Board members from developing countries insisted that making a 2050 net zero goal a condition for accreditation to the fund breaches equity principles
The UN’s flagship climate fund has been gripped by fierce debate over what decarbonisation conditions should be imposed to developing nation organisations seeking to access funding.
It was close to 4am on Friday in the Green Climate Fund’s South Korean headquarters when board members brought the four-day virtual meeting to a close.
Besides the usual delays and procedural wrangling, discussions became heated when board members were asked to consider whether to renew the GCF’s partnership with the Development Bank of Southern Africa (DBSA).
At the heart of the issue was a disagreement between members from large emerging economies and richer nations over whether decarbonisation conditions should be imposed on organisations from developing nations seeking to access funding.
The GCF was created to help poor countries curb their emissions and cope with climate impacts. It depends on agencies like DBSA to deliver projects in poor nations.
Some board members from rich countries added as a condition for DBSA to be re-accredited that the bank adopts a 2050 net zero emission target across its portfolio, and an intermediate 2030 target, within one year of the accreditation being approved.
The bank, which currently has no fossil fuel exclusion policy, would have to demonstrate how it is shifting its loans and investments away from carbon-intensive activities.
But the move was strongly resisted by developing country members who accused developed nations of imposing a carbon-cutting pathway on poorer ones.
Wael Aboul-Magd, of Egypt, told the board the 2050 net zero goal was “a global aspiration, not a prescription to every country, and particularly not for developing countries”.
Board member Ayman Shasly, of Saudi Arabia, described the condition as “blackmail,” adding that the GCF was being “manipulated by [developed countries] pushing their own agenda onto the fund”.
Yan Ren, of China, agreed with Shasly that the condition did not respect the Paris Agreement’s equity principle of common but differentiated responsibilities that nations that became rich from burning fossil fuels should cut their emissions faster to allow poorer ones to develop.
“We should not impose conditions on developing countries to force them to achieve certain targets. There is no one size fits all on fossil fuels,” she said.
DBSA is a development finance institution wholly owned by the South African government with 60% of its financing directed to the rest of the African continent.
Oil Change International data shared with Climate Home News shows that between 2018 and 2020, DBSA supported gas projects with $270m in financing, compared with nearly $320m for wind and solar.
Some of the DBSA-backed projects included a gas power plant in Ghana and LNG production in Mozambique.
However, campaigners warned that poor transparency in reporting at DBSA meant the true figures could be higher.
Campaigners have directly called on the South African government to commit to stop funding fossil fuels through DBSA by ensuring the bank adopts a fossil fuel finance exclusion policy and increases financing for accelerating the clean energy transition.
Members from rich nations pushed back against calls to re-accredit DBSA without any conditions and the issue was postponed to a future meeting.
Stéphane Cieniewski, of France, said the conditions were “not unreasonable or excessive” and aligned with the Paris accord.
Lars Roth, of Sweden, one of the board members who requested the net zero condition be applied to DBSA, told the meeting the bank was “already working on and intended to approve” a 2050 net zero goal across its portfolio and would be making a formal announcement in a couple of months.
Meanwhile, the fund agreed to re-accredit the UN Development Programme for another five years, amid ongoing corruption investigations into two of its projects in Albania and Samoa.
Overall, the board approved $1.2 billion for 13 new carbon-cutting and adaptation projects – a record amount for a single board meeting.
This included $125m for the GCF to become an anchor investor in the creation of a global fund to support and de-risk private investment designed to protect and restore coral reefs around the world.
The Global Fund for Coral Reef will support companies investing in sustainable fisheries and aquaculture practices, coral farming, plastic waste management and water treatment.
But it will also promote ecotourism and the development of “sustainably-managed hotel resorts” and tourists activities such as “surf, diving, snorkelling and cruises”.
The proposal was submitted by Pegasus Capital Advisors, a Delaware-incorporated private equity firm. The fund is due to be rolled out in 17 countries and aims to protect 29,000 hectare of reef globally and create nearly 13,000 jobs.
