As Hurricane Sandy reminded us of the force of Mother Nature, the climate change debate – lately overshadowed by the financial crisis – is in the headlines again.
Often, the catchphrase in the media is “nothing is being done”. In fact some things are already being done.
In Istanbul, the Climate Investment Funds partnership forum – organized by the World Bank and co-hosted by the EBRD – gathered between 6 and 7 November to discuss ways to stimulate investment in green energy.
This week, the European Bank for Reconstruction and Development is proud to announce a milestone in its climate change mitigation activity.
EBRD financing under its Sustainable Energy Initiative reached €10 billion since its launch in 2006, with the financing of the new 53 MW Kukinia wind farm in Poland – our 552nd climate change mitigation project.
These EBRD-financed projects – from granny flats in Slovakia to huge steel mills in Russia and Ukraine - are estimated to reduce annual carbon dioxide emissions by over 50 million tonnes, equivalent to the annual emissions of Sweden. These are concrete results. But more needs to be done. Sadly, the overall context is quite unfavourable to the real scaling-up of climate change mitigation. Based on the practical experience of the EBRD to date, three factors are critical for success: focusing on quick action and direct results, working directly with the private sector and seeking to improve the policy context.
THIRD-BEST ECONOMIC CONTEXT
Before describing these factors, a quick and intimidating outline of the challenges confronting climate action. Essentially, we are operating in a third-best economic context.
The price of carbon is not internalised in financial decisions and the level of subsidies to fossil fuels continues to run high, severely distorting energy investment decisions, from the household level to companies and countries.
Furthermore, the impact of the financial crisis has led to a dramatic refocusing of politics and policies to the short term.
The climate damage is already here. Whether or not Sandy was caused by climate change, we know that it causes droughts and other disasters in warmer and poorer regions. But the impact of climate change is still widely perceived as a potential medium to long term question.
Accordingly, it keeps being pushed further into the future as the world desperately seeks quick solutions to boost growth and employment.
This can be clearly seen in the outcomes of the UNFCCC process and of Rio+20. So today, the fight against climate change is happening in a tough financial environment and with the knowledge that game-changing global agreements are not likely any time soon. It is happening on the ground, at the level of communities, cities, regions and industries. The EBRD has been scaling up its activity on the ground to achieve concrete energy saving and carbon emissions reduction since 2006. So let’s now turn to the three factors which can make sustainable energy investments, well, sustainable.
MOST EFFICIENT SOLUTION
First, a focus on concrete action and quick results. We place a strong focus on energy efficiency, where technology is available today for results tomorrow. Whenever possible one should go for the most efficient solution, beyond the current regulatory requirements: this means the most savings in the long run. Energy efficiency also contributes to competitiveness at enterprise level and to energy security at country level.
Second, working directly with the private sector. This is key for rapid and effective implementation. Private sector financing capacity is also crucial, considering the current fiscal constraints. Close to two-thirds of our €10 billion sustainable energy financing has been with the private sector, which has contributed another €22 billion to the financing of these projects.
Third, we must seek to improve the policy context wherever possible. While hoping that one day, true long-term economic signals can be sent through carbon pricing and the removal of fossil fuel subsidies, much can be done to develop specific policy measures such as residential energy efficiency building standards in Moldova and Ukraine, industrial equipment energy efficiency labelling in Russia or the development of renewable energy frameworks in the Balkans.
The ever more frequent natural catastrophes must remind policymakers to provide a more supportive context to efforts to protect our climate and earth. At the EBRD we will continue to work hard on the business-driven sustainable energy opportunities that already exist – and there are enough to keep us busy.
But what we are really hoping for is a much-expanded scope of investment brought about by policies which place the care for our future environment at their heart. Hard-nosed business and investment will follow.
- The author is Josué Tanaka, EBRD Managing Director, Energy Efficiency and Climate Change