green finance mechanisms
TRANSCRIPT
Green Finance
Financing Green Economy
Luisa Nenci
SUB-REGIONAL Training «GREEN FINANCE: Investment Tools and Policies to promote Eco-innovation, Clean Industry and Green Economy» Amman, 28 January 2014
Index
1 Definition(s) of: Sustainable Development, Green Growth and Green Economy
2 Financing the Green Economy: Impacts, Diagnostic, Indicators, Strategy
3 Funding:
3.1 Environmental protection:
‒ Climate Change
‒ Biodiversity
3.2 Infrastructures for:
‒ Water
‒ Energy
‒ Waste
3.3 Technologies for
‒ Eco-innovation
‒ Clean Production
‒ Energy Efficiency
Conclusions
2
Definitions
What is Sustainable Development?
Green Growth? Green Economy?
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Definition Sustainable Development
the goal of Sustainable Development is ”to meet the needs of the present without compromising the ability of future generations to meet their own needs”.
Bruntland Definition,
World Commission on Environment and Development Our Common Future , 1987
Triple Bottom Line: Balanced approach to economic
development, environmental protection and social well being.
John Elkington founder of SustainAbility 1987
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Definition Green Growth
GG aims to foster economic growth and development, while ensuring that natural assets are used sustainably, and continue to provide the resources and environmental services on which the growth and well-being rely. OECD (2011), “Towards Green Growth:
Monitoring Progress - OECD Indicators”, OECD, Paris
GG is growth that is efficient in its use of natural resources, that it minimises pollution and environmental impacts, resilient because it accounts for natural hazards
World Bank (2012), Inclusive Green Growth: The Pathway to Sustainable Development, 2012,
World Bank, Washington, DC.
Definition Green Economy
Towards a Green Economy
A system of economic activities related to
the production, distribution and consumption
of goods and services that improve the well-
being in the long term, while not exposing
future generations to social risks and
ecological scarcities
Source: UNEP, 2011, Towards a Green Economy: Pathways to Sustainable Development and Poverty Eradication,p.2 www.unep.org/greeneconomy
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Impacts Human Activities
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Source: Scott Brennan & Jay Withgott, Environment: The Science Behind the Stories, 2004
Impacts Planetary boundaries
Source: OECD (2011) Toward Green Growth p. 30 AAVV (2009) Planetary Boundaries: Exploring the safe operating space for humanity, Ecology and Society p.9 8
Impacts
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Source: UNEP, 2011, Towards a Green Economy: Pathways to Sustainable Development and Poverty Eradication, www.unep.org/greeneconomy
Impacts: Ecological Footprint and Human Development
Source: The Ecological Wealth of Nations: Earth’s Biocapacity as a New Framework for International Cooperation. Global Footprint Network (2010), p. 13; Human Development Index data from Human Development Report 2009 − Overcoming Barriers: Human Mobility and Development. UNDP (2009).
Diagnostic Green Economy Report UNEP 2011
the transition to a green economy by 2050 is possible with
the investment 2% of global annual GDP through the
transformation of key sectors :
- Agriculture - Manufacture
- Construction - Tourism
- Energy - Transport
- Fishery - Water Management
- Forestry - Waste Management
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Source: UNEP, 2011, Towards a Green Economy: Pathways to Sustainable Development and Poverty Eradication, Financing the Green Economy Transition p.35
Source: OECD (2011) Tools for delivering Green Growth p.6 OECD (2011) Toward Green Growth concept based on Hausmann, Velasco and Rodrik (2008), “Growth Diagnostics” in J. Stiglitz and N. Serra, (eds), The Washington Consensus Reconsidered: Towards a New Global Governance.
Diagnostic Toward Green Growth
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Source: OECD framework for environmental indicators. Using the pressure-state-response model to develop indicators of sustainability
Indicators Pressure-State-Response Framework
Indicators Pressure
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Indicators: State
Indicators : Response GG/GE indicators
Source: Green Growth Knowledge Platform (2013) Moving towards a Common Approach on Green Growth Indicators p.6
Strategy Response: Design, reform and implement policies for green growth
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Source: OECD (2013) What have we learned from attempts to introduce green growth policies p.7 OECD-EU Support for Improvement in Governance and Management (SIGMA)
Strategy: Response: Reforming Subsidies
Budgetary (Government benefit) Fiscal savings More investments Form regressive to progressive expenditure Economic(Firms’ benefit) Prize liberalization Improved competition Incentives to domestic production Social(Household benefit) Increase in social assistance program Establishment/improvement in targeting mechanisms Conditional programs
Source: ICTSD Tackling Perverse Subsidies in Agriculture, Fisheries and Energy OECD (2011) Outils pour la mise en place d’une croissance verte p.13
Strategy: Response: Reform of Energy Subsudies
Source: UNEP (2008) Reforming Energy Subsidies. Opportunities to Contribute to the Climate Change Agenda p.9
Source: FAO (2013) Regional Initiative on Water Scarcity in the Near East Preliminary Regional Review and Gap Analysis – DRAFT p.16
Strategy: Response: Not just a Reform of Water Subsudies
Strategy: Response: Agriculture Reform Egypt
Source: Booz & Company (2010) elaboration of Data from The World Bank, “World
Development Report 2008.” and “OECD-FAO Agricultural Outlook 2009–2018,”2009.
