51499 Development and Climate Change The World Bank Group at Work SECOND EDITION Development and Climate Change The World Bank Group at Work SECOND EDITION © 2009 The World Bank Group 1818 H Street, NW Washington, DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: feedback@worldbank.org All rights reserved. This publication is a product of the staff of The World Bank Group. It does not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of the World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. RIGHTS AND PERMISSIONS The material in this publication is copyrighted. 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Printed on recycled paper with soy-based ink. 4 D E V E L O P M E N T A N D C L I M AT E C H A N G E Partnering with Governments Partnering with the UN, GEF, and MDBs The WBG works with developing country partners Collaboration with the UN family on climate change has and provides them customized demand-driven support also intensified substantially--through both numerous through its various instruments--from financing to programmatic activities in developing countries and in technical assistance to policy advice. Over the past year, pursuing a coherent strategic approach to climate change. a new level of partnership has been established, with The WBG is part of the UN Secretary General's Climate developing country governments participating in gov- Change Team and is partnering with the UN family within erning innovative climate finance vehicles such as the the collective framework of "Acting on Climate Change: Climate Investment Funds (CIF), the Forest Carbon The UN Delivering as One." As a co-convening agency Partnership Facility (FCPF), and the Carbon Partner- with UNDP on climate finance within the UN system, the ship Facility (CPF). In addition, a number of partner- World Bank Group and UNDP are spearheading the es- ships with national and subnational (state, city) gov- tablishment of a collective platform for UN agencies that ernments on various issues in the development-climate would support access to finance for climate action by de- change nexus have been built by different sector, region, veloping countries.4 Several specific partnerships with indi- and country teams. vidual UN agencies are currently being developed. For ex- ample, the Bank Group is working with UN-HABITAT To advance the international dialogue on development and UNEP to prepare citywide vulnerability assessments and climate change, Bank Group President Robert and a pilot GHG emissions index for the world's 40 larg- Zoellick launched the "Bali Dialogue Series," which est cities. The WBG has continued its strategic partnership seeks to engage ministers of finance, economy, and de- with GEF and supported its move to programmatic ap- velopment from both developed and developing coun- proaches, as well as entered into new partnerships to deliver tries in discussions about climate finance solutions.2 scaled-up financial resources for developing countries. This dialogue allows some 40 to 50 ministers and heads of multilateral agencies to meet twice annually in an in- Collaborative efforts with the multilateral development formal setting to discuss selected aspects of the climate banks (MDBs) on climate action have been further change agenda and its links to the development needs strengthened in recent months through jointly imple- of developing countries. The first three events addressed menting the Climate Investment Funds (CIF), which adaptation and development (spring 2008), the carbon were approved by the World Bank Group's Board of Di- market (autumn 2008), and most recently in April 2009, rectors in July 2008. The funds, encompassing the Clean climate finance.3 Technology Fund (CTF) and the Strategic Climate Fund (SCF), are built upon the principle of utilizing the 2. The Bali Dialogue Series was initiated in response to call by skills and capabilities of the MDBs to raise and deliver the Governments of Indonesia, Poland, and Denmark--hosts new and additional resources at significant scale. The of UNFCCC Conferences of Parties number 13, 14, and 15, respectively--and is hosted by the World Bank Group Presi- dent and the Chairman of the World Bank Group Develop- 4. Additional information on the scope of this collaboration ment Committee. can be found on the following link: www.un.org/climatechange 3. Power point Presentations by Mr. Robert Zoellick can be found on the following link: www.worldbank.org/ climatechange T H E W O R L D B A N K G R O U P AT W O R K 5 five MDBs--the African Development Bank, Asian Another example is supporting climate change adapta- Development Bank, European Bank for Reconstruction tion initiatives through the Development Marketplace and Development, Inter-American Development Bank, (DM) 2009, a competitive grant program administered and the World Bank Group--are now working together by the World Bank Group and supported by various to provide coherent support to country-driven programs partners for early-stage projects with high potential for and allow countries to select support from each MDB development impact. DM competitions--held at the based on comparative advantages.5 global, regional and country level--attract ideas from a range of innovators, including civil society groups, social entrepreneurs, academia, and business.7 Partnering with Civil Society, Nongovernmental Organizations, and the Private Sector WBG's commitment to an inclusive approach toward STRATEGY civil society and nongovernmental organizations has been evident from extensive global consultations during At the strategy level, the overall principles and priorities the preparation of the SFDCC. Face-to-face and video of the SFDCC are customized by World Bank regional consultations reached about 2,000 stakeholders in over 70 operations, IFC, and MIGA to the specific needs of their countries, and many more stakeholders provided inputs clients. Reflecting the diversity of WBG clients, the focus through web-based consultations. Following SFDCC of these operational strategies or business plans ranges endorsement, the WBG maintained its dialogue with from energy efficiency, clean production and promotion NGOs through discussions at the UNFCCC meetings in of clean technology in private sector operations by IFC to Poznan in December 2008 and Bonn in April 2009. The the need for strengthening climate resilience and capacity CIF Partnership Forum, which is being convened annual- to manage climate risks in Africa (see box 1). ly, was established as a forum for dialogue on the strategic directions, results, and impacts of the programs within the Country-led approaches, articulated in country assis- CIF, as well as lessons learned from CIF operations and tance or country partnership strategies (CAS or CPS) other relevant programs and projects. The Partnership Fo- rum is a broad-based meeting of stakeholders, including donor and eligible recipient countries, MDBs, UN and 7. DM has awarded more than $54 million in grants, support- ing projects through their proof-of-concept phase. Using DM UN agencies, GEF, UNFCCC Secretariat, the Adapta- funding as a launching pad, projects often go on to scale up tion Fund, bilateral development agencies, NGOs, private or replicate elsewhere, winning prestigious awards within the sector entities, and scientific and technical experts.6 sphere of social entrepreneurship. In 2009, the theme for the grant program is climate change. The competition on climate adaptation focuses on three sub-themes: (1) Resilience of In- digenous Peoples Communities to Climate Risks; (2) Climate 5. More information about the collaborative efforts by the Risk Management with Multiple Benefits; and (3) Climate WBG and the MDBs on CIF can be found in the finance Adaptation and Disaster Risk Management. More information chapter of this document, and on the following website: www. about the Development Marketplace can be found on the worldbank.org/climatechange following link: www.developmentmarketplace.org 6. Additional information about the Partnership Forum can be found on www.worldbank.org/cif 8 D E V E L O P M E N T A N D C L I M AT E C H A N G E Box 2 Climate issues in Country Assistance/Partnership Strategies Guyana. Guyana is a coastal country with about half its population living below sea level. About 85 percent of the country is forested but the pressures on forests are rising. The new CAS stresses (a) the need for climate change ad- aptation, and (b) the opportunity to contribute globally to climate change mitigation by reducing emissions from deforestation and to get economic benefits in return for such eco-services. The CAS provides for an IDA Forest, Cli- mate Change, and Communities project that will complement the upcoming FCPF grant (Guyana was among the first group of countries to apply and get selected into the FCPF in July 2008). Cameroon. The CAS incorporates climate change as a new area of focus to be addressed over time. While detailed sectoral interventions have not been identified yet, a "vulnerability assessment and adaptation strategy" is included in the CAS. In addition, the CAS program will focus on incorporating hydrologic risk in hydro development, including through the Lom Pamgar Reservoir. India. The India CAS for 2009-12 indentifies the following areas of engagement on climate change issues: (i) Climate Change Adaptation: Priorities focus on enhancing knowledge of sectoral vulnerabilities; increased investments in climate resilient infrastructure and livelihood; focus on high vulnerabilities particularly relating to water resources agricultural yields and coastal areas. (ii) Climate Change Mitigation: enhanced knowledge of mitigation options; increased investments in low carbon growth; programmatic carbon finance; and the use of carbon finance mainstreamed across Bank Group opera- tions. Morocco. The