Unfinished Business on Climate Change Investment Funds

This week’s first-ever CIF Partnership Forum must ensure that new Clean Technology Funds will help developing countries quickly transition to zero-carbon technologies.

Climate change will take center stage at this week’s Annual Meetings of the World Bank group and the IMF, as the Board of Governors approve the Bank’s Strategic Framework for Climate Change and Development (SFCCD). Ten countries so far have pledged almost $6.1 billion towards the Climate Investment Funds (CIFs):

Pledging Meeting for Climate Investment Funds - September 26, 2008
Donor	CIF Contributions ($US million)*
Australia	127
France	300
Germany	813
Japan	1,200
Netherlands	50
Sweden	92
Switzerland	20
United Kingdom	1,488
United States	2,000
Other	50
Total Pledges	6,141
Additional Co-Financing (bi-lateral funding)
France	200
Germany	74
*All pledges are subject to approval by the relevant parliamentary or federal authorities. Contributions calculated using exchange rates as of September 25, 2008

The CIFs are being established by the World Bank jointly with the Regional Development Banks (AfDB, AsDB, EBRD, and IDB) to promote international cooperation on climate change and support progress towards the future of the climate change regime. The CIFs include the Clean Technology Fund (CTF), designed to scale up the deployment and transfer of clean energy technologies, and the Strategic Climate Fund (SCF), aimed at supporting national activities to build climate resilience in developing countries.

The first CIF Partnership Forum convenes this week where stakeholders from donor and recipient countries, MDBs, UN and UN agencies, NGOs and the private sector begin to map out the strategic directions, results and impacts of these funds.

Funding to support developing countries to address climate change is urgently needed. However, compared to the trillions of dollars of investment needed in the energy sector in developing countries, 6.1 billion dollars is a small sum of money. It is vital that the Clean Technology Funds are used to help developing countries make rapid shifts away from the use of carbon-intensive fuels, and adopt zero carbon technologies. Resources should not be used to support technologies such as supercritical coal—which is already more cost effective than conventional coal—and only marginally less carbon intensive.

Donor governments must therefore ensure that the Climate Investment Funds, in particular the Clean Technology Fund, are governed in accordance with the following principles:

1. The CTF should leverage investment in transformational technologies and support progressive policies. Investments should prioritize renewable energy projects in the electricity sector and energy efficiency in both the power generation and transport sectors. They should also create enabling policy and regulatory frameworks that will support the wide scale deployment of clean energy.
2. The CTF should operate in accordance with widely accepted principles reflected in the United Nations Framework Convention on Climate Change (UNFCCC) and other sustainable development instruments. Donor governments should ensure that their financial commitments supplement—not supplant—existing official development assistance (ODA). They should also support poverty alleviation and sustainable development priorities of developing countries. Governance of the funds must be transparent, inclusive and accountable.
3. The CIFs should result in the transformation of the energy lending portfolios of the Multilateral Development Banks entrusted with administering these funds. Over the last three years, the World Bank alone has invested some $6.6 billion in the energy and mining sectors alone; and an additional $11 billion in the transport sector. By its own estimates, at least a quarter of its $30 billion portfolio is at significant risk from the impacts of climate change. Yet the Bank still does not seem to be systematically factoring climate change into all of its investment choices (see chart below). The MDBs can do more to ensure that all of their investments take climate change into account. A crucial step is for the Banks to begin measuring and managing the GHG emissions associated with their investments.