Climate-Related Standards and Multilateral Finance for Development
Abstract
:1. Introduction
“We recognize the potential of multilateral development banks (MDBs) in delivering climate finance and helping countries transition to low carbon economies. We call on MDBs to use to the fullest extent possible their balance sheets and their capacity to mobilize other partners in support of country-led programmes to meet this goal”.([17], p. 17)
2. MDBs Climate Standards and Environmental Assessment
2.1. Focus on World Bank—The Largest MDB
- Require the use of full life-cycle accounting;
- Prioritize end-use resource efficiency improvements;
- Assess the climate resiliency of supported projects and the impact of projects and programs on the climate change resilience and adaptive capacity of local communities;
- Require clients to manage the risks to the project and its impacts on local communities and ecosystems in a changing climate;
- Ensure coherence between World Bank supported initiatives and national climate strategies;
- Quantify the emissions of long-lived greenhouse gases and short-lived climate pollutants of the project, and account for their costs;
- Refuse to support projects that net-produce hydrofluorocarbons;
- Adopt rigorous efficiency standards for the plant and equipment of the projects it supports,
- Apply the “mitigation hierarchy” to issues of resource efficiency, energy use, and emissions;
- Require the use of Best Available Technology as part of the mitigation hierarchy;
- Establish criteria to shift from fossil-fuel dependent development paths and prioritize support for low and no-carbon initiatives, including off-grid and mini-grid renewable energy, and improved end-use resource efficiency where regulations and/or market distortions incentivize throughput and investments in fossil fuel-based supply expansion.
- The relation between provisions on climate change in the ESF and broader climate change commitments, specifically UNFCCC;
- Proposed approaches to measuring and monitoring greenhouse gas (GHG) emissions in Bank projects and implications thereof, in line with the proposed standard, including determining scope, threshold, duration, frequency and economic and financial feasibility of such estimation and monitoring; and
- Implications required for the Borrower of estimating and reducing GHG emissions for Bank projects, in line with the proposed standard.
2.2. Some MDB Approaches to Assessing Climate Impacts
2.3. Some MDB Approaches to Managing Climate Impacts
3. Setting Mitigation Standards Post-Paris
and“…to launch a process to develop a protocol, another legal instrument or an agreed outcome with legal force under the Convention applicable to all Parties, through a subsidiary body under the Convention hereby established and to be known as the Ad Hoc Working Group on the Durban Platform for Enhanced Action;[…]
….that the Ad Hoc Working Group on the Durban Platform for Enhanced Action shall complete its work as early as possible but no later than 2015 in order to adopt this protocol, another legal instrument or an agreed outcome with legal force at the twenty first session of the Conference of the Parties and for it to come into effect and be implemented from 2020”.[33]
“[…] all Parties to initiate or intensify domestic preparations for their intended nationally determined contributions, without prejudice to the legal nature of the contributions, in the context of adopting a protocol, another legal instrument or an agreed outcome with legal force under the Convention applicable to all Parties towards achieving the objective of the Convention as set out in its Article 2 and to communicate them well in advance of the twenty-first session of the Conference of the Parties […]”.[34]
4. Conclusions
Acknowledgements
Conflicts of Interest
References
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- 1This focus on “standards” does not mean that other non-binding policy measures such as institutional strategies or plans are unimportant. Indeed, in certain instances the financial institution may insist that such measures be applied as a condition of finance. Two prominent examples of this are the World Bank Strategic Framework for Development and Climate Change [1] and the World Bank Energy Sector Directions Paper, which makes extremely limited the possibility of the Bank to finance coal-fired investments. See: [2].
- 2Annex A of the Kyoto Protocol to the United Nations Framework Convention on Climate Change originally included six greenhouse gases: carbon dioxide (CO2); methane (CH4); nitrous oxide (N2O); hydrofluorocarbons (HFCs); perfluorocarbons (PFCs); and sulfur hexafluoride (SF 6). See: [3]. For the second commitment period of the Kyoto Protocol, Nitrogen Trifluoride (NF3) was added. See: [4].
