Location of consultation: Bonn (1x) and Berlin (2x) Date: May 19, 20, and 23

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Jasmine Doris Hodges
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1 STRATEGIC FRAMEWORK FOR CLIMATE CHANGE AND DEVELOPMENT CONSULTATION FEEDBACK COUNTRY: GERMANY (3 consultations) Location of consultation: Bonn (1x) and Berlin (2x) Date: May 19, 20, and 23 Participants (please attach list of participants and their affiliations): Lists submitted separately. World Bank Participants and Role: Bonn (May 19, 2008), Berlin (May 20, 2008): Presenter: Warren Evans, Director ENV; Steven Jouy, EXTEU Berlin (Support & Organization) Berlin (May 23, 2008): Presenters: Warren Evans and Monika Weber-Fahr, Manager, Sustainability Development Dept. IFC; Steven Jouy EXTEU Berlin (Support & Organization) How did the process fit into ongoing country dialogue (if relevant; for international meetings, please explain how it fit into the topic of that meeting)? EXTEU Germany through its Berlin office maintains a multi-constituency dialogue on a wide range of issues. The consultations fit well in the ongoing country dialogue, part of which includes pro-active outreach to relevant constituencies on forthcoming WBG policies. What were the key issues/themes raised by participants? For some CSOs (Urgewald, Germanwatch), the WBG s involvement in fossil fuels is a contradiction to the Bank s climate change strategy. Discussants also found the lack of a clean technology definition puzzling, and would like to see at least a basic definition enshrined in the SFCCD. Warren Evans suggested to review whether this is possible. On the government side, collaboration with MDBs and bilaterals remains a concern, especially when either group has done research that is beneficial to the WBG s work. How to enhance collaboration and share the research of, say KfW s work on shadow prices, is an issue. Government also expressed concern about the lack of effective communication on transformation impact. What are the results of the WBG s past work in the climate change arena? The German government also stressed that nuclear energy is not an option for the Bank. The private sector is seeking practical input from the SFCCD as the framework holds few concrete recommendations for the sector s involvement. One important questions is how to make technology transfer viable, and how the WBG can help to make this happen. The World Bank

2 1. What should the World Bank Group s role on climate change be within the international development community? [Government] - (a) The link between the SFCCD and the CEIF, particularly with regard to energy access, is not clear. Government welcomes further details on the future, or lack thereof, of the CEIF. - (b) There is a need to show how the WBG s past climate related activities have impacted climate change for the better, particularly when programs like the CDM have had virtually no climate change impact. - (c) The neutrality principle of the WBG should be clarified as it is not clear why the WBG should be neutral to the climate negotiations. One would expect the WBG to be supportive of them. - (d) The WBG should not get involved in nuclear energy. [Civil Society] - (a) The WBG should disengage from fossil fuel projects, especially from oil. There is also doubt the WBG is committed to reducing climate change impact seeing that its investment in clean energy grew at a much slower pace than investments in fossil fuels, e.g. recent loan to Tata coal-fired power plant in India. Another example is the Chad-Cameroon pipeline, which shows that the WBG didn t achieve many of the goals it set out to achieve - (b) It remains questionable whether the SFCCD focus on low carbon growth is the proper approach, seeing that there are many other manifestations of global environmental change, in addition to GHG emissions. As documented by the - (a) The 2007 Annual Meetings agreed to move from the CEIF to a more holistic strategic climate change framework. The CEIF will disappear, and while the energy access agenda wasn t dropped, it is better integrated in the Africa/Infrastructure Action Plans. Access remains a high priority, but is not a part of climate change strategy. - (a) The SFCCD will tackle greening the access agenda, e.g., by leapfrogging technologies and by rendering these affordable, but also by supporting off-grid renewable energy programs. - (b) The WBG has not done a good job describing the impact of past climate-related initiatives, and should do better in the future. This will require a monitoring and evaluation framework and reporting mechanism. - (c) The WBG is supportive in terms of offering lessons learned, but must remain neutral in terms of advocacy in order not to preempt the ongoing negotiations. - (d) Nuclear energy is not close to least-cost in terms of financial viability, if everything is factored in. There is no discussion within WBG to add nuclear energy to the portfolio. - (a) Many client countries have high energy needs and in many cases, fossil fuels remain the only source. WBG sees its role in helping countries move towards cleaner, more equitable distribution of the benefits of energy, including fossil fuels. - (a) WBG client countries do not currently have an obligation to reduce GHG emission, though many are doing it anyway. - (a) As the climate negotiations move forward and the future of a climate regime crystallizes, the WBG will be in a better position 1 Summary of discussion points The World Bank Page 2