Country Partnership Strategy (CPS), currently under preparation, is considering climate change and sustainable development as one of its pillars and World Bank support to the government to develop a multisector strategy to address climate change. Extending Support to Climate- agencies, and stakeholders, as well as raising cofinancing Resilient Development and Adaptation in the context of the program. The programmatic ap- proaches at the country level provide an excellent oppor- Given the priority of adaptation for developing coun- tunity for coherent cross-sectoral actions. For example, tries--and the central focus on adaptation in the Stra- within the Pacific Alliance for Sustainability Program, tegic Framework--the WBG has moved to explore and $100 million8 is allocated to the Pacific Island countries apply different instruments and products to support the from a number of GEF focal areas such as International needs of its clients. Waters, Biodiversity, Climate Change mitigation, and adaptation. The overall program is complemented by As a long-term partner with GEF, the World Bank has ADB, UNDP, and the World Bank. The India Sustain- increased its focus on programmatic projects that cut able Land and Ecosystem Management Project (SLEM) across several focal areas and increasingly involve cli- includes adaptation funding of $5 million (through the mate action, both in terms of adaptation and mitigation. This support involves partnering with many countries, 8. All dollar amounts are U.S. dollars unless otherwise indicated. T H E W O R L D B A N K G R O U P AT W O R K 21 KNOWLEDGE & CAPACITY Given the increased levels of uncertainty regarding im- pacts and adequate responses to climate change and cli- mate variability, there is a fundamental need to strength- en the knowledge base for climate action at all relevant levels and to translate such insights into informed deci- sion making. The Bank Group has rapidly stepped up its analytical work across sectors, issues, and countries and regions, and at the global level with a significant focus on adaptation, where knowledge gaps are particularly large. Out of a rich body of effort to support client countries in assessing climate change and development linkages and to inform the process of international negotiations, several highlights are provided below. Strengthening the knowledge base The 2010 edition of the Bank Group's leading pub- lication--the World Development Report--is about "Development in a Changing Climate." It focuses on the implications of climate change for development and the need for climate-smart development policies to tackle the challenges of adaptation and mitigation and to exploit the new competitive landscapes created by a changing climate. A key tenet is the imperative of an adequate, achievable, and equitable solution to climate change that meets the needs and concerns of developing countries. Another major research project is on the Economics of Adaptation. This flagship report is expected to identify global cost levels for adaptation action, which will be further validated and detailed by country-specific case studies. Global estimated adaptation costs will be avail- 24 D E V E L O P M E N T A N D C L I M AT E C H A N G E Further highlights include the development and appli- provide information and facilitation services for city- cation of tools for GHG accounting and analysis, co- based climate change activities, with a focus on adap- ordinated with other multilateral financial institutions. tation in developing country cities and actions with Building on the methodologies and tools already de- adaptation-mitigation synergies, such as well-insulated, veloped by other agencies, IFC has initiated GHG ac- energy efficient buildings. A "Climate Change Adapta- counting for several of its real sector investment projects tion Handbook for Mayors" is also being produced. since February 2009. In coordination with the IFC, the World Bank Group is focusing on undertaking GHG The WBG is also assisting client countries in meeting analysis of selected projects in the three sectors. In the the evolving needs of the global carbon market regime forestry sector, methodologies and tools have been de- (including programmatic approaches, urban areas, sec- veloped for afforestation/reforestation and sustainable toral focus) through the development of a second gen- forest management projects, and are ready to be field eration "Carbon Finance Assist" program, which was tested; in the energy sector, the work has focused on off- created to ensure that developing countries and econ- grid projects and is now extending to grid-connected omies in transition are able to fully participate in the projects; and in the transport sector, studies and pilots flexible mechanisms defined under the Kyoto Protocol, are under way with an initial focus on urban transport. and benefit from the sustainable development gains as- sociated with such projects.10 The WBG also organiz- An important recent development was the launch of es--jointly with the International Emissions Trading the "Infrastructure Recovery and Assets Platform" (IN- Association (IETA), Fira Barcelona, and Koelnmesse FRA) in April 2009 to bridge infrastructure financing, GmbH-- annual Carbon Expos, which are global car- project preparation, and capacity gaps resulting from bon trade specialist trade fairs. The most recent was on the global financial crisis (www.worldbank.org/infra). May 28, 2009. The World Bank Group is preparing guidance notes for its staff to assist with the design and implementation With the view to build climate change competencies of infrastructure investments (developed as part of the within the World Bank Group, a training program-- INFRA Platform), including guidance on identifying "Climate Change for Development Professionals"-- projects and opportunities within projects that reduce and the "Sustainable Development Leadership Pro- local pollution and GHG emissions and/or increase the gram" were launched. In these programs, a large number resilience of infrastructure investments to climate vari- of staff and a growing number of external participants-- ability and change. including NGOs and developing country governments and other institutions--are engaged in discussions and In the "Global City Indicators Program" and "Metro- learning about development and climate change link- Match," the WBG is featuring internet-based environ- mental indicators and knowledge exchange and capacity 10. For more information about the Carbon Finance Assist building assistance among cities. It has also established Program, please visit the following link: http://go.worldbank. the "Cities and Climate Change ­ Global Network" to org/T93VFJSRL0 T H E W O R L D B A N K G R O U P AT W O R K 25 ages. The WBG is also focusing on enhancing capacity to make the right choices that open new opportuni- for climate risk management in key countries, organiza- ties to their families. The development efforts can no tions and sectors, especially agriculture-water, disaster longer ignore the risks of climate change or the lo- risk management, and climate change through knowl- cal and global benefits of sustainable solutions. New edge exchange and use of learning products. A network knowledge, technology, and finance are fundamental of practitioners to enhance capacity for implementation to increasing the competitive landscape for sustain- of climate risk management activities is also being de- able innovations. Recognizing these challenges, the veloped, including for those in Pilot Program on Cli- WBG has rapidly stepped up its resource mobiliza- mate Resilience (PPCR) countries. Related to this are tion efforts and assistance to public and private sector efforts to explore the creation of a network of the ca- clients to meet the diversity of national priorities and pacity building arms of the regional development banks needs in the areas of adaptation, climate resilience, and and UNDP to capture and disseminate practical lessons sustainable low-carbon emission growth. One of the from Climate Investment Funds (CIF) operations, ini- earliest--and by now the most comprehensive--cli- tially focusing on the PPCR. mate change-related programs was developed for Latin America and Caribbean islands, in strong partnership with the countries requesting the Bank Group's sup- port (see box 11). As this brief report shows, the World CONCLUSIONS Bank and IFC operations in other regions are gearing up. The World Bank group is utilizing its capabilities The World Bank Group's mandate is sustainable de- in knowledge and innovation combined with extensive velopment and poverty reduction. This means bringing experience in development and finance to build part- power to the people in every meaning of this word--to nerships that deliver the requested support and results light their homes, to withstand difficult weather, and to developing countries. 