented. As long as the MDB concerned is able to record and track the rationale for each adaptation project or adaptation component of a project, this could be documented in the final technical document, Board document, or an internal memo, or other associated project document. 19. Clear and direct link between climate vulnerability and project activities In line with the principles of the overall MDB climate finance tracking methodology, only the specific project activities that explicitly address climate vulnerabilities identified in the project documentation are reported as climate finance. ‘Project activities’ may refer to the entire project, specific project components, or proportions of projects. It may also include project preparation activities if appropriate, depending on the standard practices of the specific MDB in question. 15 20. Reporting of specific activities only as adaptation finance As the methodology takes a conservative approach, adaptation finance should be tracked at the sub- project level or project component level where possible, and will only be counted for project activities that correspond with the climate vulnerability context. Where the same project, sub-project or project element contributes to climate mitigation and adaptation, then the MDB’s individual processes will determine what proportion is counted as mitigation or as adaptation, so that the actual financing will not be recorded more than once. The MDBs are working on the best reporting method for projects where the same components or elements contribute to both mitigation and adaptation. Some MDBs may then decide to report this as a separate category. Table 11: Adaption Sectors and Example Sub-Sectors 12 Sector grouping Examples of specific (sub)sectors Water & wastewater systems Water supplies Wastewater infrastructure Water resources management Agricultural & ecological Primary agriculture & food production resources Agricultural irrigation Forestry Livestock production Fishing Ecosystems (including ecosystem-based flood protection measures) Industry, manufacturing & Manufacturing trade Food processing, distribution & retail Trade Extractive industries (oil, gas, mining, etc.) Infrastructure, energy & built Construction environment Transport Coastal and riverine infrastructure (including built flood protection infrastructure) Urban development 13 Tourism Waste management Energy generation (including renewables) Energy transmission and distribution Other Financial services (banking, insurance) Institutional capacity (professional services, ICT) Human capacity (education, health) Disaster risk management 12 This sector categorization is a work in progress by the MDBs with the goal of harmonizing their respective systems in order to develop a robust framework for reporting adaptation finance. Further iterations may therefore be made in subsequent MDB climate finance reports. 13 Tourism is included in this category as the sector essentially revolves around ‘built environment’, e.g. hotels, transport facilities. 16 Table 12: Indicative Examples of Climate Resilience Activities by Sub-Sector Potential sectors Potential impact of climate change Example of adaptation activity Financial services Increased risk of failure of public infrastructure Incorporation of climate risk assessment in due to increased extremes ministerial investment appraisal processes ICT Damage to key national data centers from Identification of sites at greatest risk and storms or floods enhancement of resilience of those sites Manufacturing Historic specifications for equipment Design of climate resilient equipment, e.g. stable inappropriate under new climate cranes for harbors in cyclone zones Trade Disruption of national trade due to climate Local government support for business disasters continuity planning amongst local employers Professional services Increase in the demand for professional services Provision of finance to SMEs providing relevant for climate risk assessment services, e.g. engineering or insurance Education Climate change results in technical syllabus is Building technical capacity building for training outdated for high risk sectors the trainers in water and agri-sectors Construction Shift in zones affected by typhoons/ More robust building regulations and improved hurricanes/storm surges enforcement practices. Oil, gas, mining Shift in zones affected by typhoons/ hurricanes Increased intensity of seismic survey and off- shore drilling outside hurricane seasons Health Changing patterns of diseases in response to Monitoring of disease outbreaks and changing climatic conditions development of a national response plan Disaster risk management Increased frequency and/or intensity of climate Financial assistance for improved planning of related disasters government bodies/NGOs Water resources Reduction in river water levels due to reduced Improved catchment management