Climate
Chapter Five The Climate Change Focal Area
1. OPERATIONAL STRATEGY
Climate change is being caused primarily by the emission of certain greenhouse gases (GHGs) from the burning of fossil fuels, and by the reduction of GHG "sinks" which remove these gases from the atmosphere. The GEF has developed a specific Operational Strategy for Climate Change to address these causes, which is closely linked to activities under the Climate Convention. (GEFDOC #12; See Box 5.1) A centerpiece of the strategy is to strike a balance between investments that achieve permanent reductions in GHG emissions over the long-term and "short-term response measures" which deliver an immediate reduction, but do not necessarily produce a shift to an environmentally friendly energy base.
The Operational Strategy outlines three categories of activities to be supported through the GEF:
Enabling activities. These activities—being emphasised in this early stage of the GEF—prepare the foundation for the design and implementation of effective response measures, and generally cover. planning and capacity building (e.g., institutional strengthening, training, research, education and implementation reports).
Adaptation activities. These activities include, for example, dike and sea wall construction to avoid flooding associated with climate change-induced sea level rise and severe storms. The Conference of Parties (COP) to the Climate Convention has recognised that small island states and other countries with low-lying coastal areas are particularly vulnerable to these impacts, and has provided guidance to the GEF on funding adaptation activities. Because of contentious issues around infrastructure costs associated with adaptation, for now, the GEF will only fund planning for adaptation.
Mitigation measures (short- and long-term). Measures for reducing GHG emissions over the long-term will generally involve (i) removing barriers to the adoption of climate-friendly, commercially available technologies (e.g., price distortions, lack of information, low management capabilities and regulatory barriers/biases); and (ii) reducing the costs of promising technologies, making them more economically viable. While the operational strategy recognises that long-term reduction of emissions will require the use of technologies that avoid emissions (such as renewable energy technologies), it also allows for funding of "short-term" fossil fuel projects (such as supply-side efficiency or coal-to-gas conversion projects). Criteria for these projects are: cost effectiveness (only projects whose cost per tonne of carbon not emitted is below a certain ceiling would be eligible); likelihood of success; and whether they are country-driven (e.g., included in national climate change plans).
2. OPERATIONAL PROGRAMMES
The three operational programmes for long-term mitigation of climate change are:
Removing barriers to energy conservation and energy efficiency. These projects cover, for example: developing demand-side management programmes; encouraging supportive legal, regulatory and policy changes; and establishing and strengthening integrated resource planning.
Promoting adoption of renewable energy by removing barriers and recurring implementation costs.
These projects cover, for example: on- and off-grid photovoltaic installations, combustion of agricultural residues to generate heat and power, methane control technologies for waste disposal and wind power.
Box 5.1 The Climate Change Convention at a Glance
The GEF serves as the financial mechanism of the Climate Convention—an international agreement committing 168 governments to work together to address the problem of climate change (e.g., by limiting their emissions of greenhouse gases [GHGs], such as carbon dioxide [CO2], methane, and nitrous oxide [N2O]). The ultimate objective is: "stabilisation of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic (human) interference with the climate system." The convention emphasises that developed countries are mainly responsible for historic and current emissions and must take the lead in combating climate change. It recognises that the first priority of developing countries must be their own economic and social development and that their share of total global emissions will rise as they industrialise.
All parties must submit information about the quantities of GHGs they emit and about their national "sinks" (notably forests and oceans). Also, all parties must carry out national programmes for mitigating climate change and adapting to its effects, and strengthen scientific and technical research and systematic observation related to the climate system. Finally, all parties are obligated to promote development and diffusion of relevant technologies and to undertake educational and public awareness programmes about climate change and its likely effects.
Developed country parties must adopt specific policies to (i) return their levels of GHG emissions to 1990 levels by the year 2000 and (ii) protect and enhance their greenhouse gas "sinks" and "reservoirs". At the upcoming December 1997 meeting in Kyoto, Japan, Parties will likely adopt binding targets and timetables for reducing their GHG emissions. One proposal being discussed is for developed countries to reduce their emissions by 15% compared with 1990 levels by the year 2010. Developed countries must also transfer—to developing countries—financial and technological resources above and beyond what is. already available through existing development assistance, and help developing countries that are particularly vulnerable to the adverse effects of climate change to meet adaptation costs.
Reducing the long-term costs of low greenhouse gas-emitting technologies. These projects cover for example: solar-thermal power generation, advanced biomass power, fuel cells and advanced fossil fuel technologies. It is expected that through learning and economies of scale the manufacturing costs of these technologies will become commercially competitive.
3. SUMMARY OF CLIMATE CHANGE PORTFOLIO
The Pilot Phase. Pilot Phase projects included investments in and technical assistance for biomass, wind energy, solar photovoltaics, carbon sequestration, energy efficiency, fuel conversion and supply-side efficiency. Some research projects were also funded during the Pilot Phase, examining, for example, methane emissions from rice fields and alternatives to slash and-burn agriculture.