- 3The President of the World Bank Dr. Jim Yong Kim released a statement on the occasion of the launching of the new Asian Infrastructure Investment Bank referring to the infrastructure financing gap: “The developing world’s infrastructure investment needs are too huge for any single institution. The world spends about $1 trillion a year on infrastructure, but the vast majority of that goes to developed countries. Emerging markets and low-income countries face an annual gap of $1 trillion to $1.5 trillion in infrastructure spending”. For the full statement, see: [5].
- 4For the purposes of this article, the term “MDB” is intended to include the World Bank Group, particularly as it refers to the International Bank for Reconstruction and Development, the International Development Association, the International Finance Corporation, the Asian Development Bank, the African Development Bank, the European Bank for Reconstruction and Development, the European Investment Bank, and the Inter-American Development Bank.
- 5For more information about the CIFs see: [8].
- 6For more information about the carbon funds see: [9].
- 7By decision of the UNFCC COP, the UNFCCC has two financial mechanisms, established under Article 11 of the Convention, the Global Environment Facility (GEF) and the GCF. The GEF was established under the UNFCCC as the first financial mechanism of the Convention, but it appears that it will not provide the same degree of large-scale investment finance that is envisioned under the GCF.
- 8The Asian Development Bank is one of the recently accredited MDBs, see: [10].
- 9This recommendation is to last until the GCF establishes its own such standards.
- 10Thus, while there are frequent references to environmentally-friendly or climate-friendly standards in today’s world of investment, one can generally rely on the published “standards” of MDBs to be considered as requirements, and not voluntary. Having said this, to be certain as to the binding environmental standards applicable to a specific project it is always important to study the exact text of the standard at issue and to refer to the MDB specific institution instructions for clarity, as well as the project based legal agreements.
- 12UNFCCC Article 3 Paragraph 1. See [15].
- 14The policy states that “EA takes into account the natural environment (air, water, and land); human health and safety; social aspects (involuntary resettlement, indigenous peoples, and physical cultural resources); and trans-boundary and global environmental aspects. EA considers natural and social aspects in an integrated way”. See: [18].
- 15Draft Environmental and Social Standard No. 1 Assessment and Management of Environmental and Social Risks and Impacts, paragraph 26 (a). See: [20].
- 16Draft Environmental and Social Standard No. 3 Resource Efficiency and Pollution Prevention and Management, paragraph 15. See: [20].
- 17For more information on black carbon, see: [21].
- 18As shown below, some other MDBs use a specific number of tons of carbon dioxide emitted per project as the trigger for when reporting if required.
- 19IFC Performance Standard 1 Assessment and Management of Environmental and Social Risks and Impacts, paragraph 7. See: [23].
- 20IFC Performance Standard 3 Resource Efficiency and Pollution Prevention, paragraph 7. See [23].
- 21IFC’s client is expected to quantify direct emissions from the facilities owned or controlled within the physical project boundary, as well as indirect emissions associated with the off-site production of energy used by the project. IFC requires the client to quantify GHG emissions annually in accordance with internationally recognized methodologies and good practice. See: IFC Performance Standard 3 on Resource Efficiency and Pollution Prevention, paragraph 8 [23]. In quantifying the greenhouse gases, the IFC client is expected to consider all major sources of GHGs, including those that are not necessarily energy related, such as methane.
- 22A comprehensive comparison of MDB standards was prepared by Dr. Harvey Himberg under a consultancy for the World Bank and is available on the World Bank Safeguard Consultation website. See: [24].
- 23AfDB, Operational Safeguard 1—Environmental and Social Assessment. See: [25].
- 24AfDB, Operational Safeguard 4—Pollution Prevention and Control, Hazardous Materials and Resource Efficiency. See: ([25], p. 46).