28 D E V E L O P M E N T A N D C L I M AT E C H A N G E 2 D E V E L O P M E N T A N D C L I M AT E C H A N G E INTRODUCTION not divert resources from the core development needs and actions towards achieving the Millennium Devel- opment Goals. In October 2008, the World Bank Group (WBG) ad- opted the Strategic Framework on Development and The framework guides various entities and institutions Climate Change (SFDCC).1 The document was de- of the WBG, including the International Finance Cor- veloped in consultation with, and endorsed by, govern- poration (IFC), the Multilateral Development Agency ments of 185 member countries. (MIGA), and the World Bank in effectively supporting sustainable development and poverty reduction in de- The World Bank Group's Approach to Climate Action is veloping countries as climate risks and climate-related founded on its core mission of supporting economic growth economic opportunities arise. It further encourages and poverty reduction in developing countries. While climate the WBG to facilitate global action, with an emphasis change is an added cost and risk to development, a successful global climate policy can and should open new economic op- on leadership by developed countries in reducing their portunities to developing countries. emissions and transferring finance and technology to developing countries. The Strategic Framework guides the Bank Group's op- The framework contains six action areas that are aligned erational response to new development challenges posed with the Bali Action Plan and aim to: by climate change within the principles, policies, and di- rections of the UNFCCC process. Since the framework · Support climate action in country-led develop- was adopted, the WBG, building on significant previous ment processes experience, has rapidly expanded its climate change re- · Mobilize additional concessional and innovative lated work and collaborative partnerships with develop- finance ing country governments and other stakeholders. This · Facilitate the development of market-based paper highlights several new initiatives and trends; a financing mechanisms · Leverage private sector resources comprehensive progress report on the implementation · Support accelerated development and deploy- of the framework will be prepared early in 2010. ment of new technologies · Step up policy research, knowledge and capacity As a development institution, the WBG's role is to help building. accelerate or maintain robust economic growth in devel- oping countries while recognizing the added costs and Each action area supports both adaptation and measures risks of climate change and an evolving global climate with mitigation co-benefits, with particular attention to policy. Financing for adaptation and mitigation must increasing the availability of analytical tools and finan- cial resources for adaptation. 1. This document as well as the technical background docu- ment can be accessed on the following link: www.worldbank. The focus is on improving knowledge and capacity--in- org/climatechange cluding learning by doing--through actions whose ben- T H E W O R L D B A N K G R O U P AT W O R K 3 efits to developing countries are robust under significant uncertainties about future climate policies and impacts; that is, actions that have "no regrets." PARTNERSHIPS Given the magnitude of potential impacts, climate change responses require concerted efforts by the de- velopment community to ensure adequate and effective adaptation and mitigation measures. Global coopera- tion is particularly important for developing countries, which in some cases are already impacted by climate change at a time when they are addressing many other major development challenges. Having contributed the least to the current increase in greenhouse gas (GHG) concentrations, the developing countries must be able to count on extraordinary commitment by developed countries to help enable and finance adaptation mea- sures and lower emission growth trajectories. No one institution or group of stakeholders can address the climate challenge alone. The Bank Group is therefore working to broaden and deepen a large suite of partner- ships with governments, sister agencies, the private sec- tor, and civil society in all aspects of climate action. The World Bank Group adheres to the prin- ciples, policies and directions of the UNFCCC process, and is guided by the Bali Action Plan. It remains neutral to the negotiating positions of UN- FCCC parties and does not prejudge the outcomes of ongoing negotiations, while sharing analytical and practical knowledge and supporting developing countries' needs. 6 D E V E L O P M E N T A N D C L I M AT E C H A N G E Box 1 Making development climate resilient--World Bank Group support for Sub-Saharan Africa Climate change is a major development challenge for Sub-Sarahan Africa. As global warming progresses, dry areas will become drier and wet areas wetter, posing an additional challenge to natural-resource-dependent livelihoods and economic activities. Present development strategies in Africa already include important adaptations to climate risk by the poor, including investments in water storage, flood control, irrigation infrastructure, and diversification of wa- ter supply sources. Nevertheless, climate change, by increasing climate variability and incidence of extreme weather events, introduces a new set of risks and challenges, particularly in agriculture, water management, and infrastructure. Long-term projections forecast that Africa's agricultural output could fall by about 16 percent by 2080--more than any other region. This has serious implications for food security. Africa has the lowest electrification rate of all regions with only about a quarter of households having access to electricity; improving access to affordable energy is a top priority. While there is significant potential for energy efficiency in South Africa and urban centers of several other countries, 70 percent of carbon emissions come from land use degradation. Improving long term land productivity, better land and water management, reducing the loss of vegetative cover, and deforestation and forest degradation are all important priorities for Africa that can bring synergistic development, adaptation and mitigation benefits. The World Bank Group response to climate change in Sub-Saharan Africa is designed to support its overall develop- ment and business plan for the continent, known as the Africa Action Plan, along the following four pillars: Pillar 1. Make adaptation and climate risk management a core component of development. While adaptation is es- sentially a risk management strategy, it is fundamentally about sound, resilient development and the need to ensure that disaster risk reduction and adaptation are fully integrated into growth and poverty reduction strategies. Key areas on which the WBG will focus include energy; disaster risk reduction; sustainable land, water, and forest manage- ment; coastal and urban development; increased agricul- tural productivity; and health and social issues. Pillar 2. Take advantage of development opportunities with mitigation cobenefits. Given the huge energy deficit in the region and the heavy reliance on fuelwood, most of Sub-Saharan Africa's mitigation opportunities are linked to more sustainable land and forest management, energy use and development, and urban transport systems. By taking advantage of opportunities and new technologies in these areas, African countries can further development while providing clean energy access to their populations. Pillar 3. Focus on knowledge and capacity development. Uncertainties regarding the impacts of climate change on different subregions and sectors make policy decisions more complex and magnify trade-offs and opportunity costs. To ensure that Africa has access to appropriate in- formation and technologies, as well as adequate capacity to plan and prepare for projected changes in climate, the Bank Group will invest in improving weather forecasting, T H E W O R L D B A N K G R O U P AT W O R K 7 water resources monitoring, land use information, disaster preparedness, appropriate technology development, and strengthening capacity for risk management, planning, and coordination. Pillar 4. Scale up financing opportunities. Because climate change is one of the fundamental problems facing poor people, development assistance (such as IDA financing) will remain the main platform for helping African countries strengthen the resilience of development process to both current and future climate risks. Additional support is criti- cal to build the knowledge base, strengthen institutions, and "climate-proof" investments. It must come from both existing sources of climate finance and new instruments, such as UNFCCC's Adaptation Fund and the Pilot Program for Climate Resilience under the Climate Investment Funds. The World Bank Group will also work to help Africa access additional resources from its funds and facilities for activities with mitigation cobenefits. The WBG is already at work helping several countries in a number of action areas. For example, the Bank Group is supporting the Ethiopian government in reducing the vulnerability of its population to extreme weather events; pro- moting community-driven sustainable land and watershed management that help use soil and water more efficiently and increase the intensity of production where appropriate; and preparing an integrated framework for addressing climate variability and change. The Kenyan authorities are also pursuing a spatially differentiated approach to ad- dressing climate risks, with a focus on drought management in the arid north, flood management in the west, and watershed management in the southwest and center. And the South African authorities have prepared a framework for addressing climate mitigation with the long-term objective of moving to a low-carbon growth path while sup- porting equitable growth and access to key services for citizens. prepared in close consultation with developing country 40 percent of all country assistance/partnership strate- governments and other stakeholders, are the founda- gies planned for the year, reflecting a steady growing tion of the Bank Group's support for climate actions. trend (up from 15 percent in 2000­05 and 32 percent The past year witnessed a significant increase in the in 2007). number of client countries identifying climate issues as development priorities and working with the WBG to have them reflected in the agreed country partnership or assistance strategies. The main focus is on climate FINANCE risks, particularly linked to natural disasters and sus- tainable natural resource management, as well as lower The World Bank Group is using a variety of instru- emission growth opportunities, energy efficiency, re- ments--grants, concessional credits, different types newable energy and scaled-up access to climate finance of loans and guarantees, equity, carbon finance, and (see box 2 for select examples). Just this year, the list of structured financing packages--to support the in- such countries for which strategies were prepared or vestment needs of its clients. Over the past years, it are at an advanced stage of preparation included Bo- has increased financing for climate risk management livia, Brazil, Burkina Faso, Cameroon, Guyana, Haiti, and adaptation in development programs and for less India, Lesotho, Maldives, Mexico, Morocco, Nepal, GHG-intensive projects within national economic Philippines, Serbia, Tunisia, Vietnam, and Yemen, or plans and priorities. 