Ongoing work on innovative financing in the UNFCCC

1
Ongoing work on innovative financing in the
UNFCCC

• Daniele Violetti
• Programme Officer, UNFCCC Secretariat

2
Outline of the presentation

• I. Funding targeted for climate change
• The role of the private sector
• Workshop on innovative financing
• Follow-up activities

3
Funding targeted for climate change
CDM/JI
BILATERAL - ODA (OECD/DAC) - Seed financing -
Green Financing
Adaptation Fund
The GEF - Trust Fund - SCCF - LDCF
UNFCCC
PPPs Export Credit Agencies
PRIVATE SECTOR - Commercial Banks - Micro
financing - Insurances

• MULTILATERAL
• - World Bank Carbon Finance
• UNEP
• - EU COMMISSION
• - UNDP
• - IFC
• - EBRD
• - UNCTAD

4
Funding targeted for climate change

• Bilateral activities of Parties
• Multilateral activities
• e.g. The GEF (1995-2003) provided around USD
  1.35 billion in grants to climate change
  activities and another USD 6.2 billion has been
  leveraged
• Other multilateral financial opportunities e.g.
  World Bank carbon financing, Regional Banks, UN
  agencies

5
Funding targeted for climate change

• The Special Climate Change Fund will finance
  projects relating to adaptation and technology
  transfer (33 USD million allocated to A and USD 1
  million to TT)
• LDC Fund, implementation of NAPAs (USD 33
  million, USD 11 spent)
• Financial flows generated by JI/CDM projects (2
  of CDM proceedings for the Adaptation Fund)
• Private sector investments

6
Funding targeted for climate change

• Information provided by Annex II Parties in their
  third National Communications

7
Funding targeted for climate change

• Information provided by Annex II Parties in their
  third National Communications

8
Trends in financial flows
Aggregate financial flows from 1990 to 2003
Source Global Development Finance 2004. World
Bank.
9
Distribution of financial flows
Net foreign direct investment (FDI) by region
(2003)
 Source Global Development Finance 2004. World
Bank.
10
The role of the private sector

• The pressure to reduce GHG emissions helps to
  create new markets for cleaner technologies and
  offers new opportunities for companies and
  investors, as well as constraints
• Policies that attach price to carbon change the
  competitiveness of different energy technologies
  and create support for new technology development
  and public private partnerships
• How to deal with companies carbon risk exposure
  and competitive implications?

11
Workshop on innovative financing

• SBSTA 19 requested the secretariat to organize a
  workshop on innovative options.., and to report
  on the findings of the workshop to SBSTA 21
• SBSTA 20 requested the EGTT to consider the
  outcomes of the workshop with possible
  recommendations for consideration by SBSTA 21
• The workshop took place on 27-29 September in
  Montreal, Canada (FCCC/SBSTA/2004/11)

12
Conclusions from the workshop

• Technology needs assessments should form the
  basis for the development of strategic plans to
  move the technology transfer process forward
• Toolkits and handbooks on innovative/non-innovativ
  e financing of technology transfer projects are
  necessary for improving project preparation and
  assessment to international standards
• Training and capacity-building programmes could
  be developed using the above mentioned toolkits
  and handbooks

13
Conclusions from the workshop

• Enabling environments Establishing the
  necessary enabling environments, including
  removing barriers, remains an essential element
• Risk management The provision of adequate tools
  for risk management to mitigate risks and to
  improve the quality of projects is crucial
• Dialogue Engaging both public and private
  sector financial institutions, SMEs and
  entrepreneurs, as well as ECAs could be a focus

14
Conclusions from the workshop

• New investment instruments and institutes can
  play an important role in TT, e.g. the role of
  ECAs, the innovative approaches by the CDM and JI
  as well as seed financing provided by donors
• Financing secured and embedded early in the
  process not a bolt-on element to be added at
  the end of a process
• Bundling of projects reduces overall projects
  costs by increased efficiency and leads to
  development of expertise that can eventually
  lower transaction costs

15
Follow-up activities

• The EGTT work programme for 2005 includes the
  organization of a follow-up workshop in October
  2005
• Objective To find solutions to reach
  financial closure of proposals drawn from the
  results of the technology needs assessments
• Secretariat to report on the outcomes of the
  workshop at SBSTA 23
• A technical paper on innovative financing for
  SBSTA 24
• The Practitioners Guide to be prepared for SBSTA
  25

16
Issues for reflections

• Why do we need innovative financing?
• How can the private sector be better engaged?
• What could be the next concrete steps?
• Is this type of event effective?
• Should it become a yearly event?
• Could specific training in this area be useful?

17

THANK YOU!