Transcript Bangladesh: Progress and Challenges

Asia Pacific Finance and Development
Center (AFDC) 2010 Biennial Forum
Fiscal and Financial Policies for Lowcarbon Economic Development
Session I:
Fiscal and financial policies for lowcarbon economic development:
challenges and opportunities
CLIMATE CHANGE AND
ECONOMIC POLICIES IN APEC
ECONOMIES – Initial Findings from
World Bank Studies for FMPI 9
Ede Ijjasz
Sector Manager
China and Mongolia Sustainable Development
The World Bank
Ahmad Ahsan, Lead Economist, East Asia and
Pacific Region
Organization
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Background
Main Messages
Large “no-regrets” zones
Need for a full range of policy instruments
Potential of Climate-Friendly Technologies
Policy for Market Readiness
Increased climate variability and policy
responses
Regional Cooperation
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1. Background
Finance Ministers’ Policy Initiative 9 (2008)
 Under this initiative the World Bank was
asked to prepare studies on the current state
of economic policies concerning climate
change and recommendations for
strengthening these policies.
 …A Forward looking agenda: Policies,
Capacity Building Needs and Market
Readiness Diagnostics
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1. Background
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Four background studies:
– Climate Change and Fiscal Policy
– Trade and Investment Policies to Promote
Climate Friendly Technologies in APEC
– Assessing Capacity Building Needs for the
Use of Market-Based GHG mitigation
Instruments
– The Impact of Extreme Climate Events on
the Poor and Policy Responses
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Central Role of APEC on climate change:
source of 60% of global emissions
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APEC Will Also Be Highly Affected
Top Ten Countries Vulnerable to Climate Change
Drought
Floods
Storms
Sea Level Rise
Malawi
Bangladesh
Philippines
All Low-Lying Island
States
Ethiopia
China
Bangladesh
Vietnam
Zimbabwe
India
Madagascar
Egypt
India
Cambodia
Vietnam
Tunisia
Mozambique
Mozambique
Moldova
Indonesia
Niger
Laos
Mongolia
Mauritania
Mauritania
Pakistan
Haiti
China
Eritrea
SriLanka
Samoa
Mexico
Sudan
Thailand
Tonga
Mynamar
Chad
Vietnam
China
Bangladesh
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Source: World Bank, Sustainable Development Network, Environment Department, 2008
APEC Economies Have Already
Set Ambitious Targets for 2020
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2. Main Messages
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Synergies of national goal create a large zone of
“no-regrets” policies.
Most APEC economies, especially the developing
economies, have established ambitious targets to
cap and reduce green house gas (GHG) emissions.
– However, these targets will not be achieved unless the full
range of policies are considered and implemented.
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Fiscal Policy will be central – and carbon pricing
essential but not sufficient
– It will need to be complemented by broader reforms to
liberalize financial and energy markets and strengthen
independent regulators to allow pass through of carbon
prices.
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Main Messages (Continued)
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There is a diverse range of climate friendly technologies (CFTs)
used and produced in APEC economies and they are well
placed to exploit these technologies.
Market-readiness to finance and trade clean projects and
carbon caps will be crucial
Fiscal policies concerning adaptation will need to go beyond
costing of climate change and consider the cost and benefits of
adaptation strategies under conditions of uncertainty.
APEC is well positioned to use regional cooperation to advance
climate change policies.
– Several APEC economies and the East Asia region can already
now use fairly advanced market mechanism to achieve mitigation in
domestic markets or in bilateral trading.
– But for this to happen, they will need to build institutional, technical
and political capacity to manage the complexities of these systems.
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3. Synergies that create large “no-regrets”
zone Across Multiple Policy Goals
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First, countries are seeking to tackle national
environmental problems: e.g. CC mitigation goals
and air pollution reduction goals have synergy.
Second, addressing energy security is another
important goal, as dependence on energy imports
and global energy prices rise. Apart from Russia, Canada,
Australia, and Brunei, APEC economies either already are or
will become energy importers.