planning and rainfall regulation of abstraction (Waste) water infrastructure Increased groundwater salinity due to sea level Provision of microfinance for domestic rainwater rise and/ or coastal flooding harvesting equipment and storage Waste management Increased risk of pollution of areas below landfill Completion of a climate risk assessment prior to sites due to risk of flood location of landfill sites Fossil fuel energy generation Increased seasonality of rainfall, creating periods Investment in coal fired generators with minimal of low river flows cooling water requirements Renewable energy Reduction in river flows lead to loss of Hydro-infrastructure subject to due diligence generation from hydroelectric plant against climate and hydrological models Transmission and distribution Higher temperatures reduce distribution Investment in embedded renewable generation efficiency to reduce distribution requirements Tourism Drought disrupts mammal migrations and causes Diversification of tourist attractions to large scale starvation encompass biodiversity/conservation Transport High river flows cause erosion of embankments Use of revised recurrence intervals for extreme and loss of bridges events in infrastructure design Ecosystems Drought causes loss of forest cover with impacts Identification of protected areas and on livelihoods/biodiversity establishment of migration corridors Forestry Increased frequency of forest fires, causing Engagement with local communities to limit the damage to timber source, e.g. uncontrolled burning Agriculture Increased variability in crop productivity Provision of information on crop diversification options, with assessment of costs Livestock production Loss in forage quantity or quality Increased production of fodder crops to supplement rangeland diet Fishing Loss of river fish stocks due to changes in water Adoption of sustainable aquaculture techniques flows and/ or temperature to supplement local fish supplies Urban development Increased urban flooding from extreme rainfall Asset review to identify assets vulnerable to events flooding, then prioritize protection works 21. Case Studies The following case studies are intended to illustrate how the adaptation finance tracking approach has been recently used by MDBs. 17 Project title Modernisation of an agribusiness facility Climate change development policy operation Transport connections in mountainous Climate adaptation for rural livelihood and provinces agriculture Sector Agricultural & ecological resources Infrastructure, energy & built environment Infrastructure, energy & built environment Agriculture and ecological resources Brief description of MDB finance was provided for the The objective is to support the government in The project rehabilitates about 297 km of The project will be implemented in three project modernisation of equipment by an agribusiness its efforts to address climate change by provincial roads in six northern mountainous vulnerable districts in the country as identified firm that grows tomatoes and manufactures adopting policies and strengthening institutions provinces of the country. The project outcome under the National Adaptation Programme of tomato paste. for climate-resilient and low-emissions is improved and reliable road connectivity in Action (NAPA) in 2006. The goal of the project development. The operation focuses on select the project areas with increased resilience to is to improve resilience to current climate policy areas with an emphasis on resilient climate change. A parallel co-financing will be variability and future climate change by water resources and energy efficiency. The provided to integrate climate-proofing and developing and implementing adaptation operation also aims at building a platform to adaptation measures in project design and strategies and measures that will improve prioritize and integrate climate actions into enhance capacity of the provincial staff in the agricultural production and rural livelihoods. development planning and improve the climate design, planning and maintenance of road financing framework. infrastructure with regard to climate change. Climate Agricultural production in the project areas has Climate change will significantly add to growing Most of the project roads are in areas The selected districts experience changing vulnerability been affected by shifting climate conditions, for pressures on water resources, aggravating vulnerable to climate impacts, and the rainfall patterns and higher temperatures that context example the extreme heat wave and drought of problems of vulnerable households by mountainous terrain is prone to natural have shortened the growing season. Frequent summer 2010. Climate change projections as increasing crop water requirements, with disaster risks. The project looked at historical droughts and floods are eroding assets and set out in the respective