Last week, representatives of the world’s multilateral development institutions and member institutions of the International Development Finance Club reconvened in Paris for the One Planet Summit to reaffirm their commitment to the 2015 Paris Agreement on climate change.
With development finance institutions increasingly focused on supporting the international climate agenda, it is a good time to reflect on the COP 23 climate conference in Bonn that I attended last month, and to analyze how ADB is contributing to some of the areas highlighted during the event.
ADB provided financial and advisory support for Fiji’s successful presidency of COP 23—a significant achievement for the country and one which has helped to raise awareness about climate threats faced by Pacific island nations.
The crucial issue of finance was hotly debated in Bonn, with developing countries insisting on more clarity and ambition from developed countries on financing commitments. But aside from modest replenishments of the Adaptation Fund—which targets mainly small-scale projects—and the Least Developed Countries Fund, governments made few new pledges.
The Green Climate Fund (GCF) was urged to make its financing instruments available to all countries, ensure timely disbursement of approved funding, and to launch its first replenishment process in 2018.
ADB’s deepening engagement on climate
ADB is broadening its engagement with the GCF. The institutions signed an Accreditation Master Agreement in August 2017. ADB is developing a robust pipeline of project proposals for submission in 2018, and has thus far secured nearly $75 million in GCF financing for ADB projects in its Pacific developing member countries.
With GCF financing, ADB will help to make a water supply system for Fiji’s capital Suva more climate-resilient, support seven Pacific countries to accelerate implementation of renewable energy and help ensure year-round connectivity for Nauru through the construction of climate-resilient port infrastructure.
Moreover, in line with its 2015 commitment to deliver $6 billion in climate finance annually by 2020 from its own resources, ADB will also double climate finance to its Pacific developing member countries to $500 million between 2017 and 2020.
In Bonn, some headway was made on the rules and procedures underpinning the Paris Agreement, commonly called the “Paris Rulebook”, particularly regarding Nationally Determined Contributions (NDCs), transparency, and carbon markets.
Regarding NDCs, which outline intended climate actions by countries and will be periodically reviewed and strengthened, discussions centered on the establishment of clear rules for NDC structuring, implementing, and updating.
I was happy to announce that ADB has joined the NDC Partnership, a grouping of around 65 countries and the European Union—among them 27 ADB members—and development organizations committed to supporting the implementation of ambitious NDCs.
ADB is working to launch a dedicated NDC support platform in 2018. This platform, for which $3 million in initial funding has been secured from ADB’s Climate Change Fund, is intended to support selected developing member countries in turning their NDCs into bankable climate investment plans.
Collective action to hit climate targets
Progress was made in Bonn on the sensitive issues of increasing transparency of financial flows and monitoring compliance of climate actions. The Talanoa Dialogue, a consultative dialogue set to continue throughout 2018, aims to support an open and constructive exchange on how climate ambitions can be enhanced through collective action.
For its part, in addition to reporting its overall annual climate investment and greenhouse gas footprint, ADB has begun to publicly disclose information on every project that involves climate mitigation or adaptation finance, a first among multilateral development banks.
Through its Climate Change Operational Framework 2017-2030, ADB has also committed to measuring and reducing its portfolio-level greenhouse gas emissions in line with efforts to limit global warming to 2°C.
ADB also requires that the social cost of carbon be considered in the economic analysis of projects. This valuation should apply to the difference in emissions between the with and without project scenarios. Based on a meta-analysis conducted for the IPCC’s Fifth Assessment Report, a 2016 value of $36 per ton of CO2-equivalent emissions (rising 2% in real terms annually) is applied to reflect the marginal damage cost of emissions.
Though no text was adopted, there were some positive developments regarding the market mechanisms envisaged under Article 6 of the Paris Agreement. ADB has supported carbon pricing through its continued engagement with existing and emerging carbon markets by facilitating carbon finance through trust funds and capacity-building support for market-based opportunities in emissions reduction.
These efforts will continue. ADB is committed to helping its developing member countries to use market mechanisms to incentivize investments in climate-friendly technologies for achieving their respective NDCs. At COP 23, ADB presented an assessment of its Future Carbon Fund projects, demonstrating strong linkages between investments in climate change mitigation projects and the delivery of sustainable development co-benefits.
Conversely, little progress was made on the issue of loss and damage, which seeks to address the disproportionate impact of climate change on countries that have made little historical contribution to the problem.
Helping the most vulnerable
Some of these impacts are becoming evident. ADB presented at COP 23 its flagship report A Region At Risk: The Human Dimensions of Climate Change in Asia and the Pacific, which outlines how climate change is already impacting human development in the region and underscores the importance of taking decisive climate action to help the most vulnerable.
To help countries cope, a major new initiative, the InsuResilience Global Partnership for Climate and Disaster Risk Finance and Insurance Solutions, was launched by the G20 countries in partnership with the so-called “Vulnerable 20”. The latter is a group of 43 climate vulnerable countries-18 of which are ADB developing member countries- which aims to help an additional 400 million poor and vulnerable people gain access to climate risk and insurance solutions.
ADB is supporting the aims of the partnership through the Asia-Pacific Climate Finance Fund (ACliFF), a new trust fund to increase developing countries’ access to financial products to address both climate investment risk and climate risk. Germany has committed an initial €28 million to ACliFF, which will initiate operations in 2018.
Going forward, development finance institutions will be expected to deliver more climate finance and related support to countries, and to make all their activities compatible with efforts to address climate change. ADB has an opportunity to play an even more significant role in helping our developing member countries fulfill their climate pledges.