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Third, countries are also seeking technological
advantage and new sources of growth, and see lowcarbon technologies as a growth opportunity for the
future.
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4. The ambitious emissions targets of APEC
economies will not be achieved unless the full
range of policy instruments is used.
Many developed countries’ inability to reduce
emissions in line with their Kyoto Protocol
targets, as well as the challenges facing
China
 Need to go beyond low-cost policies:
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– energy efficient buildings
– higher cost policy interventions with fewer
immediate co-benefits (but long-term market
opportunities), such as CCS
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Opportunities for a green growth vision
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Overview of Fiscal Policy Instruments
Carbon pricing
- Emissions trading
-Carbon tax
-Hybrid trading-tax
schemes
Technology-based
Fiscal Led
Regulations-Led
- Demonstration grants
-Public R&D
-Investment subsidies
-Public investment in
Venture Capital
-Public investment
vehicles
-Feed-in tariffs
-Tax credits
-Public procurement
-Renewable energy
certificate trading
-Subsidies for energyefficiency purchases
-Improving information
availability
-Technology
performance standards
-Renewable fuel/energy
standards
-Building regulations
-Automobile regulations
-Information standards
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Fiscal Policy and Pricing will have
Central Role
 Low Energy Prices vs. Energy Efficiency
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Can Have Gains – even double
dividends
– Global action on climate change by pushing down
global energy prices can raise revenues from
0.5% to more than 2% of GDP
– Could improve the terms of trade for most net
energy importing APEC developing countries.
– Use of carbon revenue to offset other taxes
• A Bank CGE modeling study for South Africa concluded
that a reasonably high carbon tax combined with
reductions in taxes on labor and labor market reforms
was actually welfare-improving (ignoring climate benefits)
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Carbon Pricing Will Be Essential But Not
Sufficient–
- May not lead to Pass Through
- Under Rationing response may be different
– Inferior substitution to biomass or to oil
– Energy security issues
Liberal energy policies, Independent
Regulators, offsetting assistance
 Complementary Technology Supporting
Policies
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5. Large Potential of Climate-Friendly
Technologies
“Win-win” measures–examples of countries
provided. But Strong Policy and Institutional Requirement
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APEC countries are leaders in
climate friendly technologies
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Overview
TOWARDS SUSTANABLE DEVELOPMENT
Green Growth is not “cost neutral” (eg Energy)
But there are tools to help manage this
CO2 Abatement cost
Energy
Efficiency
Renewable
Energy
New
Technologies
Energy pricing reforms
Regulations and
financial incentives
• Financing mechanisms
• Institutional reform
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• Feed-in
Tariff or
Renewable Portfolio
Standard
• Tax on fossil fuel
• Support for R&D
• Financing
incremental cost
• Technology transfer
World Bank Group
Investment Policies to Support
CFTs
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Clean Development Mechanism (CDM) permits
investment in ventures that reduce emissions in developing
countries: hydroelectric power, wind power, bio-mass methane
avoidance projects. China, Indonesia, Thailand, Vietnam
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Public investment and subsidy programs in CFTs
have played a leading role – China: hydro-electric and (fit) PV
Solar Power; Thailand – tax, tari
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Private Investment: total investment in clean energy
increased from approximately USD 33 billion in 2004 to
approximately USD 148 billion in 2007
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Investment Certainty -current costs of CFTs, their
financing require a policy environment that
encourages more certainty on investment incentives:
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a number of countries practicing this.