22 D E V E L O P M E N T A N D C L I M AT E C H A N G E able by July 2009; and a consultation about early find- and perspectives, and a series of targeted dissemination ings is planned during the Bonn talks in June 2009. events. Highlights of regional work are in box 10. The importance of adaptation in the World Bank pro- On the mitigation side, analytical work is focusing on grams is reflected by a series of major sector-specific accelerating clean technology innovation, transport and and regional studies. A report on "Adaptation in Agri- climate change, economics, social and distribution im- culture" was completed earlier this year, and a study on pacts of policy responses and helping countries assess " Water and Adaptation to Climate Change: Implica- low-carbon growth opportunities and strategies. Low- tions on Investment and Project Design" is in final draft. carbon-growth studies are under way for Mexico, South The ongoing effort is looking into developing a state- Africa, Brazil, China, India and Indonesia, and most of-the-art assessment of agricultural carbon sequestra- recently Poland. The studies are undertaken in close col- tion knowledge, evolved methodologies, and emerging laboration with the respective governments, agencies, technologies that overcome the soil carbon trade con- and local stakeholders, and are targeted to specific needs straints of high variability, poor traceability, and lack of and priorities of each country. Across studies, analysis permanence. It also looks at developing an Agro-Eco covers energy efficiency in end-use applications, power Zone (AEZ) model with an economic interface for as- sector, transport, land use, and bio-energy, comple- sessing climate change impacts on agricultural systems. mented by advice for priority implementation options. The World Bank launched a new publication at the Key results and dissemination activities are expected IUCN Congress entitled Biodiversity, Climate Change to start in the second half of 2009. For several years, and Adaptation. The report reviews of the entire Bank's the Bank Group has issued a widely recognized report biodiversity portfolio, emphasizing how activities pri- on the "State and Trends of the Carbon Market." The mary contributing to biodiversity can also contribute to 2009 Report was released at the CarbonExpo event in climate change adaptation and mitigation. Barcelona in May. A study on "Financial and Institutional Adaptation to Building new tools and capacity Climate Change in the Forest Sector " is undertaken in four countries where forests are (or could be) an impor- The WBG uses a wide range of analytical approaches tant part of rural adaptation strategies. The objective is and instruments to inform its policy dialogue and lend- to identify financial and institutional arrangements that ing at the project, sector, and country level. In addition, would facilitate the use and management of forests to the Bank Group works closely with client countries to adapt to climate change, by examining the role of for- inform and support national, sectoral, and local develop- ests in adaptation to climate change and with an em- ment policy and planning, and to extend similar support phasis on improvement of livelihood of affected rural to its private sector clients. communities. An-going program on Social Dimensions of Climate Change includes studies on equity and vul- These efforts cater to different audiences, and include, nerability, workshops to bring together different views for example, a series of "Policy Notes on Climate T H E W O R L D B A N K G R O U P AT W O R K 23 Change" intended to summarize good practice and The WBG is also establishing a specific management tool key policy findings on economic policy, gender, gover- for its own operations--the Screening Tool (ADAPT). nance and public sector reform, poverty, and trade. For This is a software-based tool for assessing development project practitioners, a series of guidance notes is being projects for potential sensitivities to climate change. To produced that addresses climate proofing and adapta- support dissemination of gained knowledge and tools, tion at the project level. The notes are focused on the a number of efforts are under way. A "Climate Change agricultural and natural resources management sectors, Portal" containing climate-related and socioeconomic summarizing lessons learned from World Bank Group data is being developed in collaboration with UNDP experience in adaptation projects thus far. and other UN agencies. Box 10 WBG regional studies on climate impacts and strategies The World Bank is working, in collaboration with developing country governments and research institutions, on a vast suite of regional studies on climate impacts and strategies for building resilience of which a few can be men- tioned here: · For Africa, analytical work entitled "Climate Change and Africa's Water: What are the Operational Implications?" is focusing on the economic impact of climate change and costs and benefits of adaptation in Ethiopia, Sudan, Mozambique, South Africa and Ghana; the impact of climate change on smallholder agriculture in Kenya and poten- tial for carbon sequestration from agriculture, and; the impact of climate change on coastal erosion and CZM with a particular focus on Senegal. · For Europe and Central Asia, the Bank Group has completed a major study on "Adaptation to Climate Change in Europe and Central Asia" and launched the follow-up "Pilot Program on National Adaptation to Climate Change," which aims to assist countries understand the range and likely impacts of climate variability and change on vulner- able subsectors in sensitive subregions, and to develop candidate adaptation approaches to mitigate impacts in a cost-effective manner. · The Latin America and Caribbean Region has produced a flagship report, "Low Carbon, High Growth, Mitigat- ing and Dealing with Climate Change in Latin America and Caribbean," as well as a pioneering study on the social impacts of climate change. · In the East Asia and the Pacific Region, a regional study on "Climate Impact and Adaptation in Asian Coastal Cit- ies" is under way with the Asian Development Bank (ADB). · The South Asia Region has recently completed a study on "Climate Change Impacts in Drought and Flood Affected Areas in India;" is undertaking a study on the implications of climate change for food security and adaptation strate- gies for Bangladesh; and is participating in a regional study on adaptation in coastal cities. · In the Middle East and North Africa Region, a series of studies have been initiated, covering a range of countries and issues. For example, "The Economic and Social Impacts of Climate Change on Agriculture in Middle East and North Africa: A Regional Analysis" aims to improve the understanding of the regional impacts of climate change on agriculture as a way to improve the design of adaptation initiatives and promote their integration into sector policies and programs 26 D E V E L O P M E N T A N D C L I M AT E C H A N G E Box 11 Addressing climate change in Latin America and the Caribbean region: Supporting new development challenges through partnerships, knowledge, and finance The countries of Latin America and the Caribbean (LAC) were among the first to partner with the World Bank Group in addressing climate change. Starting with analytical work to better understand the physical nature of the impacts, the Bank Group's assistance has grown to a strategic compact that aims to use the full suite of WBG products, in- struments, capabilities, and experiences to help with a new and complex development challenge. The LAC climate change portfolio includes approximately 130 activities totaling $2.5 billion and includes regional studies, country assessments, and IBRD lending. Other products include innovative catastrophic insurance schemes; GEF grants and carbon finance; and technical assistance and new concessional finance, such as the Clean Technology Fund. Building knowledge at the country and regional levels -- approximately $5.5million: · Regional Flagship study on dealing with the impacts and mitigating climate change · Low-carbon growth studies for Brazil and Mexico · Program of analytical work on clean energy and climate change · Regional study on social impacts of climate change · Country and sector studies on the impacts of climate change on fisheries, agriculture, tourism, and hydropower · Modeling the impact of climate change on the Amazon basin, agriculture, and ecosystems Supporting policy development: · Mexico Climate Change DPL ($500 million) is supporting the government's commitments under the UNFCCC out- lined in their 3rd National Communication, and the Special Climate Change Program. · Assistance to the government of Argentina to formulate its Third National Communication to the UNFCCC Investments in adaptation total $28 million for six projects, mostly financed by the Special Climate Change Fund, as well as by IBRD for disaster risk management in the Caribbean. The