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MDBS' commitment to the challenge of climate change.


The MDBs, individually and collectively, recognized the challenge of climate change and its potentially adverse implications for their respective development, transition, and poverty-reduction agendas well before the Gleneagles summit meeting. For example, virtually all the MDBs have included energy efficiency as a key component of their development strategies and assistance efforts since the early 1990s. In the period following the Gleneagles communique, all the MDBs have defined new initiatives designed to help their clients mitigate the impact of their past and future development programs on climate change. In those regions where the impact of global warming is already apparent, the MDBs are also increasingly helping their clients to adapt to the new, higher-risk environment. As part of this process the MDBs have set themselves a number of targets:

* The European Bank for Reconstruction and Development's (EBRD) Sustainable Energy Initiative (SEI) commits the institution to more than doubling its investments in energy efficiency and cleaner energy during the 2006-2008 period to over 1.5 billion [euro] in projects, with total costs of over 5 billion [euro].

* The Asian Development Bank (ADB) is in the process of expanding its clean energy operations to reach US$1 billion a year.

* The European Investment Bank (EIB) has adopted ambitious renewable energy targets, has adjusted its product offering so as to enhance its support for climate change mitigation, and works closely with the EU Commission's climate-change policy agenda, including support for the EU's flagship program that plans to support up to 12 carbon capture and storage power plants.

* The African Development Bank (AfDB) has just announced a program to provide financial support to 5 to 10 climate "adaptation" projects a year by 2010.

* The Inter-American Development Bank (IDB) is in the process of establishing targets for expanding its sustainable energy operations to reach up to US$1.5 billion

per year over the period of 2008-2012.

* The World Bank Group (WBG) is committed to increasing its energy efficiency and renewable lending by 20 percent a year.

Further examples of the MDBs' response to the G-8 challenge are provided below.

One of the most important and enduring challenges in the countries of Central and Eastern Europe and the Commonwealth of Independent States (CIS) is to address their inefficient use of energy, a legacy of the former command economy that undermines the competitiveness of enterprises and economies, threatens energy security, and contributes disproportionately to carbon emissions. In response to the call from the G-8, the EBRD launched its SEI, through which it proposes to more than double its energy efficiency and cleaner energy investments in 2006-2008. The SEI was presented at the EBRD's 15th Annual Meeting held in London on 22 May 2006, where it was broadly supported by the Bank's shareholders. The SEI reflects the conditions and challenges of its countries of operations and its specific experience and comparative advantage. It has been defined within the broad consultative process established to develop an Investment Framework for Clean Energy and Development, taking account of the paper prepared by the World Bank for the Spring 2006 meetings of the Development Committee.

In parallel to the call by the G-8, increased focus on the challenges of climate change has moved energy policy to the top of the European Union (EU) agenda. Energy has become a key item in the EU policy agenda, in particular following the release in March of the green paper "European Strategy for Sustainable, Competitive and Secure Energy."

The EIB has been associated with these developments and, in parallel, has launched several internal actions. On this basis, and following the presentation in January 2006 of the Energy Review, the Board of the EIB approved the integration of energy as a specific objective in the Corporate Operational Policy for 2007-2009, with appropriate guidelines and monitoring. The EIB commitment is linked to the EU targets to achieve at least a 20 percent reduction of greenhouse gas emissions by 2020, compared to 1990. Specifically there is a binding target of a 20 percent share of renewable energy in overall EU energy consumption by 2020. This target is supplemented by a binding minimum target of 10 percent for the share of biofuels in the petrol and diesel consumption for transport. In addition, an energy efficiency target has been established in the EU to achieve the objective of saving 20 percent of energy consumption, compared to projections for 2020.

In Asia, the ADB is committed to, and currently promoting, greater use of clean energy in its Developing Member Countries (DMCs). The ADB recognizes the increased challenges of ensuring energy security and the need to address environmental degradation and climate change if Asia is to maintain its current rate of economic growth. Thus, the ADB's medium-term strategy identifies managing the environment as one of five strategic priorities; promotion of energy efficiency in order to lower the carbon intensity of DMCs is specifically named as one of two interventions. The ADB's new energy strategy is currently being prepared and drafts indicate that even greater priority will be afforded to renewable energy and energy efficiency. To drive this agenda, and in line with the investment framework for clean energy developed as a response to the call by the G-8 for MDBs, the ADB has also put in place a Clean Energy and Environment Program (CE&EP) which includes (a) an energy efficiency initiative (EEI) launched in July 2005 to expand the ADB's operations in clean energy to US$1 billion a year; (b) a carbon market initiative (CMI) approved in November 2006; (c) a sustainable transport initiative (STI); (d) climate-change adaptation activities; (e) establishing regional knowledge hubs to act as think tanks for the ADB and its DMCs on renewable energy, climate change and 3R (reduce, reuse and recycle); (f) providing access to modern energy services following a low-carbon development path under the Energy for All Initiative; (g) the Renewable Energy, Energy Efficiency and Climate Change (REACH program, launched in 2002; and (h) updating the ADB's energy strategy, which emphasizes acceleration of the widespread application of renewable energy (RE) and energy efficiency (EE).

