Tag Archives: risk mitigation

Philanthropy’s Role in Financing a Climate-Resilient World

June 16, 2016 |

 

resLorenzo Bernasconi, Associate Director, The Rockefeller Foundation and Dr. Barbara Buchner, Executive Director, Climate Finance, co-authored this piece, which originally appeared on The Rockefeller Foundation blog.

In April of this year, leaders from 177 countries signed the Paris Agreement, with a goal to put the world on track to keep global warming below 2°C in order to avoid the catastrophic impacts of a warming planet. While mitigating the future impacts of climate change is crucial, there is a concurrent need to address the effects that are already present, and that are sure to increase. The Paris Agreement also raised the political profile of climate resilience, recognizing that adaptation represents a challenge with local, national, and international dimensions.

This is good news given that the effects of climate change are already threatening communities around the world. The Guardian recently reported that five islands in the Pacific have already been lost due to rising sea levels, and just last month US$49 million was committed to relocating an entire community of ‘climate refugees’ in rural Louisiana, with plans to move several other towns in the United States for similar reasons.

With the Paris Agreement—as well as the UN Sustainable Development Goals adopted in 2015—international attention on climate adaptation and resilience is rising, but so too are the costs.

The 2016 UNEP Adaptation Gap report estimates that adapting to climate change in developing countries could cost between US$280 and US$500 billion per year by 2050. Despite these rising costs, actual investments in climate adaptation lag. According to the Global Landscape on Climate Finance, only US$25 billion was invested in climate adaption activities globally in 2015—around 7 percent of total climate-related investment. While this is only a rough estimate due to a lack of information on domestic and private resilience investments, current investments clearly constitute only a fraction of what is needed to avoid costly and catastrophic future impacts.

Further compounding this gap is the fact that climate change disproportionally affects the poorest communities and individuals globally—those that often lack the means to build adaptive capacity. For example, the world’s 450 million smallholder farmers are especially vulnerable to droughts, extreme weather events, and other climate-related shocks, but have little financial or educational resources to build the resilience necessary to withstand this volatility.

“What’s needed is a paradigm shift to ensure that the benefits of building climate resilience—and the costs of failing to do so—are integrated into investment and planning decisions in both public and private sectors.”

It is clear from the rising costs and impacts that investing now in climate resilience makes good economic sense in the near and long term, but constrained national and local public budgets will not be enough to finance this transition.

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Graphic Spotlight: What is the role of public finance in deploying geothermal energy in developing countries?

March 9, 2016 |

 

Despite great potential, geothermal deployment in developing countries has been below expectations since 2010. Geothermal energy has the potential to provide significant amounts of low-carbon electricity in many developing countries and is the cheapest source of available power in some developing countries.

The major barrier is securing early-stage project finance given the scarce public resources available to invest in exploration and development. While some countries are pursuing policies to liberalize energy and electricity markets to attract private investment, significant difficulties remain.

CPI analyzed three case studies on behalf of the Climate Investment Funds, with the aim of helping policymakers and development finance institutions understand which policy and financing tools to use in order to enable rapid and cost-effective deployment of geothermal for electricity.

Role of public finance in deploying geothermal energy

Our case studies show that the increase in tariffs needed to provide sufficient returns to incentivize private investment can be entirely offset by public measures addressing specific risks. This graphic illustrates how these public risk mitigation measures (orange) combine to result in a final levelized cost of electricity for a privately developed project (dark grey) that is even lower than what it would have been for the state to develop it (light grey).

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