projects support activities such as: · Hurricane-proofing public buildings--schools, hospitals, other essential services--in the Eastern Caribbean · Improving dike systems to handle sea level rise and saltwater intrusion (Guyana) · Watershed stabilization and reforestation (Haiti) · Using wetlands as tool to combat sea level rise (Mexico) · Managing coastal zones through land use planning (Mexico) and pollution management (Argentina) · Training and equipping health providers to deal with increased incidence of vector-borne diseases (Colombia, Brazil) T H E W O R L D B A N K G R O U P AT W O R K 27 Financing for mitigation activities in the region amounts to over $2 billion in IBRD/IDA operations and includes a wide range of activities across sectors: · Sustainable Transport: ­ Regional Air Quality and Sustainable Transport (Mexico, Brazil, Argentina) ­ Urban transport projects in most large cities -- Rio, Sao Paulo, Buenos Aires, Lima, Santiago, Federal District of Mexico · Energy Efficiency: ­ Supporting introduction of compact fluorescent lighting, appliances, air conditioning, new building codes (Argentina, Mexico, Brazil) ­ Reducing losses in transmission (Honduras, Uruguay) ­ Technical Assistance to reform policy and regulatory framework to encourage energy efficiency (Nicaragua, Honduras, Dominican Republic, Ecuador, Uruguay, Argentina, Guatemala) · Renewable Energy: ­ Mini-hydro power plants, off-grid rural electrification throughout Central America, Peru, and the entire region; wind power in Colombia FURTHER ACTIVITIES IN LATIN AMERICA AND THE CARIBBEAN REGION: Leveraging private sector investments in renewable energy and energy efficiency: Between fiscal year 2005 and December 2008, IFC net investments in the region to renewable energy and energy efficiency projects amounted to over US$500 million. More than 20 percent of these commitments (around US$107 million) were provided in the first half of 2009, marking a clear increase in IFC's engagement over the last five years. IFC projects include 2 renewable energy projects in Colombia and Nicaragua, and 3 energy efficiency projects in Para- guay, Colombia, and Mexico. Additionally, there was a dedicated carbon mitigation project approved for Nicaragua. Carbon Finance: The region is also benefiting from greenhouse gas reduction projects and has signed 37 emission purchase reduc- tions agreements valued at $152.5 million for a total reduction of 22.3 million tCO. Forest Carbon Partnership Facility: Out of 37 participating countries, 15 are from LAC. Clean Technology Fund: One of the first three investment plans endorsed in January 2009 was for Mexico. At $500 million, it focuses on renewable energy and urban transport. In May 2008, Mexico became the first country with a private sector (wind farm) project prepared by IFC approved for CTF financing of $15 million. T H E W O R L D B A N K G R O U P AT W O R K 9 Strategic Priority on Adaptation) with a total project A major advantage of the Bank Group is its expertise in funding of $30 million. It supports activities such as an packaging specialized adaptation assistance with other analysis of the impact of climate change on mountain development finance, leveraging private sector resources, ecosystems and related livelihoods and working at the and increasing the overall impact and sustainability of village level to develop adaptation measures in dryland supported programs. Without being comprehensive, box as well as flood-prone areas. 3 illustrates some recent activities and financing packages to support more climate-resilient development tailored to Through the Special Climate Change Fund (SCCF) and different climate risks and the needs of specific countries. the Least Developed Country Fund (LDCF), the Bank supports a number of projects and programs, such as the An important new feature is a move from individual op- regional project to pilot Climate Change Adaptation erations addressing climate variability and extremes to a Measures in the Andean Region to meet the anticipated comprehensive approach to strengthening climate resil- impacts from climate change in the Andean highlands, ience and climate risk management that spans across a including impacts of glacial melt (see box 3). Under range of projects within the context of regional priorities the LDCF, the Bank has supported the preparation of and country assistance strategies. Box 5 illustrates this National Adaptation Programs of Action (NAPA) in approach in action in providing assistance to countries Madagascar and Sao Tome and Principe. The Bank is in the Middle East and North Africa region. also aiming to support a number of NAPA implementa- tion projects, such as a project in Vanuatu on increasing Enabling insurance schemes in resilience to climate change and natural hazards. support of climate adaptation Another important partnership of the World Bank, the The Bank Group is pursuing ways to further develop in- United Nations International Strategy for Disaster Re- surance schemes as a way to assist governments in their duction (UNISDR), and an expanding group of donor management of risks associated with climate change governments is the Global Facility for Disaster Reduc- and climate variability. Such weather risk-management tion and Recovery (GFDRR). In the past several years, transactions can be adapted to a country's specific needs, it has evolved into a global partnership for advancing depending on the type of weather hazard, level of pro- the reduction of vulnerabilities to natural hazards and tection, and the estimated financial loss associated with extreme events, based on ex ante support to high-risk a severe and catastrophic event. The potential applica- countries. Presently, donor pledges stand at $83 million. tion of this product spans diverse sectors, including ag- Disaster risk reduction is an essential part of climate riculture, energy production, and tourism. change adaptation and GFDRR is actively pursuing climate risk management. The current investment of Since June 2008, the World Bank has been able to act GFDRR in its 35 climate change adaptation programs as an agent for whether derivatives to facilitate IDA and is $15 million (see box 4 for examples). IBRD countries' access to the weather derivate markets. In October 2008, the WBG mediated a weather risk 12 D E V E L O P M E N T A N D C L I M AT E C H A N G E management derivative that was designed to help Ma- in maize production. The maximum on the contract is $5 lawi protect itself against the risk of severe drought. Ma- million. During the 2008/09 season, about 2,600 farmers lawi suffers from chronic drought that cuts agricultural have been covered with a sum insured at $2.5 million. yields, depresses farmer incomes, and creates contingent liabilities for the government. The weather derivative is Examples of other weather-based crop insurance in- an option on a rainfall index which links rainfall and clude the Central American Weather Risk Manage- national maize production. If precipitation falls below ment Program which has been developed in Honduras, a certain level during the coverage period (October to Guatemala, and Nicaragua. The program is currently May), the index will reflect the value of the projected loss only operating in Nicaragua, where 2,500 hectares of Box 5 Scaling up support for adaptation in Middle East and North Africa Tunisia: second water sector investment project (2009): The project will address the threat of climate change- induced increased water scarcity by improving modernizing irrigation, investing in monitoring of water (surface and ground, quantity and quality), linking soil and water quality monitoring, promoting community self-regulation of groundwater consumption. Morocco: Oum er Rbia Irrigated Agriculture Modernization Project (2010): The project development objec- tive is for participating farmers in the Oum Er Rbia basin to overcome current and future water deficits by making their water use more productive and environmentally sustainable. The project is designed to address the two types of risk that farmers face -- hydrological and commercial. The project will be implemented in irrigation sectors of Tadla, Doukkala and Haouz in the Oum er Rbia basin, selected through project feasibility studies based on technical, socio-economic and farmers' demand criteria. The project will focus on an area of approximately 20,000 ha benefiting 8,000 farmers. The project includes 3 components: (1) improving the irrigation water service; (2) supporting farmers' access to technology, financing and markets; and (3) assisting implementing agencies in project management and monitoring. Morocco: Integrating Climate Change in Development Planning and Disaster Prevention to Increase Resilience of Agricultural and Water Sectors (2010): The project will assist the Government of Morocco in mainstreaming climate change in the national development planning process. The specific objectives are to a) im- prove the understanding of climate change implications for high-slevel strategic development planning; and b) en- hance resilience to climate change of key development sectors -- agriculture and water -- through strengthened institutional capacity, knowledge management, and piloting innovative climate change adaptation and disaster management options to reduce rural poor's vulnerability. Yemen: Adaptation to Climate Change Using Agrobiodiversity Resources in the Rainfed Highlands (FY10): Enhance coping strategies for adaptation to climate change for farmers who rely on rainfed agriculture in Yemen highlands, through the conservation and utilization of biodiversity important to agriculture (particularly local land races and their wild relatives) and associated traditional knowledge. Yemen: Integrated Coastal Zone Management (FY11): To help coastal communities adapt to impacts