Board members overwhelmingly backed the design of the project despite strong opposition from civil society members acting as observers at the fund.
“We are very concerned that instead of helping communities in reef ecosystems adapt from climate change impacts, this adaptation project will profit out of harming the reefs,” Erika Lennon, of the Center for Environmental Law, told the board.
Lennon described the absence of connection between funding surf, diving or snorkelling enterprises with safeguarding reef ecosystems as “woefully inadequate” and urged for investments in hotel resorts, cruises and shrimp farming to be explicitly excluded from the scope of the project.
She warned that reef-damaging practices promoted by the project risked damaging the GCF’s reputation.
The following story is about how one country responded to disappointing Doing Business scores to reform its rules and regulations for its own benefit. Would discontinuation of this instrument mean its non-availability to others?
The above image is for illustration and is of iStock.
How one country responded to disappointing Doing Business scores
On September 16, 2021, the World Bank discontinued the Doing Business (DB) report, one of its flagship diagnostic products. This action follows what the World Bank called “a series of reviews and audits of the report and its methodology.”
The DB report, published each year since 2004, was one of the World Bank’s most influential reports in recent years. Every autumn, people around the world would wait eagerly and, in some cases, with some trepidation, for its release. Over time, the reports increasingly attracted the attention of heads of governments who wanted to see their countries do well in the rankings.
When the DB report came out in 2015, the Indian government was disappointed. Soon after taking office in 2014, Prime Minister Modi announced his government’s intention to bring India’s ranking into the top 50 within a few years. Several reforms were carried out in the following months, which the Indian government hoped would put India on a trajectory of rapid annual improvements in the ranking. The 2015 report (officially called “Doing Business in 2016”, since the World Bank always gave the report a forward-looking title) indicated only a modest improvement in India’s rank, from 142 to 130.
The World Bank explained to the Indian government that while several reforms may have been enacted on paper, Indian businesses did not report feeling an impact on the ground. Some responded, “What reforms?”, while others heard about the reforms but had not seen improvement on the ground. The reforms could not be officially recognized until the private sector reported real improvements. The World Bank suggested that the government put in place feedback loops to provide real-time information from businesses on whether the reforms were being well implemented. The government, instead of whining further about the scores, started working on such feedback loops. For several regulatory reforms covered by the DB indicators, it started surveying businesses on whether they felt any reform impact on the ground.
From February 2016 to May 2017, the government carried out a series of business-to-government (B2G) feedback exercises and focus group discussions (FGDs) on how much the businesses were aware of the enacted reforms and their views on the quality of reform implementation. Nine B2G feedback exercises were carried out. Topics covered construction permits (three surveys each in Delhi and Mumbai), starting a business (two surveys), and trading across borders.
The exercises revealed several implementation gaps, some major and some minor. An example is construction permitting. A business survey carried out in Delhi in March 2016 revealed the following implementation issues: a) significant lack of agency coordination—architects still need to obtain approvals from up to 10 different agencies; b) some facilities for online payment were not properly implemented and certain fees were still paid manually; c) very low awareness of the online system among users; d) no way to track the status of an application; e) information lacking on documentary and other requirements. In other words, the reforms had not gone far enough to have impact on the ground.
This feedback exercise helped generate several recommendations to address the deficiencies. These were provided to the Municipal Corporation of Delhi (MCD), and most were acted upon. Follow-up feedback exercises in October 2016 and February 2017 validated these actions while generating additional recommendations for further improvement. A similar effort was made in Mumbai.
The impact of these efforts can be seen in the trends in India’s performance on the “Dealing with Construction Permits” indicator. In the Doing Business in 2016 report, India’s ranked 183 on this indicator. Thirty-three procedures were involved taking 191 days according to the indicators. Two years later, the number of days had come down to 144 with a modest improvement in the rank to 180. The more substantial improvements came the following year when the DB report published in October 2018 indicated a reduction in the number of procedures and days required to 18 and 95 respectively. Still a long way to go but enough to propel India’s ranking on this indicator to 52. While all this improvement cannot be attributed to the feedback exercises alone, it is possible to trace a substantial part of this improvement to actions taken as a result of these exercises.