National greater irrigation water demand and additional climate patterns, observations by local knowledge, leaving people more vulnerable to Communication to the UNFCCC indicate that stress to the sustainability of irrigation residents, and studies by local and international disaster. Moreover, an upsurge in malaria and these risks are likely to intensify in the coming schemes. Water availability is expected to organizations in the region. The project then cholera due to climate change requires the decades. The MDB together with the firm decrease in dry season and increase in wet used these data and observations in conducting smallholder farmers to spend more time identified that fact that there is an increasing season but greater variability in rainfall and climate change modelling exercises to tending to the sick and less time working in need for water-efficient irrigation in high-value incidence of extreme weather events are likely determine annual flows of rivers, storms and their fields. Rainfall is unimodal and occurs crop production (such as tomatoes) for this to increase the overall uncertainty and risk floods, which may exacerbate damages to from November to May, which varies from less country, in order to make production more associated with water resources. Higher water existing and planned road infrastructure. than 600 mm in the Southern region to over resilient to climate change. temperatures can also cause water quality 1,800 mm in highlands. The mean annual issues and disturb ecological balances. temperature ranges from 8°C in the highlands to over32°C in the lower shire valley. Statement of The project documentation developed by the This operation will support the implementation The project outcome is improved and reliable The project document has a climate change purpose or intent MDB recognised the risks to the firm’s of the government’s multi-sector platform and road connectivity in the project areas with impact section: operations posed by climate variability and institutional development agenda on climate increased resilience to climate change. The “(…) It is in this context that the project was climate change. The project design and change. For adaptation, focus is on improving outputs include “climate proofing” the 297-km conceived as a climate change adaptation investment plan specifically prioritised the climate resilience of water resources. The road project and building the capacity of project. The goal is therefore to improve inclusion of water-efficient drip irrigation water sector was chosen not only due to the provincial staff to manage potential climate resilience to climate variability and future systems as a direct response to these risks. urgency of its adaptation challenges, but also change impacts. climate change by developing and due to cross-linkages with most other implementing adaptation strategies and adaptation areas, including agriculture. measures that will improve agricultural production and rural livelihoods. The expected impact of the project is improved resilience to 18 current climatic variability and future climate change. (…)” Link to project Building on the above analysis and statement of This operation aims to promote a more The grant component is designed to (i) enhance The project has the following components: activities intent, the project was structured to include a integrated approach to water resources the capacity of provincial staff in designing, 1- Community-based integrated climate component providing highly-water efficient drip management as a foundation for climate planning and maintaining road infrastructure change adaptation irrigation systems intended to help the client resilience. The prior action for this operation vulnerable to climate change, (ii) conduct 2- Strengthening the capacity of national maintain productivity in the face of increasing relates to submission for Prime Minister vulnerability mapping of selected roads, (iii) and district agencies in climate climatic variability and climate change. approval of a national target program for water identify and prioritize adaptation approaches, change adaptation resources management. Triggers for (iv) prepare detailed design to increase the All the activities under these components link subsequent operations include developing the climate resilience of roads, and (v) strengthen to the context of climate vulnerability described new law on water resources and priority policies for climate-resilient road infrastructure. above. actions, and defining responsibilities for the The loan component will implement the implementation of this national action plan. designed and selected climate adaptation Other actions target irrigation efficiency and activities according to the recommendations of water productivity in order to increase the the vulnerability assessment. resilience and sustainability of irrigation