of cli- mate change through institution strengthening, knowledge management, and demonstrated implementation of the National Decree of the Integrated Coastal Zone Management approach at national and local levels. T H E W O R L D B A N K G R O U P AT W O R K 13 export crops, with a value of $41.6 million, were insured trustee, under which the WBG will monetize certified in 2008. In Thailand, weather-based crop insurance is emission reductions (CERs) allocated to the fund. offered on a pilot basis to 400 farmers for a total sum in- sured of $300,000. Other excess/deficit rainfall projects The establishment of the Pilot Program for Climate Re- are under development in Kenya, Ethiopia, and Senegal. silience under the Climate Investment Funds (see be- The feasibility of other applications of index-based in- low), in consultation with and support from the board of surance is being assessed in Indonesia, Burkina Faso, the Adaptation Fund, has already given further momen- Bangladesh, and Jamaica. These weather-based crop in- tum to the dialogue with developing countries about surance pilots are linked to agricultural lending and aim supporting their adaptation plans and initiatives and to strengthen agricultural finance, agricultural supply is expected to significantly increase and deepen Bank chains, and profitability in agriculture. Group support for these activities. Exploring new partnerships and Using Insurance to reduce climate risks. The WBG has assisted the government of India in the mechanisms to sustain forests development of the Weather Based Crop Insurance and climate Scheme (WBCIS). This scheme protects famers against specific adverse natural events--such as rainfall defi- Forests provide critical sources of livelihood in developing ciency, excess rainfall, or low temperature--through countries and important carbon sinks; yet international weather-based insurance. More than 600,000 farmers incentives maintaining these sinks have been lacking. The purchased weather-based crop insurance in 2007 in Bank Group has given significant attention to explor- India. This program draws on small-scale weather- ing opportunities and partnerships to provide incentives based insurance pilots conducted in India with the and enabling investment finance for activities that reduce Bank's technical assistance since 2003. emissions from deforestation and forest degradation (REDD). A wide range of partners, such as UN-REDD, The Nature Conservancy and others are working togeth- Supporting new instruments for er to understand the potential for REDD, as well as the challenges and the needed actions. The Forest Investment adaptation finance Program and the Forest Carbon Partnership Facility de- Recognizing the critical importance of adaptation scribed in box 6, are major complementary initiatives that for developing countries, the Word Bank Group was intend to strengthen linkages among sustainable forest honored by the request of the 13th Conference of Parties management, improved livelihoods and climate. to the UNFCCC to become the trustee for the Adapta- tion Fund. The World Bank Group and the Conference The World Bank Group is also supporting, in partner- of the Parties--serving as the meeting of the Parties to ship with the International Union for Conservation of the Kyoto Protocol (CMP)--recently concluded the legal Nature (IUCN), Food and Agricultural Organization arrangements for the Bank Group to serve as the financial (FAO) and International Institute for Environment and 16 D E V E L O P M E N T A N D C L I M AT E C H A N G E IFC has also partnered with GEF in strengthening fi- has collaborated with GEF in financing a new renewable nancial intermediaries and markets to support a more energy project in the amount of $76 million, which at the robust investment capability for sustainable energy. same time aimed to increase energy access in rural areas. Such programs are now operational in eight countries with commitments of more than $400 million in IFC The Energy Efficient Cities Initiative was launched in funds. IFC seeks to expand this business with financial October 2008 by the Joint UNDP-World Bank Energy intermediaries to the level of $500 million in new com- Sector Management Assistance Programme (ESMAP) mitments per year, supporting more than twice that level to promote energy-efficient programs and sustainable of lending by other partner banks. energy planning among developing country cities. It is a flexible, cross-cutting, demand-driven program that The World Bank has actively supported renewable energy/ identifies and pursues innovative ways to improve en- energy efficiency projects in a number of sectors through ergy efficiency in the delivery of city services and reduce its IBRD/IDA financing, carbon finance operations (see the costs and environmental impact of energy use. The a separate section below), and in partnership with GEF. program supports city level capacity in identifying and Four new renewable energy projects amounting to over prioritizing energy efficiency interventions by develop- $135 million were started in Argentina, Mali, Uganda, ing and sharing analytical and planning tools; spur city and the Philippines. IDA financing for energy efficiency energy efficiency activities by providing small grants to was around $40 million, with six projects approved in the cities to test new approaches and by sharing good prac- Arica, Eastern Europe and Central Asia, and the Latin tices; and help develop large scale city energy efficiency America regions. The Jiangxi Shihutang Navigation and investments by assisting World Bank operational units Hydropower Complex Project in China alone contribut- to design, package and finance urban energy efficiency. ed over $90 million to the use of renewable hydropower. The Eco-farming Project in China's agriculture sector also Several new WBG initiatives to support technology in- provided mitigation cobenefits in excess of $100 million novation and commercialization are described in box 8. by means of using waste biogas as household fuel. Within the urban sector, a municipal development project was approved in Macedonia, aiming to improve energy effi- Deepening the reach of carbon markets ciency in this country's municipalities. The World Bank's carbon finance operations offer a means of leveraging new private and public investment The World Bank has closely collaborated with UNIDO, into projects that serve to mitigate climate change by re- UNDP, and the GEF Secretariat in the preparation of ducing greenhouse gas emissions, while promoting sus- the West African Energy Program. Under this program, tainable development. Currently, the Bank is managing the Bank Group has taken the lead in developing and 10 carbon funds and facilities amounting to over $2.5 implementing sustainable transport projects in Nigeria and billion.9 Despite uncertainties over the future of interna- Burkina Faso, and energy efficient lighting projects in Togo, Benin, and Burundi. In Uganda, the World Bank Group 9. Contributed by 16 governments and 66 private firms. T H E W O R L D B A N K G R O U P AT W O R K 17 Box 8 Supporting innovation in technology With support from the Global Environment Facility, the IFC organized the first meeting of the Earth Fund, a new facil- ity for innovative projects with climate change and other global environmental benefits. The Fund begins with $60 million. The IFC has announced it will commit its resources for investments in early-stage clean technologies; operational guidelines and eligibility criteria are now under development. Based on the analysis of barriers and gaps in the commercialization of advanced energy technologies (AETs) in devel- oping countries, three targeted instruments--at the respective levels of policies and regulation, markets and tech- nologies, and companies--are being proposed and are under discussion with GEF: 1. Technology Policy Support Program (TPSP), which will respond to client country demand by providing policy sup- port to advance the commercialization and deployment of AETs for local conditions. 2. Advanced Energy Innovation Program (AEIP), which will provide funds for developing countries to advance the com- mercialization infrastructure to profitably partake in energy technology evolution. 3. Energy Technology Innovation Facility (ETIF), which will enable business advisory and incubation services and early capital to support enterprises involved in the AET innovation. Through increased allocation of CGIAR funding and financing of agricultural innovation projects, the Bank Group also is scaling up support to new agricultural technologies aimed at improving agricultural productivity under water stress and adverse climate conditions. tional offset markets, nine carbon finance projects valued IFC has committed $135 million on behalf of the gov- in excess of $100 million have been signed over the last ernment of the Netherlands to purchase emission re- 10 months. Projects span a number of sectors, includ- duction credits from projects eligible under the CDM/ ing energy efficiency, solid waste management, biogas, JI. So far, it has concluded 12 transactions to purchase reforestation, and wetland restoration, as well as several emissions reductions from more than 40 RE projects countries, including Brazil, China, Indonesia, Jordan, (wind farms, small hydros), as well as landfill and coal- Pakistan, the Philippines, Russia, Senegal, and Trinidad bed methane, and industrial gas operations. and Tobago. Carbon finance, if used strategically to be larger-scale and longer-term, could be key to lowering global emission trajectories. With a view to providing Helping address climate change continuity well beyond 2012, the World Bank has set through supporting development policy up its two newest carbon facilities -- the Forest Carbon A highlight of the World