The Indian government also recognized that the DB indicators did not cover many regulatory interfaces that created problems for businesses and that the indicator measures were based on conditions in just two cities, i.e., New Delhi and Mumbai. Thus, in parallel to its efforts on the DB front, the Indian government embarked on an ambitious regulatory reform program at the state-level covering all states and union territories in the country. A long list of regulatory reforms was identified covering several regulatory areas, and state governments were instructed to carry out the reforms. Called the Business Reforms Action Plan, the program started in 2015.
Progress was monitored through annual indicators that ranked states according to their performance on implementing the reforms. The first such indicators, published in 2015, did not take into account business feedback. However, seeing the usefulness of the feedback exercises carried out as part of the DB program, the government changed the state-level reform indicators in 2018 by making a substantial part of the indicator scores dependent on business feedback.
The powerful demonstration effect of such feedback exercises had touched individual state governments too. In 2018, four state governments, Chhattisgarh, Jharkhand, Orissa, and Rajasthan, expressed an interest in knowing why there was poor uptake of self-certification and third-party certification options provided in business inspection reforms carried out by these states. At their request, the World Bank carried out an independent feedback exercise that could help design corrective actions to improve uptake.
The Indian experience from 2016 onward is a good example of what the DB indicators can lead to if governments use them well. First, the government refocused its attention from reforms on paper to reforms on the ground. Second, it recognized the importance of consulting with the private sector, which knows best where the shoe pinched, and designed corrective actions based on the feedback. This iterative process helped improve reform implementation quality. Third, the government recognized that while the DB indicators were useful, they were not adequate to diagnose the myriad of regulatory issues that businesses all over India faced. Thus, the government embarked on a more comprehensive, state-level, reform program, and, inspired by the power of indicators, underpinned this program by a set of performance indicators. Finally, once the pioneering DB-related feedback exercises proved useful, they created a demonstration effect, first within the central government, which replicated such exercises for the state-level reform program, and then on individual state governments.
The UAE seeks to reach net-zero emissions by 2050 with a $163B plan. It is one of the countries in the Middle East and North Africa (MENA) region since its founding that wants to effectively attract investments through diversification of its economy. The country is one of the biggest oil exporters in the world. It announced an ambitious plan to achieve zero carbon emissions that would see the Gulf nation spending $163 billion on renewable energy. The plan to be completed by 2050, puts this country at the top of the MENA region in terms of concrete climate commitment.
The above image is for illustration and is of Abu Dhabi’s Crown Prince Sheikh Mohammed bin Zayed al-Nahyan as seen during the World Future Energy Summit in Abu Dhabi, United Arab Emirates January 13, 2020. WAM/Handout via REUTERS
UAE seeks to reach net-zero emissions by 2050 with $163B plan
The United Arab Emirates on Thursday announced a plan for net-zero emissions by 2050, and would oversee 600 billion dirhams ($163 billion) in investment in renewable energy.
This makes it the first country in the Middle East and North Africa region to launch a concrete initiative to achieve that climate commitment.
The Gulf state has launched several measures over the past year – coinciding with 50 years since the country’s founding – to attract investment and foreigners to help the economy recover from the effects of the COVID-19 pandemic.
The economic initiatives also come amid a growing economic rivalry with Gulf neighbour Saudi Arabia to be the region’s trade and business hub. read moreReport ad
“We are committed to seize the opportunity to cement our leadership on climate change within our region and take this key economic opportunity to drive development, growth and new jobs as we pivot our economy and nation to net zero,” said Sheikh Mohammed bin Rashid Al Maktoum, vice president and prime minister of the United Arab Emirates and Ruler of Dubai.