schemes. Calculation of The proportion of the project finance by the This USD70 million operation includes five prior The total estimated cost of the project is about All the project finance (including project adaptation finance bank that was allocated for the drip irrigation actions, of which four contribute to climate USD108 million, which includes a loan, grant management) qualifies for adaptation finance . systems (i.e. EUR 1.05 million out of a total of resilience: and government counterpart. Of the total reporting: USUSD3 million (100%). EUR 15.2 million) was reported as adaptation • One prior action for improving resilience estimated project cost: finance. of water resources – explained above; • USD2.78 million in grant finance was • Two prior actions for strengthening the obtained externally from a capacity and preparedness to formulate, development fund to assess the prioritize and implement climate change project’s vulnerability to climate policies; change and strengthen the capacity • One prior action for strengthening the of the local staff in planning, climate finance framework (this action is designing and maintaining road also considered to support mitigation). infrastructure with due consideration Four out of five prior actions provide to climate impacts. adaptation co-benefits and 80% of program of • USD3 million is tentatively allocated USD70 million (USD56 million) is therefore from the loan component of the reported as having adaptation co-benefits. project to implement the climate- Carving out the overlap between mitigation and proofing and adaptation activities adaptation, 3.5 prior actions are considered to recommended by and derived from support adaptation only and therefore 70% of the vulnerability assessment USD70 million (USD49 million) are mapped to adaptation finance. Type of adaptation MDB non-concessional loan (private sector Development policy operation Concessional loan and externally financed Grant finance project) grant. 19 3.4 JOINT MDB APPROACH FOR MITIGATION FINANCE REPORTING 3.4.1. Principles of the Joint MDB Mitigation Finance Reporting 22. The joint MDB approach for mitigation finance reporting is based on the following principles or attributes: a) It is activity-based, namely, it focuses on the type of activity to be executed, and not on its purpose, the origin of the financial resources, or its actual results. b) The classification is ex-ante project implementation. c) An activity can be a project or a project component: the joint approach aims to report on mitigation activities disaggregated from non-mitigation activities through a reasonable level of data granularity by dissecting projects into main components. For example, a project with a total cost of USD100 million may have a USD10 million component for energy efficiency improvements – only the USD10 million would be reported. d) The joint approach measures financial flows, rather than greenhouse gas (GHG) emissions reduced by the investment. e) An activity can be labeled as contributing to climate change mitigation if it promotes “efforts to 14 reduce or limit greenhouse gas (GHG) emissions or enhance GHG sequestration.” In the absence of a commonly-agreed method for GHG analysis among MDBs, mitigation activities considered in this joint approach are assumed to lead to emission reductions, based on past experience and/or technical analysis. Ongoing efforts to harmonize GHG analysis among MDBs will bring more consistency regarding the identification of mitigation activities in the long-term. f) The purpose of this joint approach is to enable practical, harmonized climate finance classification categories without having to resort to long, complex studies or highly specialized experts. g) The approach covers both MDBs’ own resources as well as external resources managed by the MDBs (such as funding from the Global Environment Facility, the Climate Investment Funds, or Carbon Funds). To prevent double counting (in particular as some external resources may already be covered in bilateral reporting), external resources managed by the MDBs are clearly separated from MDBs’ own resources. h) The qualification of a project under this methodology does not imply evidence of its climate change effects. Inclusion is not a substitute for project-specific theoretical and/or quantitative evidence of GHG emissions mitigation, and projects seeking to demonstrate such effects must do so through project-specific data. 3.4.2 Typology of Mitigation Activities Included in the Joint MDB Mitigation Finance Reporting 15 1 Demand-side, brownfield energy efficiency 1.1 Commercial and residential sectors (buildings) 1.1.1 Energy-efficiency improvement in lighting, appliances and equipment 1.1.2 Substitution of existing heating/cooling systems for buildings by cogeneration plants that generate electricity in addition to providing heating/cooling 14 OECD DAC. Definition of the Rio Marker on climate change mitigation. http://bit.ly/RioMit. 