By Joelle Chassard
Manager, Climate Finance Unit, The World Bank
The future looks a little brighter in Senegal following a unique agreement last month between the
Senegalese Rural Electrification Agency and the World Bank to provide some 1.5 million compact
fluorescent lamps to tens of thousands of rural households. While half a world away in northern
Russia, estimated emissions of 6.7 million tons of CO2 equivalent are set to be avoided, following an
agreement with the Bank for the recovery and utilization of the associated petroleum gas at the
Komsomolskoye oil field.
The two activities, Senegal’s first CDM ‘programme of activities’ to reduce
greenhouse gases, and Russia’s first Joint Implementation activity of such scale targeting gas
flaring reduction, are two recent examples of World Bank efforts to find innovative ways to leverage
investment and catalyze climate action.
Over the years, the World Bank Group has acquired substantial experience in mobilizing and leveraging
finance to support development projects with climate benefits, most notably through its carbon
finance activities (a key channel to catalyze low-carbon investment in developing countries and
economies in transition), and through the GEF (critical to develop a knowledge base for adaptation).
As a pioneer of the carbon market, its efforts encompass the following:
- Manage an active portfolio of ten carbon funds and facilities that have pioneered and
deepened the market for emission reductions in every continent and in a wide range of sectors
and development activities
- Purchase carbon credits beyond 2012 (through the new Carbon Partnership Facility), to
help provide carbon market continuity and increase the stream of carbon revenues to projects
with positive implications for their financing
- Enable reducing emissions from deforestation and degradation (through the new Forest
Carbon Partnership Facility)
- Explore frontloading mechanisms, to encourage lending against anticipated carbon revenue
streams and, more recently, carbon-linked bonds to direct the capital so-raised to low-carbon
- Develop risk-management products (such as IFC Carbon Delivery Guarantee or MIGA political
risk insurance), to increase the confidence of potential carbon asset buyers or of potential
investors in the underlying projects
- Innovate in asset creation, such as development of methodologies – with a focus on
underserved sectors like energy efficiency or forestry assets, or assistance to countries
setting up Green Investment Schemes
- Share knowledge, raise awareness and build capacity in host countries, most notably
through the Carbon Finance Assist (CF-Assist), an active partner in the Nairobi Framework.
Today, the challenge before us is to scale up the carbon market, reduce the transaction costs, and
expand from a project by project approach to approaches that promote and reward lower emission
trends. Critical here is the need to strengthen certainty around carbon markets after 2012, building
on the endorsement given by Parties at the United Nations Climate Change Talks in Bangkok earlier
this year to continue the market-based mechanisms under the Kyoto Protocol beyond 2012.
Progress at the upcoming climate negotiations in Poznań in this respect is critical.
In the meantime, a group of industrialized nations recently pledged more than US$6.1 billion to the
Climate Investment Funds (CIF), a pair of international investment instruments designed to provide
interim, scale-up funding to help developing countries in their efforts to mitigate increases in
greenhouse gas emissions and adapt to climate change.
The Clean Technology Fund will invest in projects and programmes in developing countries that
contribute to the demonstration, deployment and transfer of low-carbon technologies. The Strategic
Climate Fund will serve as an overarching fund for various programmes to test innovative approaches
to climate change.
The funds, to be disbursed as grants, highly concessional loans and/or risk mitigation instruments,
will be administered through the World Bank Group and other multilateral development banks.
In designing the funds, and in support of the Bali Action Plan, the World Bank in consultation with
developed and developing countries took care to recognize the primacy of the UNFCCC in global climate
negotiations. The countries are equally represented in the governance structure. All funds and
programmes under the CIF have a sunset clause in order not to prejudice UNFCCC deliberations
regarding the future of the climate change regime.
The climate change debate is changing rapidly. Not long ago, the issue was the domain of environment
ministers. They helped us to understand the challenge as a development issue, and our efforts to help
countries address climate change are now captured in the Development and Climate Change Strategic
Framework for the World Bank Group.
The stories from countries as different as Senegal and Russia show what can be achieved when there is
a will and a way; yet such actions need to be repeated across the globe. Innovative financing in the
fight against climate change is needed now, more than ever, if we are to confront what has emerged as
the major threat to the development priorities of the poorest countries and communities.