Box 5.2 The GEF's Climate Portfolio at a Glance
(This table provides key statistics summarising the current climate change portfolio.)
Total allocated funding US $608 million
% of total GEF funds allocated to climate change work program 38.7%
Total projects approved for funding 104
• # of global projects (13)
• # of regional projects (6)
• # of national projects (85)
Source: GEF Quarterly Operational Report, June 1997. Aggregate figures for total funds disbursed in each focal area were not available at time of printing.
Box 5.3 A Sampling of Climate Projects Funded by the GEF Efficient Industrial Boilers Project (China). With US $32 million in GEF allocations, and $68 million in co-financing, this project aims to reduce GHG emissions by adapting high-efficiency foreign technologies to local conditions for small- and medium-size, coal-fired industrial boilers.
Solar Thermal Electric Project (India). With US $49 million in GEF allocations, and US $196 million in co-financing, GEF funds will help finance construction and operation of a grid-connected 140 MW solar-thermal/fossil fuel hybrid power plant in Rajasthan.
Renewable Energy Small Private Power (Indonesia). With US $4 million in GEF allocations, and US $137 million in co-financing, this project will catalyse the introduction of private sector, grid-based renewable energy projects into the national power company's network.
Klaipeda Geothermal Demonstration Project (Lithuania). With US $7 million in GEF allocations, and US $11 million in co-financing, this project helps to finance construction of a demonstration geothermal plant to provide hot water to the Klaipeda district heating system.
Planning for Adaptation to Climate Change (Regional—Caribbean). With US $6.3 million in GEF financing, this project encompasses a set of enabling activities to cope with climate change (especially sea rise), which include strengthening regional monitoring capacity, identification of particularly vulnerable areas, development of an integrated management framework for response and adaptation to climate change, training and capacity building, and information sharing.
The Independent Evaluation (GEFDOC #27; see Chapter 9) was rather critical of the climate change portfolio during the Pilot Phase, particularly with regard to the strategies and criteria for selecting projects.
One of the principal objectives of this focal area was to develop a menu of technologies that offered the greatest possible emissions reduction at the lowest cost. However, the political need for a geographical balance in funding projects undercut a focus on countries with the highest emissions. Another difficulty was that rigorous application of the incremental cost criteria prevented some support for important activities, such as energy efficiency projects.
Examples of activities that could be funded through the GEF:
• Programmes to promote efficient energy production, distribution and/or consumption.
• On- and off-grid photovoltaic installations.
• Combustion of agricultural residues to generate heat and power.
• Methane control programs for waste disposal.
• Wind, solar, hydro and geothermal power demonstration projects.
• Programmes to improve demand-side planning for electricity generation.
• Carbon sequestration activities.
• Programmes to reduce market barriers to advanced energy sources (e.g., biomass power, fuel cells, advanced fossil fuel technologies).
• Technical training related to renewable and high efficiency technologies.
• Programmes to raise public awareness of climate change issues.
4. NGO PERSPECTIVES
Some key NGO perspectives related to the climate change portfolio include:
Funding for fossil fuel projects. Some NGOs believe that the GEF should not fund any activities involving fossil fuels, especially coal. Others argue that developing countries should be able to use their own natural resources but should use them as sustainably as possible through technology transfer and financial assistance. NGOs were generally disappointed in the removal of a sentence from the final version of the Climate Operational Strategy that stated, The emphasis will be on renewable energy, and support for applications of fossil fuel technologies will be relatively modest."
Transport sector programme. NGOs were generally disappointed in the decision not to create an operational programme on reducing emissions in the transport sector. However, the GEF Secretariat is working on such a programme.
Social costs and energy pricing policies. Some NGOs have expressed concern regarding the social costs of changes in energy pricing policies supported by the GEF. Even small energy price increases can have significant adverse social impacts for citizens in developing countries.
Targeted research. NGOs have proposed that one particularly important area of research and analysis should be macroeconomics and other key factors influencing investment in climate unfriendly technologies (e.g., multilateral development banks, and private, foreign direct investment).
Catalyst for changes in other processes. NGOs have expressed concern that the Operational Strategy does not clearly articulate how the GEF should catalyse changes in other processes (e.g., multilateral, national and private sector initiatives, particularly those of the World Bank).
NGO participation. In general, NGOs seem relatively satisfied with the level of participation in climate projects. Examples of country-driven projects with reasonably good participation include the Jamaica Demand-Side Management Demonstration Project; the Peruvian Project on Technical Assistance to the Centre for Energy Efficiency; and the Electricity, Fuel and Fertiliser from Municipal and Industrial Organic Waste in Tanzania: A Demonstration Bio-Gas Plant for Africa.