15 The general principle for brownfield energy efficiency activities involving substitution of technologies or processes is that (i) the old technologies are substituted well before the end of their lifetime and the new technologies are substantially more efficient, or (ii) new technologies or processes are substantially more efficient than those normally used in greenfield projects. 20 1.1.3 Retrofit of existing buildings: Architectural or building changes that enable reducing energy consumption 1.1.4 Waste heat recovery improvements 1.2 Public services 1.2.1 Energy-efficiency improvement in utilities and public services through the installation of more efficient lighting or equipment 1.2.2 Rehabilitation of district heating systems 1.2.3 Utility heat loss reduction and/or increased waste heat recovery 1.2.4 Improvement in utility scale energy efficiency through efficient energy use, and loss reduction. 1.3 Agriculture 1.3.1 Reduction in energy use in traction (e.g. efficient tillage), irrigation, and other agriculture processes 1.4 Industry 1.4.1 Industrial energy-efficiency improvements through the installation of more efficient equipment, changes in processes, reduction of heat losses and/or increased waste heat recovery 1.4.2 Installation of cogeneration plants 1.4.3 More efficient facility replacement of an older facility (old facility retired) 16 2 Demand-side, greenfield energy efficiency 2.1 Construction of new buildings 2.1.1 Use of highly efficient architectural designs or building techniques that enable reducing energy consumption for heating and air conditioning, exceeding available standards and complying with high energy efficiency certification or rating schemes 3 Supply-side, brownfield energy efficiency 3.1 Transmission and distribution systems 3.1.1 Retrofit of transmission lines or substations to reduce energy use and/or technical losses, excluding capacity expansion 3.1.2 Retrofit of distribution systems to reduce energy use and/or technical losses, excluding capacity expansion 3.1.3 Improving existing systems to facilitate the integration of renewable energy sources into the grid 3.2 Power plants 3.2.1 Renewable energy power plant retrofits 3.2.2 Energy-efficiency improvement in existing thermal power plant 3.2.3 Thermal power plant retrofit to fuel switch from a more GHG-intensive fuel to a different, less GHG-intensive fuel type 3.2.4 Waste heat recovery improvements 4 Renewable Energy 4.1 Electricity generation, greenfield projects 4.1.1 Wind power 16 The general principle for greenfield activities is that they prevent a long-term lock-in in high-carbon infrastructure (urban, transport and power sector infrastructure). 21 4.1.2 Geothermal power 4.1.3 Solar power (concentrated solar power, photovoltaic power) 4.1.4 Biomass or biogas power that does not decrease biomass and soil carbon pools 4.1.5 Ocean power (wave, tidal, ocean currents, salt gradient, etc.) 4.1.6 Hydropower plants only if net emission reductions can be demonstrated 4.2 Transmission systems, greenfield 4.2.1 New transmission systems (lines, substations) or new systems (e.g., new information and communication technology, storage facility, etc.) to facilitate the integration of renewable energy sources into the grid 4.3 Heat production, greenfield or brownfield projects 4.3.1 Solar water heating and other thermal applications of solar power in all sectors 4.3.2 Thermal applications of geothermal power in all sectors 4.3.3 Thermal applications of sustainably-produced bioenergy in all sectors, including efficient, improved biomass stoves 5 Transport 5.1 Vehicle energy efficiency fleet retrofit 5.1.1 Existing vehicles, rail or boat fleet retrofit or replacement (including the use of lower- carbon fuels, electric or hydrogen technologies, etc.) 5.2 Urban transport modal change 5.2.1 Urban mass transit 5.2.2 Non-motorized transport (bicycles and pedestrian mobility) 5.3 Urban development 5.3.1 Integration of transport and urban development planning (dense development, multiple land-use, walking communities, transit connectivity, etc.), leading to a reduction in the use of passenger cars 5.3.2 Transport demand management measures to reduce GHG emissions (e.g., speed limits, high-occupancy vehicle lanes, congestion charging/road pricing, parking management, restriction or auctioning of license plates, car-free city areas, low-emission zones) 5.4 Inter-urban transport and freight transport 5.4.1 Improvement of general transport logistics to increase energy efficiency of infrastructure and transport, e.g. reduction of empty running 5.4.2 Railway transport ensuring a modal shift of freight and/or passenger transport from road to rail (improvement of existing lines or construction of new lines) 5.4.3 Waterways transport ensuring a modal shift of freight and/or passenger transport from road to waterways (improvement of existing infrastructure or construction of new infrastructure) 6 Agriculture, forestry and land use 6.1 Afforestation and reforestation 6.1.1 Afforestation (plantations) on non-forested land 6.1.2 Reforestation on previously forested land 6.2 Reducing emissions from the deforestation or degradation of ecosystems 6.2.1 Biosphere conservation projects (including payments for ecosystem services) 22 6.3 Sustainable forest management 6.3.1 Forest management activities that increase carbon stocks or reduce the impact of forestry activities 6.4 Agriculture 6.4.1 Agriculture projects that do not deplete and/or improve existing carbon pools (Reduction in fertilizer use, rangeland management, collection and use of bagasse, rice husks, or other agricultural waste, low tillage techniques that increase carbon contents of soil, rehabilitation of degraded lands, etc.) 6.5 Livestock 6.5.1 Livestock projects that reduce methane or other GHG emissions (manure management with biodigestors, etc.) 6.6 Biofuels 6.6.1 Production of biofuels (including biodiesel and bioethanol) 7 Waste and wastewater 7.1.1 Solid waste management that reduce methane emissions (e.g. incineration of waste, landfill gas capture, and landfill gas combustion) 7.1.2 Treatment of wastewater if not a compliance requirement (e.g. performance standard or safeguard) as part of a larger project 7.1.3 Waste recycling projects that recover or reuse materials and waste as inputs into new products or as a resource 8 Non-energy GHG reductions 8.1 Industrial processes 8.1.1 Reduction in GHG emissions resulting from industrial process improvements and cleaner production (e.g. cement, chemical) 8.2 Air conditioning and cooling 8.2.1 Retrofit of existing industrial, commercial and residential infrastructure to switch to cooling agent with lower global warming potential 8.3 Fugitive emissions and carbon capture 8.3.1 Carbon capture and storage projects (including enhanced oil recovery) 8.3.2 Reduction of gas flaring or methane fugitive emissions in the oil and gas industry 8.3.3 Coal mine methane capture 9 Cross-sector activities 9.1 Policy and regulation 9.1.1 National mitigation policy/planning/institutions 9.1.2 Energy sector policies and regulations (energy efficiency standards or certification schemes; energy efficiency procurement schemes; renewable energy policies) 9.1.3 Systems for monitoring the emissions of greenhouse gases 9.1.4 Efficient pricing of fuels and electricity (subsidy rationalization, efficient end-user tariffs, and efficient regulations on electricity generation, transmission, or distribution), 9.1.5 Education, training, capacity building and awareness raising on climate change mitigation/sustainable energy/sustainable transport; mitigation research 9.2 Energy audits 9.2.1 Energy audits to energy end-users, including industries, buildings, and transport systems 23 9.3 Supply chain 9.2.1 Improvements in energy efficiency and GHG reductions in existing product supply chains 9.4 Financing instruments 9.4.1 Carbon markets and finance (purchase, sale, trading, financing, guarantee and other technical assistance). Includes all activities related to compliance-grade carbon assets and mechanisms, such as Clean Development Mechanism (CDM), Joint Implementation (JI), Assigned Amount Units (AAUs), as well as well-established voluntary carbon standards like the Verified Carbon Standard (VCS) or the Gold Standard. 9.4.2 Renewable energy and energy efficiency financing through financial intermediaries or similar (e.g. earmarked lines of credit; lines for microfinance institutions, cooperatives, etc.) 9.5 Low-carbon technologies 9.5.1 Research and development of renewable energy or energy efficiency technologies 9.5.2 Manufacture of renewable energy and energy efficiency technologies and products 9.6 Activities with greenhouse gas accounting 9.6.1 Any other activity not included in this list for which the results of an ex-ante greenhouse gas accounting (undertaken according to commonly agreed methodologies) show emission reductions that are higher than a commonly agreed threshold 3.4.3. Mapping Report Sectors against the Typology Table 13: Mitigation Sector Definition Sector Label from Table 9 Mapped Sections of the Typology Energy efficiency Sections 1-3 of the typology Renewable energy Section 4 of the typology Sustainable transport Section 5 of the typology Agriculture, forestry and land use Section 6 of the typology Waste and waste water Section 7 of the typology Cross-sector activities and others Sections 8 -9 of the typology -------------------------------------------------------------------------------------------------------------------------------------------------------- This report was prepared by professional staff at the Multilateral Development Banks. The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the MDBs, their governing bodies or their members. 24