Strategy Response: Taxes on pollution and other fiscal instruments
Welfare Effects of Environmental Taxes in the Pigouvian Framework
Strategy Response: Taxes on pollution - Light Fuel Oil -
Source: IMF Working paper (2012) Environmental Tax Reform: Principles from Theory and Practice to Date p.8
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Payments for ecosystem services (PES) compensate individuals or communities whose land use or other management decisions that affect resources on providing the ecosystem services for the additional costs of providing these services.
Strategy Response: Payments for ecosystem services (PES)
Rangelands in Jordan: Seek possible additional sources of funding for local communities for range management through:
•global PES with respect to carbon capture (or “sequestration”) – either through the “Kyoto Protocol” or through voluntary, pilot markets – and other global common goods. •national PES by rationalizing assistance and payments to land users (mainly Bedouin communities) under various public programs. •considering payments part of the Climate
Change agenda. IFAD Jordan National Program for Rangeland Rehabilitation and Development - Phase I
Strategy Response: Standards and certification on sustainable production
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Global Eco-labelling Network
International Social and Environmental Accreditation and Labeling Alliance
European Eco-Management and Audit Scheme (EMAS)
International Standards Organization (ISO) Environmental Management System
ECO-Label
Source: OECD, Government at a Glance 2013: Procurement Data, OECD Meeting of Leading Practitioners on Public Procurement, GOV/PGC/ETH(2013)2, 23-Jan-2013 p.7
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Public authorities in the EU actually spends more than 16% of EU GDP – equal to almost 1.8 billion Euros
Source: European Environmental Bureau
Strategy Response: Public Procurement
Strategy Response: Sustainable Public Procurement
"A sustainable purchasing policy ... take the life cycle into account with profit, social and environmental costs ..."
Procuring the Future (2006)
UK Sustainable Procurement Task Force
Source: UNEP Capacity Building for Sustainable Public Procurement
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Source: Republic of Lebanon Ministry of Finance (2013) Professionalizing Public Procurement in Lebanon: Diagnostic Review and a vision forward
Strategy Response: Land tenure rules
IFAD Land Tenure Security: Rights for natural resources utilisation: Rangeland projects may need to clarify the land-tenure system and rights to resources. • recognizing and documenting group rights to rangelands and grazing lands, forests, artisanal and fishing waters • recognizing and documenting smallholder farmers’ land and water rights in irrigation schemes • strengthening women’s secure access to land • using geographic information systems to map land and natural resource rights, use and management • identifying best practices in securing these rights through business partnerships between smallholder farmers and investors
To improve access to land for the poor (especially women, minorities and other disadvantaged groups) who wish to practice agriculture.
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Framework & Guidelines on Land Policy in Africa Source: OECD Green Growth Toolkit p.55
3.1 Environmental protection:
‒Climate Change ‒Biodiversity
3.2 Infrastructures for:
‒Water ‒Energy ‒Waste
3.3 Technologies for ‒Eco-innovation ‒Cleaner Production ‒Energy Efficiency
Funding
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Funding Environmental Protection: EU Definition
«Support to biodiversity water and energy and the fight against climate change are key areas of cooperation development, as expressed in the European Consensus on Development
Sustainable management of the environment is also one of the Millennium Development Goals.»
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Source: From Policy to Action: An outline of EU external aid for Sustainable Development
Environmental Protection Climate Change
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Sources: EU (2012) European Union fast start funding for developing countries EU (2012)Supporting a Climate for Change p.35, Commissioners Piebalgs announce "Climate Change Windows“ ECDPM (2012) EU Regional Blending Facilities GCF (2013) Financial Instruments , Documents
EU-Climate Change Windows
GCF the new operating entity of the financial mechanism of the UNFCCC.