3 Millennium Ecosystem Assessment (MEA), energy intensity is not the only problem but resource and ecosystem intensity as a whole. The SFCCD lacks a systemic approach to many of the MEA findings, and focuses instead solely on carbon growth. - (c) The WBG needs to show how its involvement in Accra in September, and its commitment to aid effectiveness in general, will link to the broader climate change question. to help countries move more rapidly towards a real low carbon economy. In the meantime, the WBG helps countries reduce poverty and generate economic growth. - (a) It can be expected that developing countries will interpret carbon footprint requirements as an additional set of conditionalities, which would bring about resistance from client countries. - (a) The issue whether carbon footprint should become part of the due diligence process in addition to economic, social, environmental rates of return, is a matter for the Board. - (a) One added difficulty in the debate is that some WBG shareholders (e.g. U.S.) continue to build coal-fire plants for energy generation, which doesn t provide an argument for developing countries not to do the same. - (b) The WB has requests from 34 countries to participate in the Forest Carbon Partnership Facility readiness fund. The linkage of forests to climate change elevated forests and ecosystem services in general to a level that wasn t achieved after the Millennium Assessment. The WB believes the FCPF will identify a few countries that are ready to engage in some kind of a credit-worthy scheme on a sustainable basis where revenues will be generated for reducing deforestation. It will important to ensure that revenues get to local communities, which is where the WBG can help. - (c) It will be crucial for the Boards of MDBs to come together on the harmonization agenda and link this to adaptation and mitigation. [Private sector] - (a) The WBG should look into the feasibility, or lack thereof, of a global emissions trading system that would go beyond regional initiatives of, say the EU. How realistic would such a global trading system be to get other countries involved? - (a) While a global market is the way forward, practically speaking, there will also be a need for regional markets. Most likely, one will see a mix of regulated markets at the national, regional, and global level. - (a) The WB also sees its role in carbon funds diminishing over time for the benefit of piloting new initiatives. The Bank sees great potential for government to government initiatives, requiring less involvement by the Bank, and more involvement by the private sector. 2. The Concept and Issues Paper states that both mitigation and adaptation must be integrated into development efforts. Where do you see the key areas of focus for the World Bank Group? The World Bank Page 3

4 [Government] - (a) If the WBG gets involved in adaptation and mitigation, the SFCCD must include details on the division of labor between the WBG and: o other MDBs o the GEF - (b) It is necessary to clarify how the WBG s work can link up with the work done by bilaterals in a time-effective manner. KfW has, for instance, done detailed research on shadow prices in the oil sector. How can knowledge be shared between the WBG and bilaterals? - (c) As the investment needs for mitigation and adaption are vast, it is clear that the public sector will not be able to foot the bill. The WBG will have to show how its work in the climate change arena relates to the interest of the private sector, which is crucial for adaptation and mitigation. - (d) While the government understands that adaptation work will be mainstreamed through the WBG s due diligence process, the question remains whether this approach is enough to tackle adaption challenges. Adaptation is not limited to WBG projects but should encompass the whole range of private sector investment in a country, and due diligence might not be enough. - (e) The WBG should devise criteria and procedures that will help developing countries identify projects that are eligible under the climate change scenario. - (a) No other issue has brought the MDBs more together than climate change (and safeguards in the past). There are however currently no plans for a division of labor, as it remains questionable whether a viable division of labor is feasible. Some in-country programs are currently already organized according to regional or sectoral specializations, complementing rather than duplication the efforts of other partners. It remains clear however that in many countries, for instance in China, both the ADB and the WBG have a role given the amount of investment that is necessary for low carbon growth, changes in transport and energy infrastructure. - (a) The WBG will continue to lead on the analytical base and collaborative arrangements with donors, and pioneer new initiatives, such as the Global economics of adaptation study with the UK and Netherlands. - (a) The WBG and the GEF have agreed on a division of labor on mitigation. The GEF remains in its traditional role of removing barriers, piloting at small scale, and building capacity. The WBG will help move this to the next level, in terms of scale and investment programs on mitigation. On adaptation and on forestry issues, discussions between the WBG and the GEF are ongoing. - (b) The WBG does indeed not have a good understanding of what bilaterals are doing in the area of climate change. Although there exists a basis for technical cooperation across institutions, there is no institutional network to understand what the bilaterals bring to the table on some of these issues. More collaboration is needed. - (d) Adaptation work will not be limited to due diligence and project-level intervention. The WBG will help governments rethink the PRS, based on the NAPA. [Civil Society] - (a) The problem of the country-driven approach on mitigation and adaptation is the difficulty of identifying the field of action in developing countries. While there is a general idea about the regional impact of climate change, what tools are there to help identify the impact and key areas of action at the country level? - (b) The plan to mainstream climate change into development programs raises the question whether making small adjustments in programs is a good enough concept to reach a low carbon economy, given that a low carbon economy should be a systemic approach, which requires an economy that grows sustainably and uses far less natural resources than what exists at the moment. - (a) The IDA and Climate Change paper is trying to understand the WBG s role in poorest countries with regard to adaptation. - (a+b) While there will be a need for adaptation projects to deal with the impact of climate change (e.g. seawalls), most adaptation work will be done through the development process and by rethinking options in sectors, and by linking a country s NPA to a PRS. Rather than start with projects, the WBG will begin its adaptation work at the sector/strategy level. The World Bank Page 4