The UAE, an OPEC member, has in the past 15 years invested $40 billion in clean energy, the government said. Its first nuclear power plant, Barakah, has been connected to the national grid and the UAE aims to produce 14 GW of clean energy by 2030, up from about 100 MW in 2015, it said. read more
No further details on the 600 billion dirhams of investment were given.
The UAE will use the path to net zero as a way to create economic value, increase industrial competitiveness and enhance investment, said Sultan Al Jaber, minister of industry and advanced technology and special envoy for climate change.Report ad
The UAE is bidding to host the COP28 global climate talks in 2023.
The World Economic Forum (WEF)’s article is a snapshot, at this conjecture, of the current vital decarbonisation awareness process throughout the world. In it, Ekaterina Miroshnik and Adam Sieminski ask How can we get hydrocarbon-rich nations to board the EV wagon? So here are the authors’ answers.
How can we get hydrocarbon-rich nations to board the EV wagon?
As the fourth largest source of carbon emissions, global transport must decarbonize.
Near-term reductions are most feasible in the light-duty vehicle sector.
Supply-side policies could be more effective in encouraging hydrocarbon-rich states to participate.
Hydrocarbon fuels account for more than 80% of commercially traded energy consumption. The abundance, convenience and affordability of fossil fuels have generated economic growth and made life better for billions of people. But the emissions and climate challenges associated with combustion are significant, and policy-makers around the world must limit the rise in global temperatures caused by greenhouse gas (GHG) emissions.
Global transport is the fourth largest source of GHGs, producing about 23% of global energy-related CO2 emissions. About 73% of transport emissions come from road vehicles including cars and trucks, 22% from planes and ships, and 1% from trains. GHG emissions reduction in transport is expected to significantly contribute to meeting the Paris Agreement goals.
GHG emission reduction from long-range heavy-duty transportation (trucks, trains, ships, planes) will likely require substantial R&D breakthroughs and policy interventions, because green technologies for these vehicle segments are not yet commercial. The majority of near-term GHG emission reductions in the transport sector are projected to come from electrification of light-duty vehicles (LDVs) as well as buses, where such technology is already commercial.
Governments globally have adopted various policies to support LDV electrification. Tax and other incentives to reduce the upfront price of electric cars are among the most commonly used policy levers. Using such a model, Norway, a hydrocarbon-rich economy, achieved the highest penetration of EVs in Europe. However, such measures can be expensive. The cost of reducing tailpipe CO2 through subsidies to EV alternatives can be as high as $1,000 per ton, significantly higher than other approaches to reducing carbon.
Demand-side measures can incentivize consumers, but also act to spur the automotive industry by helping the automakers recover their R&D investments on EVs and by allowing them to charge relatively higher prices for EVs. These incentives are part of governmental energy and environment policy, and industrial policies, designed to support local innovation and manufacturing.
Incentivizing the fossil fuel hubs
Demand-side policies are difficult to justify in countries without a local EV manufacturing industry, as is currently the case with countries in the Middle East and North Africa (MENA) region. Additionally, market barriers to EVs in the MENA region and in Eurasia are exacerbated by the policies that tend to favour hydrocarbon fuels use, reducing consumer incentives to adopt electric vehicles by lowering their operational cost advantage. Though government support for fossil fuels is phasing out over time in most MENA countries, economies in Eurasia have been taking very slow steps in this area.
An alternative approach for the regions with an abundance of fossil fuels, especially if the goal is long-term GHG emissions reduction that is also highly cost-effective, is to emphasize technology-neutral supply-side policies, such as fuel economy standards. Such policies are based on a combination of more stringent technology-neutral performance standards with credit-based mechanisms to incentivize the uptake of lower emission vehicles. Such technology-neutral standards offer the possibility of utilizing high-efficiency gasoline-electric hybrids or high-compression internal combustion engine vehicles as affordable interim solutions. In the longer term, there is the possibility of utilizing alternative technologies once they become available, including mobile carbon-capture technology.