EU-Fast Start Finance
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Climate Change Policy of the Hashemite Kingdom of Jordan launched on 14 May 2013 “Enabling Activities for the Preparation of Jordan’s Third National Communication Report to the UNFCCC (TNC)” project, “Adaptation to Climate Change to Sustain Jordan’s MDG Achievements” Project, “Water Governance Programme for the Arab States” and “Developing policy-relevant capacity for implementation of the Global Environmental Conventions (CB2)”
Environmental Protection Climate Change
Lebanon electricity generation mix 2010-2030
Source: EUROMED (2012) Climate change and economic growth: an inter temporal general equilibrium analysis for Egypt
Egypt Impacts on Sectoral Capital Stocks 2050
Source: MOE, GEF, UNEP(2011) Lebanon Technology Needs Assessment-ClimateChange p.71
Environmental protection Biodiversity
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Biodiversity through the financing of Climate Change: funded 2009/2010 with USD 70-120 billion each year while biodiversity with only 8 billion USD.
A further loss of 10% of the world's biodiversity is expected between 2010 and 2050.
Source: Scaling up Finance Mechanisms For Biodiversity p.16
Source: OECD (2011) Toward Green Growth p. 21
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PES Offset of an area of 30 hectares: 10 hectares of cultivable field and 20 of degraded limestone grasslands. The proposal aims to restore arable field limestone and improve the condition of the existing meadow.
Source: DEFRA (2012) Biodiversity Offsetting Pilots. Guidance for offset providers p.19
Environmental protection Biodiversity
Funding Infrastructures: Grants European Commission
Mainly European Countries Agriculture, fisheries and foods Animal welfare Aquaculture CAP CFP Plant health Rural development Business Climate action Competitiveness Enterprise and Industry Free movement Internal market SMEs Energy and natural resources Climate action Energy Intelligent Energy Europe
Environment, consumers and health Consumers Environment Health Maritime policy Sustainable development Employment and social rights Employment, Social Affairs and Inclusion Regions and local development EU solidarity fund Regional Development Fund Regional policy Science and technology Research
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NIF promotes investment particularly in the sectors of Transport projects, Energy, Environment and Social sector. The Facility also supports the private sector, including through risk capital operations for Small and Medium Enterprises (SMEs).
Funding Infrastructures: Neighbourhood Investment Facility (NIF)
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Source: AAVV (2012) Analysis for European Neighborhood Policy (ENP) and the Russian Federation on the Social and Economic Benefits from Enhanced Environmental Protection. (2011) Regional Report: ENPI South. A Synthesis Report on Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, occupied Palestinian Territories, Syria and Tunisia. P.54
Infrastructures Water
Monetary benefits of meeting water quality improvement targets – South ENPI countries, 2020
Source: UNEP (2011) Green Economy Report Synthesis p.16
Business as usual approaches will not meet demand for raw water
Infrastructures Water
Infrastructures: Waste: Carbon Finance WB
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Egypt, Aerobic Composting Egyptian solid waste recycling (ECARU) provides treatment and service land filling of municipal waste collected in the south of the city.
ECARU processes of recyclables, composes organic biomass (food, non-recyclable paper, wood) and manages residual waste.
Infrastructures Energy
EU financial instruments specifically support the achievement of policy objectives in the energy sector with:
market-based instruments (mainly taxes, subsidies and trading system for CO2 emissions rights):
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Source:
Greenhouse gas emission allowance trading scheme
Community framework for the taxation of energy products and electricity
- Current minimum excise rates
Petrol (€/1000 l.) 421
Unleaded petrol (€/1000 l.) 359
Diesel (€/1000 l.) 330
Kerosene (€/1000 l.) 330
LPG (€/1000 l.) 125
Natural gas (€/gigajoule) 2.6
The minimum levels of taxation applicable to motor fuels in EU
Infrastructures
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Tentative typology of green growth sectoral policy objectives in Mediterranean countries: job creation and risk of irreversibility
Source: FEMIPE (2012) Toward Green Growth in Mediterranean Countries P.90
ICZM = Integrated Coastal Zone Management
FP7 projects are at an early stage of research or development, or with a high technological risk.
H2020 is the financial instrument to be implemented between 2014-2020 with a budget of just over € 70 billion Euros.
This new EU program for research and innovation, combine the Framework Programs for research and Technical Development, the Competitiveness and innovation Framework Program (CIP) and the European Institute of innovation and Technology (EIT).
Six main areas:
1.Depollution 2.Maritime and land highways 3.Civil protection 4. Alternative energy 5. Research 6. SMEs Development.