5 3. What role can the World Bank Group play to accelerate the development and deployment at scale of climate friendly technologies for energy, transport, agriculture and other sectors in developing countries? [Civil Society] - (a) At the very least, the WBG needs to define what it considers to be a clean technology. It is not clear why countries should define clean technology according to national needs when climate change is a global phenomenon that warrants a global/systemic approach, and that includes a working definition of clean technology. - (b) While technology transfer is important, it is not clear how it should happen. Developed countries like Germany own the technology and the patents, which they are ready to sell to developing countries. Of course, this will not help or create incentives in developing countries to develop home grown technologies or to diversify their economies. Technology transfer runs the risk of inhibiting local capacity building. There is room for the WBG to provide possible steps to avert this dilemma. - Another problem is that most technology in use in developing countries comes from developed countries, which are in turn far away from becoming low carbon. How is this reconcilable with the goal of transferring technology to reach low carbon growth? [Private sector] - (a) Incentives are needed for a company to invest as technology transfer is not about giving technology to developing countries for free. Intellectual Property rights are an issue here. The WBG needs to provide input on establishing a realistic basis for technology transfer, benefitting both the provider and recipient of technology transfer. - (b) The WBG should clarify the viability of Carbon Capture and Storage (CCS) as climate friendly technology. - (a) The WBG does not see its role in prescribing to countries what clean technology is or is not. The WBG sees its role in helping countries tailor their strategies and plans so that they can move in a direction that is less carbon intensive, from a development point of view. Once a country identifies certain areas of work, the community of donors can make a judgment whether or not this justifies the use of public funds. - (a) The WBG will nonetheless review whether a basic working definition of clean technology can be included. - (b) There are many opportunities for developing manufacturing capacity in countries where patents are paid for, but it also means technology needs to be affordable at the national level, i.e., the problem of subsidies and other issues need to be addressed. The business climate needs to be improved, which is an area the WBG is working on. - (b) Technology transfer is most likely to happen through the investment process, where the private sector comes in and brings technology when there is a business incentive. From our observations in countries like India and China, it is clear that some countries are ready to invest in the manufacturing process of clean technologies. The reason they don t do it is that there is no market as the risks are too high, which is where the WBG can come in. - (a) Large amounts of technology transfer have happened through private investments, which is an area the WBG needs to stay focused on, which includes establishing an enabling environment in a country. The WBG also sees a role in terms of risk mitigation in order to speed up transfers. - (a) A lot of the technology comes from medium-sized companies, which are innovative, but do not get out of the comfort zone of national and regional markets. These companies face difficulties in obtaining access to finance or identifying partners when entering new markets in developing countries; in addition, not all technology can be ported to a new environment, some of it may need to be adjusted to local conditions. - There is information work to be done by the WBG, which it The World Bank Page 5

6 does through IFC advisory services, but chambers of commerce in developed countries, and their local branches in developing countries, are vital to get the right information to the right companies. There is scope for closer collaboration. - (b) CCS is an eligible technology, which could potentially be deployed to countries like China and India. There is some thinking among donors (e.g. Norway, Canada) that if CCS cannot be deployed through the market that some form of concessional financing package could be put in place as an incentive for countries to consider CCS. 4. What should be the role of the World Bank Group in mobilizing additional concessional financing and private sector investments to respond to climate change? [Civil Society] - (a) It is unclear from the SFCCD what role the WBG sees for public money, and how it intends to ensure that public money does not duplicate private investments. - (b) The SFCCD should explain how it intends to complement UNFCCC s adaptation financing mechanism, which remains underfunded to even implement one-tenth of the NAPAs of LDCs, while at the same time, new money will go to WBG funds, including the CIF. While the WBG may not be necessarily at fault here, NGOs are weary of a possible cannibalization of funds. How can this be avoided? [Private sector] - (a) There is a need for closer collaboration between IFC and medium-sized companies, particularly with regard to IFC advisory services to medium-sized companies. (b) Many developing countries are already borrowing from IDA for adaptation, Yemen has been borrowing for trying to deal with water resource issues (borrowing = IDA credits, mostly grants), but the WBG hopes the borrowing will eventually be entirely grants based. On the LDC adaptation fund vs. the World Bank, the answer is that we don t know what the new adaptation fund is going to look like, though there will be collaboration. (a) Agree. This is the scope of the WBG s work 5. Building capacity within countries, regions and institutions will be crucial to address climate change issues. How can the World Bank Group contribute? [Agency/Government] - (a) The private sector needs to be properly included in the strategy and in programs. The WBG needs to help create an enabling environment in developing countries, and set framework conditions that are conducive to private sector growth and involvement. - (b) In order for the private sector to get involved, prices will have to come up to show that resources are scarce. Rising prices however bring about an equity problem, something the SFCCD does not discuss. Is there a low carbon vs. equity thinking in the WBG? 6. Other issues? (a) Agree. This is the scope of the WBG s work (b) Agree. This low carbon vs. equity issue is so far not being discussed within the WBG. The World Bank Page 6

SFCCD Briefing in Copenhagen, Denmark Ministry of Foreign Affairs Monday, May 26, 2008 at 11:00 am

SFCCD Briefing in Copenhagen, Denmark Ministry of Foreign Affairs Monday, May 26, 2008 at 11:00 am MoFA - Copenhagen, Denmark (face to face) and Oslo/Stockholm via video conference Monday, May 26, 2008