Saudi Arabia, led by the Saudi Energy Efficiency Center, is among the first MENA countries to have adopted fuel economy standards. Outside the region, another example includes the recent revision in the European Union’s CO2 emission standards for LDVs. In such a case, the speed and extent of GHG emissions reduction depends on how stringent the implemented standards prove to be.
While an EV is emission-free on the road, it is useful to calculate the net carbon emissions associated with using one by considering the energy mix that provides the electricity to charge it. Ideally, the energy used to charge EVs should be generated from low-carbon or carbon-neutral sources, so that EV deployment results in overall net emissions lower than levels generated by internal combustion (ICE) engine vehicles.
Countries possessing significant shares of renewable energy like hydro, solar and wind in their energy mix are better suited for EV deployment. For example, countries such as Georgia and Tajikistan (both have a substantial share of hydropower) have increased investments in electric urban transport recently.
This does not mean that countries with inexpensive and abundant fossil fuels cannot still adopt EVs and reduce emissions. Hydrocarbon-rich nations can shift their generation from marginal sources toward lower-emission alternatives. For example, Saudi Arabia has announced an ambitious target aiming to generate 50% of its power needs using renewable energy by 2030, with the remainder provided by natural gas. Renewable electricity costs as well as battery costs for EVs, have been falling sharply. If the trend continues, EVs may eventually be suitable for general use in emerging markets, including in the MENA and Eurasia regions.
However, a rapid increase in demand for the core battery materials (e.g. cobalt, lithium), combined with constrained supply, may lead to significant increases in the cost of raw materials. Such increases could increase battery prices and ultimately electric vehicles prices, which could act as a barrier to EV adoption in the short term.
Another barrier is the lack of widespread EV charging infrastructure. Going forward, it we must build roads with an eye to a future where a significant proportion of vehicles could be EVs. This means that at the planning and design phase, road corridors need to be equipped with high-capacity EV chargers within existing fueling stations. To do so, in many cases it might be important to upgrade the local electrical grids and substations to handle these fast chargers, which consume significant energy.
Challenges like air pollution in cities continue to worsen, which should lead electorates exercising more pressure on local authorities to advance green policies. Cities are likely to become the e-mobility change champions in Eurasia (e.g., in Kazakhstan, Uzbekistan, Azerbaijan) with many embracing green development concepts and preparing green city action plans (GCAPs). GCAPs will focus on developing e-mobility strategies and prioritizing investments in electric transport (buses, trolleybuses, taxis, metro and light rail transport systems). The bottom-up pressure will encourage mayors and city councils to speed up electrification of transport, while greening electricity supply.
With the right policy mix and synergy between the power and transportation sectors, as well as supportive investment by multilateral development banks to eco-responsible governments, all countries – including those who most rely on fossil fuels – have an opportunity to reduce their transportation-based GHG emissions.
Ekaterina Miroshnik, Director; Head, Infrastructure, Eurasia, Sustainable Infrastructure Group, European Bank for Reconstruction and Development (EBRD) and Adam Sieminski, President, King Abdullah Petroleum Studies and Research Center (KAPSARC)
The burning of organic materials (such as fossil fuels, wood, and waste) for heating/cooling, electricity, mobility, cooking, disposal, and the production of materials and goods (such as cement, metals, plastics, and food) leads to emissions. This affects local air quality and the climate. In a recent blog, we showed that the Middle East and North Africa region (MENA) lags behind all other regions in decoupling air pollutant emissions from economic growth.
Particulate matter with a diameter of less than 2.5 micrometers (PM2.5) is the air pollutant associated with the largest health effects. MENA’s cities are the second-most air-polluted following South Asia; virtually all of its population is exposed to levels deemed unsafe. In 2019, exposure to excessive PM2.5 levels was associated with almost 300,000 deaths in MENA and it caused the average resident to be sick for more than 70 days in his or her lifetime. It also carries large economic costs for the region, totaling more than $140 billion in 2013, around 2 percent of the region’s GDP.