Green Growth through Mitigation
Policy & Regulatory
Menu of Financing Gap
“bridging factors”
• Green Building Codes
• Zoning and Land Use
• Legislative Mandates
• Renewable Portfolio
Standards (RPS)
• Qualifying Projects
Green Bank
Green Buildings & Urban Space
• Guarantees
• Grants
• Concessional Loans
Energy Efficiency
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Alternative Fuels
• Fiscal Subsidies
• Tax Incentives
• Energy Efficiency Tax Credits
Renewable Energy
• Green Specifications
• Policy Targets
• Alternative Fuel
Obligations
• Reducing Emissions from
Deforestation and
Degradation
Renewable Energy Credits
Feed-In Tariffs
Technology Risk Guarantees
Incubation
R&D Co-Funding
Carbon Offsets
• Carbon fund
• Carbon Exchange
World Bank Group
6. Policy For Market Readiness
Importance of Markets and Financing
 Offset mechanisms like CDMs,
Reformed CDMs
 Sector-based crediting and trading
 Crediting/payment systems based on
nationally appropriate mitigation actions
(NAMAs)
 Allowance-based emissions trading
systems (cap and trade)
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International Deployment of
Selected Market Mechanisms
TYPE OF SYSTEM
COUNTRIES/REGIONS
National emission trading
systems(in implementation)
European Union, New Zealand
National emission trading systems
Japan, Korea, Australia (concrete
plans stopped recently)
Regional emissions trading systems
USA
Company level GHG emission
reporting
Mexico
Energy efficiency certificate trading
China (trial system), India (to be
operational end of the year)
Renewable certificate trading
EU (some member states), India
(operational end of the year)
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Market Readiness Cycle
Assessment of
technical and
political context
Compliance and
enforcement
system
Selection of
instruments
Stakeholder Consultation and Participation
Questionnaire
Existing
capacity
Evaluate
results and
identify gaps
Identify key
stakeholders
Capacity Building
Design
capacity
building
programs
Implement
programs
Reporting
template
Monitor and
evaluate
effectiveness
Required
capacity
Monitoring,
reporting and
verification
system
Implementation
framework
Social, economic
and
environmental
impact
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7. Extreme Climate Events and
Policy Responses
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Annual Natural Disaster Economic
Loss (in US$ millions)
Annual
mean
(’80-’08)
2008
1. USA
18.000
57.290
2. China
10.700
109.520
3. Japan
7.100
0
4. Italy
2.000
0
5. India
1.600
0
6.
Germany
1.200
1.200
7. France
1.000
0
8. UK
1.000
3
9. Mexico
900
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10. Turkey
800
0
Country
In 2008, natural disasters cost the
world US$200 billion. USA and
China bore 90% of this burden
China’s Vulnerability
Vulnerability of
China to
meteorological
hazards:
70% of land area
50% of
population
80% of industrial
and agricultural
areas
Source: China Meteorological Administration
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Fiscal Policy and Adaptation: In addition
to considering costing, decision making will
be Important. A First Approach to
Investment Principle Under Uncertainty
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Green Growth through Adaptation
Policy & Regulatory
• Unlock Urban Land
Values
• Zoning and Land Use
Sanitation and wastewater
• Legislative Mandates
• Privatize landfill/STP
management
• Establish PPP arrangements
Solid Waste Management
• Set Abatement Specifications
• Pay on abatement
• Establish insurance
mechanisms
Vulnerability to disasters
Menu of Financing Gap
“bridging factors”
Redevelop Urban Land
• Guarantees
• Private financing
• Concessional Loans for
public good aspects
Redefine Roles and
Responsibilities for Brown
Agenda
Pay for achieving national
abatement standards
Establish Catastrophic Risk
Financing arrangements
World Bank Group
8. APEC’s Regional Cooperation
APEC may be well positioned to use
regional cooperation to advance
climate change policies. Its voluntary
and non-binding framework may give it
advantage to progress in these regional
cooperation areas in four areas
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Harmonizing trade policies regarding
climate friendly technologies would be
to review and remove tariff peaks on
environmentally friendly goods.
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AND….
Increasing coordination among
regulatory systems that will that will
enable the growth of regional markets
for climate friendly products
 Strengthening regional climate
monitoring efforts to inform progress in
mitigation efforts and long-run
adaptation decisions
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