- 25For example, the IDB states, that “As part of agreed mitigation measures, the Bank may require that the borrower, where feasible and cost effective, adopt cleaner production processes, energy-efficiency or renewable energy”. See: ([26], p. 12).
- 26The EBRD Performance Requirement 6 on Biodiversity states, as follows: “The assessment process will characterize the baseline conditions to a degree that is proportional and specific to the anticipated risk and significance of impacts. The baseline assessment will consider, but will not be limited to, loss of habitat, degradation and fragmentation, invasive alien species, overexploitation, migratory corridors, hydrological changes, nutrient loading, and pollution, as well as impacts relevant to climate change and adaptation”. EBRD Performance Requirement 1 on Environmental and Social Assessment and Management also notes that “It may be appropriate for the client to complement its environmental and social assessment with further studies focusing on specific risks and impacts, such as climate change, human rights and gender”. See: [27].
- 27The Asian Development Bank, like the other MDBs, requires in its Safeguard Requirements 1: Environment, as follows: that a project impact assessment identifies “[…] potential transboundary effects, such as air pollution, increased use or contamination of international waterways, as well as global impacts, such as emission of greenhouse gases and impacts on endangered species and habitats”. See: [28].
- 28According to the EIB, this “economic cost” takes into account the long term costs of meeting carbon emission targets, and is distinct from a “financial cost of carbon, such as the spot price [of carbon] on traded markets, which may be used in the [project’s] financial analysis” [30].
- 29World Bank Group Environment, Health and Safety Guidelines (EHSGs) have replaced the 1998 Pollution Prevention and Abatement Handbook (PPAH). These Guidelines identify acceptable pollution prevention and abatement measures and emission levels in a Bank financed project.
- 30For specific recommendations for CO2 emissions from thermal power plants, see “Table 4—Typical CO2 emissions from thermal power plants”. See: ([32], p. 8).
- 31World Bank’s Operational Policy 4.01 on Environmental Assessment, paragraph 6. See: [18].
- 32The EBRD Performance Requirement 3 Resource Efficiency and Pollution Prevention and Control, paragraph 15. See: [27].
- 33EIB Environmental and Social Handbook, Climate-Related Standards. See: ([30], p. 45).
- 34Thus, according to the ADB, the “significance threshold to be considered for these requirements is generally 100,000 tons of carbon dioxide equivalent per year for the aggregate emissions of direct sources and indirect sources associated with electricity purchased for own consumption”. ADB Safeguard Requirements 1: Environment. See: ([28], p 38).
- 35A discussion during a UNCCC COP side event in July 2014 concerning the relationship between INDC and NAMAs summarized key issues as follows: (1) NAMAs prove to be a successful mechanism to support mitigation as well as meeting of development goals in developing countries; (2) It is important to build on the success achieved so far and to maintain enthusiasm. Providing finance at scale is crucially important here; and (3) NAMAs are useful to inform the INDC process and the negotiations, but progress could be slowed if they became part of the political discussion. See: [36].
- 36Statement made by Mr. Subhash Chandra Garg, Executive Director for Bangladesh, Bhutan, India and Sri Lanka, at the Committee on Development Effectiveness on 24 June and 1 July 2015 on ESF. See: [38].
- 37See English version [39].
- 38Kenya’s Climate Change Bill 2014, at section, 5 (k) (i). See: [40].
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Di Leva, C.E. Climate-Related Standards and Multilateral Finance for Development. Laws 2015, 4, 674-690. https://doi.org/10.3390/laws4040674
Di Leva CE. Climate-Related Standards and Multilateral Finance for Development. Laws. 2015; 4(4):674-690. https://doi.org/10.3390/laws4040674
Chicago/Turabian StyleDi Leva, Charles E. 2015. "Climate-Related Standards and Multilateral Finance for Development" Laws 4, no. 4: 674-690. https://doi.org/10.3390/laws4040674