A good understanding of the emission sources leading to air pollution is necessary to planning for how to best reduce them. Figure 1 shows that waste burning, road vehicles, and industrial processes accounted for around two-thirds of PM2.5 concentrations. Electricity production is also a significant contributor, most of which is used by manufacturing and households.
5 PRIORITY BARRIERS AND OPPORTUNITIES FOR POLICY REFORMS TO KICK-START DECOUPLING
A forthcoming report titled “Blue Skies, Blue Seas” discusses these measures, alongside many others, in more detail.
1. Knowledge about air pollution and its sources is limited, with sparse ground monitoring stations. Detailed source apportionment studies have only been carried out for a few cities within the region, with results often not easily accessible for the public.
Extensive monitoring networks and regular studies on local sources of air and climate pollutants are foundational, as is making results easily accessible to the public (e.g., in form of a traffic light system as is done in Abu Dhabi). This will empower sensitive groups to take avoidance decisions, but also nurture the demand for abatement policies.
MENA’s heavy subsidization of fossil fuels, whether that is at the point of consumption or at the point of intermediary inputs in power generation and manufacturing, makes price reforms essential. Aside from incorporating negative externalities better, lifting subsidies also reduces pressure on fiscal budgets, with freed-up fiscal space being available to cushion the impact for low-income households. There have been encouraging steps by some countries such as Egypt, which reduced the fossil fuel subsidies gradually over the last couple of years, leading to significant increases in fuel prices, which in turn had positive effects on air quality.
To support a shift in the modal share toward cleaner mobility, it is imperative to invest in public transport systems, while making them cleaner and supporting nonmotorized options such as walking and biking. Cairo’s continued expansion of its metro system has been effective in reducing PM pollution and other MENA cities have also invested heavily in their public transport infrastructure, moving the needle on improving air quality. Furthermore, it is also important to raise environmental standards, both for fuel quality and car technology, together with regular mandatory inspections.
4. Lenient industrial emissions rules and their weak enforcement. The industrial sector is characterized by low energy efficiency standards, also due to the low, subsidized prices for energy mentioned above. MENA is currently the only region, where not a single country has introduced or is actively planning to introduce either a carbon tax or an emission trading scheme.
Mandating stricter emissions caps, or technology requirements, together with proper enforcement and monitoring is crucial. Incentivizing firms to adopt more resource-efficient, end-of-pipe cleaning, and fuel-switching technologies are additional crucial means to reduce air pollution stemming from the industrial sector. A trading system for emissions could either target CO2 emissions, or air pollutants, such as the PM cap-and-trade system recently introduced in Gujarat, India. Such a system should target both the manufacturing industry as well as the power sector.
5. Weak solid waste management (SWM) is a major issue in MENA. Although the collection of municipal waste has room for improvement in many countries, it is mainly the disposal stage of SWM where the leakage occurs. Too often waste ends up in open dumps or informal landfills, where it ignites. Furthermore, processing capabilities are often limited, and equipment outdated, at least for the lower- and middle-income countries of the region.
Hence, enhancing the efficiency of disposal sites is critical to reducing leakage and the risk of self-ignition. To start, replacing or upgrading open dumps and uncontrolled landfills with engineered or sanitary landfills is a viable option. Going forward, recycling capabilities should be improved and the circularity of resources enhanced. For agricultural waste, the establishment of markets for crop residues and comprehensive information campaigns in Egypt showed that such measures can supplement the introduction of stricter waste-burning bans.
Kick-starting decoupling and banking on green investments hold the promise for MENA not only to improve environmental quality and health locally, and to mitigate climate change globally, but also to reap higher economic returns (including jobs). Moreover, decoupling now will prepare MENA economies better for a future in which much of the world will have decarbonized its economies, including its trade networks.
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