In September 2005, the Development Committee requested the World Bank to develop an Investment Framework for Clean Energy and Development in the context of the Gleneagles communique on Climate Change, Clean Energy and Sustainable Development that was issued in July 2005. The World Bank presented the outlines of key elements associated with such a work program at the April 2006 Spring Meetings of the Development Committee in a paper titled "Clean Energy and Development: Towards an Investment Framework." Progress on this work was reported to the Development Committee at the Annual Meetings in Singapore in September 2006 in a document titled "An Investment Framework for Clean Energy and Development: A Progress Report." Another progress report was presented to the development committee in March 2007: "Clean Energy for Development Investment Framework: World Bank Group Action Plan." The Bank Group's action plan includes (a) the further development and implementation of sector strategies for energy efficiency, renewable energy, and transportation (b) implementation of low-carbon projects funded by the IBRD/IDA, IFC, Global Environment Facility (GEF), and carbon finance, often together, and with an emphasis on leveraging the private sector; (c) a series of country case studies for the G-8+5 countries (Brazil, China, India, Mexico, and South Africa) to assess the opportunities to transition to a low carbon economy, followed by the development of a set of action plans for potential implementation, and (d) facilitating the further development of the carbon market, and innovative ways to combine existing financial instruments. A follow-up progress report on the Bank Group's action plan was prepared in September 2007.

The IDB has launched its Sustainable Energy and Climate Change Initiative (SECCI) to help countries address the challenge of climate change and its impact on the region's development and poverty-reduction agendas. Approved by the IDB Board of Directors in March 2007, SECCI is a bank-wide initiative that complements the Bank's existing efforts in energy. As such, it is focused on promoting renewable energy, energy efficiency, and climate change mitigation and adaptation. The strategic objectives of the initiative are to (a) provide Latin America and the Caribbean with new levels of assistance and cooperation to expand the application of renewable energy and energy efficiency technologies; (b) expand access to international carbon finance; and (c) to support climate change adaptation strategies.

The initiative focuses on (a) scaling up Bank investments in energy efficiency and renewable energy (including biofuels, solar, wind, and other sources); (b) integrating policy and institutional reform with project financing for market transformation; (c) mainstreaming energy efficiency and renewable energy investment across sectors; (d) refining and expanding financing tools; (e) accessing international carbon finance through capacity building, programmatic clean development mechanism (CDM) initiatives and lowering of transaction costs; (f) addressing adaptation needs in LAC countries and IDB-financed projects; and (g) collaborating and forming partnerships with the public and private sectors in LAC, donor agencies and other international financial institutions.

Although Africa is the continent least responsible for climate change--by generating the lowest GHG emissions--it is particularly vulnerable to climate change (including current climate variability) risks: lower agricultural production levels, increased frequency of natural disasters, worsening food security, increased incidence of both floods and droughts, spreading of vector borne diseases, and higher risks of conflicts over scarce land and water resources. The continent is particularly vulnerable to climate change due to its widespread poverty, unsustainable use of natural resources, and overdependence on rain-fed agriculture. In responding to these threats, it is increasingly clear that climate adaptation strategies must be integrated into African countries' development agendas. Accordingly, the AfDB has, on its part, recently finalized the Clean Energy Investment Framework for Africa, which recommends that African countries need to focus greater effort and resources on expanding energy access. At the same time, within the scope of the principle of minimum long-term marginal cost, all efforts should be made to make the best use of low-carbon energy technologies, increasingly taking advantage of carbon financing opportunities. With respect to climate adaptation, the AfDB already has a number of climate-adaptation projects in preparation and has recently started work on a new climate risk management and climate adaptation policy.

The MDBs thus share a common vision regarding approaches and actions to tackle the challenge posed by climate change. Prior to Gleneagles they had a long history of close cooperation in such areas as energy efficiency, renewable energy, clean coal technologies, urban transport, forestation, and environmental protection, all of which have a direct impact on climate change. The joint efforts have accelerated and become much more intense in the post-Gleneagles period. In particular, each MDB has consulted with its sister institutions in developing and revising its overall climate change and energy strategies to respond to the new global priorities. While much more needs to be done, there is an emerging, consistent set of policies, programs, and instruments across the MDBs. Additional initiatives are being taken to increase the level of collaboration among the MDBs on climate change activities; these are seen to be particularly important as the MDBs move from strategy formulation to implementation.

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Title Annotation:THE MULTILATERAL DEVELOPMENT BANKS AND the Climate Change Agenda
Publication:The Multilateral Development Banks and the Climate Change Agenda
Date:Nov 1, 2007
Previous Article:Introduction.
Next Article:Transition to a low-carbon economy: the mitigation agenda.

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