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Technologies Innovation: FP7- Horizon 2020
Technologies Eco-Innovation: EU
Source: Eco-Innovation: When business meets the environemnt
•has an innovative character; •shows clear and substantial advantages for environmental policy objectives; •achieves significant environmental improvements; •provides an important replication; •demonstrates a European added value; •sounds technical at a project management perspective; • is 'cost-effective'
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Source: Oxford Research (2011) EU Financing Eco-innovation p.16
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Eco-Innovation Types & Economic Sectors
access to finance is a major constraint to innovation in business, which is inherently risky
A venture capital market operating effectively is: -facilitating the access to debt financing (which is the main source of innovation) and issue of shares; -planning risk sharing with the private sector
Eco-Innovation Funding
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Source: The OECD Innovation Strategy
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Eco-Innovation Instrument of Financing and Financed sectors
Source: Oxford Research (2011) EU Financing Eco-innovation p.56
Source: Oxford Research (2011) EU Financing Eco-innovation p.71
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Eco-Innovation Incentives to finance innovative SMEs
EUROPEAN FUNDS focused on clean technologies such as: WHEB Ventures, Environmental Technologies Fund (ETF), Capricorn Venture Partners, Demeter Partners, Emerald Technology Ventures, Carbon Trust Investment Partners, Low Carbon Accelerator, Ludgate Investment GIMV and Set Venture Partners. ERBD Sustainable Resource Initiative favourises: efficiency and innovation and increases competitiveness in three areas: •energy, •water •materials.
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Eco-Innovation Specialised Financing Instruments
Eco-Innovation Intermediary Financing Institutions: State Promotional Banks
The KfW Mittelstandsbank •risks fifty-fifty with the intermediary banks. •not specifically targets eco-innovation, but innovation in general. •the share of loans to eco-innovative SMEs is very low (≈ 5%) •insolvency of new innovative companies is ≈ 30%.
Source: Oxford Research, EU Financing Eco-innovation p.114 GIZ (2013) Promoting Eco Innovation p.37
ALMI, Innovation Loan (Sweden) AWS, Eco- Bonus (Austria) ERP, Capital for startups/ERP, Innovation Programme/BMU, Environmental Innovation Programme (Germany) ICO, Sustainable Economy Facility (Spain)
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KfW Promoting green innovation and sustainable responsible entrepreneurship: the ZERO Award in Egypt and Ethiopia
Local investors (max 38%) in startup companies taking an advisory role without financial compensation. With co-investment funds: investment mechanism resulting from a public-private partnership for investment in start-ups.
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Eco-Innovation Business Angels Venture Capitals
Professionally managed fund with requirements of financial performance. There is not an integrated market, the regulatory framework varies greatly from one country to another. The European Union seeks to unify the venture capital market to facilitate access to finance for innovative small businesses.
Source: EBAN (2009) Compendium of Co-investment for Business angels and Early stage funds in Europe
Technologies: Eco-Innovation
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Eco Innovation European VC Investment on cleanear tecnologies for sector
Eco-Innovation Banks and other private financing
Institutions utilized by SMEs to be financed
Source: Oxford Research, EU Financing Eco-innovation p.42
PRIVATE CLIMATE FINANCE Tracking measurement of total private climate finance to and in developing countries
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Technologies Energy
Eu financial instruments are specifically supporting the achievement of policy objectives in the energy sector with the development of energy technologies for:
energy efficiency,
low carbon technologies
and renewable energy
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Technologies Energy Efficiency
Source: Plan Bleu (UNEP/MAP) 2011 Energy Efficiency, building and Climate Change in the Mediterranean. p.3
Investment needs for EE measures by 2030 (billion €)
Technologies: Technologies propres: Cleaner Energy Production
Source: ERBD Cleaner Energy Production BERD Sustainable Energy Financing Facilities
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Cleaner Energy Production Program included in the Sustainable Energy Initiative (SEI) and covers the need to strengthen economic development in carbon limited conditions of: thermal power generation and cogeneration; hydropower; transmission and distribution, including SCADA systems and smart grids; grid connected renewable energy, including wind, small hydro and biomass
Source: FEMIPE (2012) Toward Green Growth in Mediterranean Countries p.20
Employment potential associated with renovation of buildings in 2030
Summary
Source: OECD (2012) A Toolkit of Policy Options to Support Inclusive Green Growth p.17
Summary suite
Conclusions
Countries should continue their efforts to manage natural resources in a sustainable manner.
Price instruments (pricing et al.), supplemented by regulations or subsidies have encouraged green growth.
The main challenge to foster GE is to coordinate policies and to develop indicators and tools for monitoring the progress of implementation.
Innovation is essential to foster green growth
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