Bank operations using tra- Partnership Facility (FCPF) for REDD, and the Car- ditional (IBRD/IDA) lending instruments has been bon Partnership Facility (CPF) for programmatic and an increased use of its development policy (budget sector-based interventions (see Table 1). support) operations--as a means to scale up financing 20 D E V E L O P M E N T A N D C L I M AT E C H A N G E Figure 2 Clean Technology Fund gets a quick start Clean Technology Fund (CTF) at work: | Three investment plans endorsed with a total funding envelope of over $1 billion leveraging over $10 billion Mexico Turkey Egypt Energy Efficiency--Program to Renewable Energy--Implement- Wind Power--From <1,000 MW to replace inefficient lighting and ing "intelligent" grid management 2,500 MW of electricity from wind appliances with expected emis- and control systems to support Urban Transport--Six bus rapid sions reductions of 4 million tons large-scale integration of wind transit corridors and five light rail of CO2 per year power routes Urban Transport--20 bus rapid Renewable Energy and Energy Proposed CTF $300 million » transit corridors with low-carbon Efficiency--Promoting private leverages » $1.9 billion bus technologies sector development through credit lines to local development Renewable Energy banks Proposed CTF $500 million » Proposed CTF $250 million » leverages » $6.2 billion leverages » 2.1 billion Box 9 Strategic Climate Fund (SCF) Pilot Program for Climate Resilience (PPCR). The program helps the most vulnerable developing countries explore practical ways to increase climate resilience in core development planning and budgeting. It builds on National Adaptation Programs of Action, and provides lessons for wider replication. Grants are the main instrument. The selection of nine country and two regional pilots is based on advice by an independent expert group that consid- ered (a) transparent vulnerability criteria; (b) preparedness and ability to move toward climate resilient development plans; and (c) distribution across regions and types of hazards. Countries that accepted the invitation are Bangladesh, Bolivia, Cambodia, Mozambique, Nepal, Niger, Tajikistan, Yemen, and Zambia. Two regional programs are in the Carib- bean and South Pacific regions. Forest Investment Program (FIP). FIP finances investments in developing countries to reduce GHG emissions from deforestation and forest degradation. This program has received pledges of $349 million. Scaling Up Renewable Energy in Low Income Countries (SREP). SREP demonstrates the economic, social, and environmental viability of low-carbon development pathways in the energy sector by creating new economic opportunities and increasing energy access through the use of renewable energy. This program was approved by the Trust Fund Committee in May 2009. 10 D E V E L O P M E N T A N D C L I M AT E C H A N G E Box 3 A range of activities and instruments to support climate resilience and adaptation China: Climate Change Adaptation in Irrigated Agriculture Project (Ongoing) The development objective of this project is to enhance adaptation to climate change in agriculture and irrigation water management practices through awareness-raising, institutional and capacity strengthening, and demonstra- tion activities in the Huang-Huai-Hai river plain (3H Basin) in China. The project is linked to an ongoing Irrigated Agriculture Intensification project. The project's cost, estimated at $55.5 million, has been divided into two parts: (a) $50.5 million is covered under the ongoing IBRD-financed project to increase resilience to climate change for those activities that are potentially most affected by climate change; and (b) $5 million is funded by the Special Climate Change Fund (SCCF) to support additional adaptation activities not directly linked to the baseline project, namely: · Identification and prioritization of adaptation options · Demonstration and implementation of adaptation measures · Adaptation into national CAD program and institutional strengthening. Kenya: Adaptation to Climate Change in Arid and Semi-Arid Lands (Pipeline) Livelihoods and economic activities in Kenya are highly vulnerable to climatic fluctuations. About 80 percent of the country is arid or semi-arid, where the main sources of sustenance are pastoral and subsistence agriculture. Given the dramatic impacts of climate variability on Kenya's economic performance and the livelihoods of the poor, the super- imposed effects of climate change pose severe threats to sustainable economic development and poverty reduction by introducing another layer of uncertainty in the sustainability of livelihoods. The project aims to (a) strengthen climate risk management and natural resource base related knowledge; (b) build institutional and technical capacity for improved planning and coordination to manage current and future climate risks at the district and national levels; and (c) invest in communities' priorities in sustainable land and water management and alternative livelihoods that help communities adapt to climate risk. Project costs amount to $46 billion. An estimated IDA contribution of $40 million is expected to strengthen national institutions and district-level capacities; support CDD micro-projects for service delivery and drought rehabilitation; and address immediate needs and provide the baseline for the KACCAL project. An incremental SCCF grant for joint implementation by UNDP and the World Bank, as well as contributions from the government and beneficiary communities, will support the integration of a longer-term perspective in na- tional and district-level planning and a variety of local interventions to adapt to climate variability and change that result in the overall mitigation of that risk. Adaptation to the Impact of Rapid Glacier Retreat in the Tropical Andes Project (Ongoing) The broad development objective of this project is to contribute to strengthening the resilience of local ecosystems and economies to the impacts of glacier retreat in the Tropical Andes through the implementation of specific pilot adaptation activities that illustrate the costs and benefits of adaptation. The specific objectives of the project in sup- port of this broad objective are (a) in glacierized basins, the effective integration of the implications of glacier retreat into regional and local planning; (b) the inclusion of glacier retreat impacts in local and sector development projects; and (c) the generation of data on glacier dynamics. The project finances planning (design of at least six strategic adaptation measures), investments in specific adaptation measures addressing the most pressing priorities in each country (on a pilot basis), and scientific support for monitoring glacier retreat in the region in order to enable better long-term planning. The total project cost is $32.72 million; about 30 percent is financed by the SCCF, 43 percent by the participating governments (Bolivia, Ecuador and Peru) and the remainder by bilateral agencies and NGOs. T H E W O R L D B A N K G R O U P AT W O R K 11 Box 4 Reducing vulnerability to natural disasters and strengthening climate resilience: the Global Facility for Disaster Reduction and Recovery (GFDRR) A $145,000.00 GFDRR grant supported the development of a primer for city managers on reducing disaster vulner- abilities. A step-by-step self-assessment challenges policymakers to think about the resources needed to combat natural disasters through an innovative hot spot risk and vulnerability identification tool. The primer generated con- siderable interest and it is now being implemented in cities in the Philippines, Indonesia, Vietnam, and others in Africa and the Middle East. A $250,000 grant helps city governments in Casablanca, Tunis, and Alexandria to increase their resilience toward cli- mate change and disasters by formulating action plans. The program manages the disaster risk reduction and climate change adaptation components largely as one integrated agenda. The resulting climate risk management approach generates social and economic impacts in the short term, while reducing vulnerability to long-term changes in the climate. In West Africa, a $900,000 grant is supporting the development of local policies and strategies to help communities in Senegal, Sierra Leone, and Mauritania acquire stronger management of their own coastal and marine resources. In Madagascar, a $1.3 million grant is strengthening the country's capacity to deal effectively with climate change by facilitating the modeling of present and future cyclone risks, the development of cyclone-proof building codes, and the improvement of emergency capacity. A $75,000 grant is helping the government of Bangladesh determine how climate change may impact the depth, extent, duration, frequency, and timing of future floods and the resulting risks to agriculture and food security. 