Transcript Climate Justice, Investment and the role of the private sector

Climate Justice, Investment and
the role of the private sector
Sheelagh O’Reilly
21st November 2012
Aberdeen University
IF…….
Climate justice is a vision to dissolve and alleviate the
unequal burdens created by climate change. As a form of
environmental justice, climate justice is the fair treatment
of all people and freedom from discrimination with the
creation of policies and projects that address climate
change and the systems that create climate change and
perpetuate discrimination.
AND IF
we recognise that there are finite limits to the planets
resources either as inputs or outputs to an economic
systems;
AND IF
we recognise that we have responsibilities to enable other
human beings (alive now and in the future) to a life that at
least meets the basic rights to physical security, subsistence
and liberty
AND IF
We recognise that we have responsibilities to enable the
flourishing of non-human entities
THEN
Is low carbon energy generation part of the answer, and does
this need to be tied to a) attention on human rights and b)
issues of economic growth and measurement?
Climate Change and Human Rights
• Climate change mitigation requires a dramatic
shift towards low carbon technologies in every walk of
life – a shift that must ultimately take place globally.
• Climate change adaptation is of greatest urgency in
the developing world, where the worst effects of climate
change are already being felt. Here too, access to
technologies is critical.
• If technology is critical then how is the ‘transfer
managed’? What technology, when, by whom and how?
There are a range of ethical and political dimensions
which are rarely considered.
Investing in Low Carbon Economy
• OECD 2012 indicates that: Decarbonising the world’s
energy system improving resource use efficiency and
providing energy access for all require cumulative
investment in green infrastructure at USD2 TRILLION
per year to 2030 – 2% of global GDP per year. Currently
only USD1 Trillion is invested.
• Where is the finance to come from?
Role of Institutional Investors
• The OECD argues that:
• Institutional investors (pension funds & insurance
companies) have USD71Trillion in assets so that
• These institutions could play a role in financing clean
energy schemes that generate inflation adjusted, steady
income streams;
• Need investment grade counterparts i.e. States!
G20 Low Carbon Economy Index (PWC)
• In sum, the 2011 PWC Low Carbon Economy
Index shows that the G20 economies have moved from
travelling too slowly in the right direction, to travelling in
the wrong direction.
• In 2012 the PWC Low Carbon Economy Index
headlines: ‘This report shows that global carbon
intensity decreased between 2000 and 2011 by around
0.8% a year. In 2011, carbon intensity decreased by 0.7%.
The global economy now needs to cut carbon intensity by
5.1% every year from now to 2050. Keeping to the 2oC
carbon budget will require sustained and
unprecedented reductions over four decades.
Governments’ ambitions to limit warming to 2oC
appear highly unrealistic.
Use of public finance to leverage private
finance
• Public finance tools likely to be required to required in
both
– developed
• Feed in Tariffs (and in UK Renewable Obligation
Certificates)
• Subsidies
– developing countries
• concession finance,
• equity investment to write down risk,
• early stage feasibility investment,
• FITs
• wider infrastructure investment
• Technical Assistance to government & SMEs;
One process for ‘technology transfer’
• One key area for ‘technology transfer’ is for there to be
international investment in the provision of modern
energy services (for public and private consumption) as a
way to:
– Enable access to services quickly
– Provide effective services and long term operations
and maintenance through the financing of
infrastructure
IS THIS AN APPROPRIATE MECHANISM AND
WHAT ARE THE IMPLICATIONS OF PRIVATE
FINANCE PROVIDING SERVICES WITH HIGH
LEVELS OF PUBLIC GOODS BENEFITS?
‘Investment grade’ renewable energy policy
• Clear, unambiguous policy objectives, with clear
enforcement provisions
• Policy and regulation streamlined across all factors within
the boundary of the deal: from planning approval to
delivery;
• Carefully designed incentive or support mechanisms to
achieve targets or objectives
• Policy stability across a project-relevant durations (?20+
years)
• Simplicity to reduce complexity and variables that might
add risk
• Near-term attention to infrastructure to ensure overall
system is optimised for significant uptake of RE, and
demand-side options.
The ‘long, loud and legal’ requirement from
STATES
Core characteristics of a policy to attract private finance
i.e. what the STATE needs to do to attract private capital:
• LOUD: incentives need to make a difference to the
bottom line and improve the bankability of projects;
• LONG: sustained for a duration that reflects the
financing horizons of a project or deal
• LEGAL: a clear, legal regulatory framework – binding
targets or mechanisms to build confidence that regime is
stable and provide for long-life capital investments.
Additional factors for developing countries
• Political risks – lack of stability & changing priorities
• Legal and regulatory environment
• Foreign exchange risks (volatility and actual devaluation
for international companies)
• Energy markets very weak (role of state owned
enterprises)
• General infrastructure (hard and soft)
• Perceived risks around new technologies
• Value chain for import of hardware and the value chain
for spare parts as well as technical support
What are the responsibilities of the private
sector?
• How far do renewable energy companies engage with the
current discourse on
– human rights e.g. UN respect, protect & remedy
approach for business & human rights;
– financial standards e.g. Equator Principles for
financing projects
– Regarding technology transfer, ownership, IPRs etc
– Labour standards
– Environmental Information for decision making
– Safeguards and standards (e.g. World Bank and IFC)
Some questions for consideration (1 of 2)?
• What is the role of the State (and its partners) in the
provision of a basic service such as energy?
• How do States with weak governance arrangements
negotiate with international business to provide the
‘investment grade policies’? How are the rights of
citizens factored in?
• How are the roles and responsibilities of investors, states
and consumers of the service as well as citizens laid out?
• Are there other approaches to technology transfer in the
field of climate mitigation that enables effective, and
inclusive, social-economic development?
Some questions (2/2)
• Are the poorest being asked to pay the price (financially
and physically) around both mitigation and adaptation for
others prior and ongoing unwillingness to make changes
in their lifestyle?
• Is Climate Change just another opportunity for economic
growth under the label of ‘A Green Economy? Of does
addressing mitigation and adaptation at the local and the
global levels require a different approach to reduce the
risk of the a more than 2 degree rise?
• OECD 2012:
http://www.oecd.org/environment/WP_23_TheRoleOfI
nstitutionalInvestorsInFinancingCleanEnergy.pdf
• World Bank Independent Evaluation Group regarding
World Bank engagement on Climate Change:
http://ieg.worldbankgroup.org/content/ieg/en/home/re
ports/climate_change3.html
UN Secretary-Generals Special Representative on Business
& Human Rights
http://www.businesshumanrights.org/SpecialRepPortal/Home
Equator Principles: http://www.equator-principles.com/
ICHRP:
http://www.ichrp.org/files/reports/65/138_ichrp_climat
e_tech_transfer_report.pdf