14 D E V E L O P M E N T A N D C L I M AT E C H A N G E Development (IIED), the development of the Growing was over $2.6 billion (Figure 1), constituting around 30 Forest Partnerships which will provide a platform to link percent of the entire WBG energy portfolio. New renew- the international dialogue on forests with local priorities able energy and energy efficiency investments have grown and needs by building on existing partnerships and forest at a rate of over 20 percent per year; growth over the next management and funding mechanisms. This partnership three years is expected to be 30 percent annually. process, currently being piloted in Ghana, Guatemala and Mozambique, would create networks through which The results for this fiscal year (ending June 30 2009) national climate change policies and strategies could be are not yet complete. In the first half of the fiscal year, discussed and developed in a participatory (and therefore the International Finance Corporation (IFC) has had more sustainable) way, and eventually help national-level a record pace of investments in renewable energy and processes link into international-level debates. energy efficiency: 11 projects valued at more than $1.6 billion were approved with more than $260 million in IFC financing, including the first large wind farm in Growing portfolio of energy efficiency Bulgaria. This fiscal year included the first examples of and renewable energy projects IFC's solar investment strategy, which recognizes the Since 2003, financing for renewable energy and energy ef- potential for investments across the value chain, as re- ficiency projects has grown considerably. In fiscal year 2008, flected in solar materials and manufacturing projects in RE/EE project financing (including large hydropower) Russia and China (see box 7). Box 6 Working to recognize and protect the value of forests for people and the planet The Forest Carbon Partnership Facility (FCPF) was announced at CoP13 in Bali in December 2007 and became operational in June 2008. The FCPF builds the capacity of developing countries in tropical and subtropical regions to reduce emissions from deforestation and forest degradation and to tap into any future system of positive incentives for REDD. In some of these countries, the FCPF will also help reduce the rate of deforestation and forest degradation by providing an incentive per ton of carbon dioxide of emissions reduced through specific Emission Reductions Pro- grams targeting the drivers of deforestation and forest degradation. 25 countries --10 in Africa, 10 in Latin America and 5 in Asia and the South Pacific -- were initially selected to be a part of the FCPF, but due to high demand, another 12 countries were selected at the March 2009 meeting held in Panama. The partnership now consists of 37 developing countries, with13 financial contributors having firmly committed $160 million. Six observers are from forest-depen- dent people, NGOs and international organizations, while the Bank Group is acting as overall convener and trustee, providing secretariat services and chairing the Participants Committee. Forest Investment Program (FIP), a program under the Climate Investment Funds, will finance transformational investments that address the drivers of deforestation and degradation with an emphasis on sustainable forest man- agement (SFM). The interventions could include developing incentives for sustainable forest management to local communities and indigenous groups such as for certification, improving institutional capacity, strengthening forest governance and information, and complementary investments in non-forest sector programs (agriculture, infrastruc- ture, etc.) to include provisions for forest protection. The FIP was designed through a series of multistakeholder de- sign meetings and has received pledges of over US$340 million. T H E W O R L D B A N K G R O U P AT W O R K 15 Figure 1 World Bank Group renewable energy and energy efficiency financing FY2003­08 3,000 2,500 US $ millions 2,000 1,500 1,000 500 FY03 FY04 FY05 FY06 FY07 FY08 Fiscal Year Box 7 IFC highlights in fiscal year 2009 During 2009, IFC has been on a record pace for renewable energy investments, all financed on its own balance sheet without donor subsidy. Projects include: · First ever project-financed wind farm in Chile, $61.5 million for 46 MW · $45 million for thin film solar in China, to produce about 60 MW annually · $82 million for a geothermal company in the Philippines, to allow increasing production and improve efficiency of operations · 55 m euro for 135 MW wind farm in Turkey · An investment in Russia for materials for solar cells In addition, IFC has been working with donor funds to develop riskier, pre-commercial projects, such as · A wind energy commercialization program in Mexico, with support from the Clean Technology Fund · A grid-connected photovoltaic (PV) power project in India 18 D E V E L O P M E N T A N D C L I M AT E C H A N G E Table 1 New carbon partnerships Forest Carbon Partnership Facility (FCPF) Carbon Partnership Facility (CPF) Reducing emissions from deforestation and Programmatic and sector-wide forest degradation (REDD) carbon finance intervention · Operational in June 2008 · Objectives · Objectives: Build capacity and catalyze ­ Target long-term emissions private sector investment to enable scaling up ­ Scale up finance to programmatic and sectoral of forestry projects carbon reduction investments · Features: ­ Support strategic, transformational interventions in ­ 37 REDD Country Participants (12 submitted power sector development, energy efficiency, gas Readiness Plan Idea Notes) flaring, transport, urban development, etc. ­ Target size of Readiness Fund: $185 million · Features ­ Currently pledged by donors: $160 million ­ Move from individual projects to program ­ Financial assistance available to approxi- approaches mately 20 countries ­ Partnership between buyers and sellers ­ Guyana, Indonesia, Panama, Suriname: first ­ Fostering both demand and supply in uncertain four countries to present draft Readiness market Preparation Proposals (RPP) ­ Target size: first tranche 350 million · First developing country participant is in Morocco; dis- cussions with entities in Indonesia, Vietnam, and China to countries (or states) for their climate-change-related The first dedicated climate change development policy priorities. Two pioneering operations were the Morocco loan of $500 million was requested by and delivered Energy Sector loan (fiscal year 2007) and the Himachal to Mexico in May 2008. In addition, two environ- Pradesh (HP) DPL in northern India (fiscal year 2008). ment sector DPLs approved for Mexico in 2008­09 Both contained components that promote greater use have a strong focus on policy and institutional mea- of renewable energy sources. The Himachal Pradesh op- sures related to climate change, with lending specifi- eration further assisted the state government in build- cally for these components amounting to more than ing its capacity to adopt adaptation strategies for glacial $325 million. melting in the Himalayan ecosystems due to impacts of climate change. By simultaneously targeting agricultural Among recent examples, the programmatic develop- productivity and environmental resilience, the Agricul- ment policy operation for Sustainable Environmental ture development policy operation in Ghana (2008) set Management in Brazil approved in March 2009 sets an example of a developing country's effort to integrate a record lending amount of $2 billion while address- climate risk management and adaptation into the broad- ing climate change actions both at the inter-sectoral er economic growth and poverty reduction agenda. level and within the targeted sectors, including natu- T H E W O R L D B A N K G R O U P AT W O R K 19 ral resources, water, sanitation, and energy. Another Scaling-up support to country-led example of environmentally driven innovation in the efforts with the Climate Investment use of traditional Bank products is the Solid Waste Funds Management development policy loan in Morocco, which was approved in March 2009. Amounting Approved in July 2008, the Climate Investment to 100 million, the loan seeks to improve the sec- Funds are a collaborative effort among the multilat- tor's governance as well as its financial sustainability eral development banks and countries to bridge the through performance-based incentives for munici- financing and learning gap between now and a new palities. It also aims to strengthen social and envi- global climate change agreement. The CIF--gov- ronmental considerations and set a framework to sell erned by balanced representation of donors and re- to 7-10 million tCo2eq of carbon credits with a local cipient countries--are comprised of the Clean Tech- aggregator (Fonds de l'Equipement Communal). This nology Fund (CTF) and the Strategic Climate Fund is the first World Bank policy-based lending that sup- (SCF), with total pledges in excess of $6 billion of ports enabling access to the carbon market. highly concessional funding (equivalent to about $3 billion in grants). Over several months, MDBs, with This series of loans represents a new generation of partner countries, made rapid progress in establishing sustainable development finance instruments that are these new instruments. CTF investment plans of over able to deliver significant financing on a "wholesale" $1 billion were endorsed for three countries--Egypt, scale to help developing countries with their policy, Mexico, and Turkey--and two projects were approved institutional, and investment priorities. in Turkey and Mexico (see figure 2). The concept note for the first regional program--supporting 1 mega- watt of concentrated solar power in eight countries Raising finance on capital markets of the MNA region, West Bank and Gaza--has been recommended for further preparation. Several more Another innovative application of World Bank re- countries are preparing investment plans. sources to support climate action are "green bonds," which the Bank launched to raise additional funding With respect to the Strategic Climate Fund (SCF), in the capital markets for projects or programs that information about its programs is summarized (see support lower-carbon and climate-resilient activities box 9). Nine pilot countries were selected and invited in client countries. The first issue of green bonds was to participate in the PPCR; and two regional pilots in in November 2008; it was denominated in Swedish the Caribbean and the Pacific have been approved. kronor (SEK) for a total amount of SEK 2.325 bil- lion and a maturity of 6 years. The second issue of green bonds took place in April 2009 to the state of California which raised $300 million. 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