World Bank calls for climate-smart OAD: Update
"We need to mobilise considerable amounts of concessional finance for climate-smart development... to boost resilience and help countries move on to a low-carbon pathway," Kyte said.
But she would not be drawn on whether rich nations should commit to a post-2020 climate finance package under a new, global deal to be sealed in Paris in December.
Developing countries have said they will only sign a binding, post-Kyoto protocol agreement if industrialised parties offer continued support for climate change mitigation and adaptation.
High-profile figures, including French president Francois Hollande and UN secretary-general Ban Ki-moon, have called on rich nations to come forward with clear financial commitments, as they see this as crucial to securing a strong deal in Paris.
Although countries like France and Germany have recently announced new funding towards meeting industrialised nations' 2009 pledge to raise \\$100bn/yr by 2020, none have made any post-2020 commitments.
A recent OECD study cited finance flows of an estimated \\$61.8bn in 2014 as proof that developed countries are well on their way to meeting the pledge.
But the figure is hugely inflated, according to critics, as it includes non-concessional loans and overseas development aid (ODA).
Poorer countries questioned the report's veracity on the basis that it was commissioned by donor countries. Its accounting methodology lacks transparency, they said.
But Kyte rejected the claims, arguing that the OECD study amounted to "a solid job" of aggregating data and using the same criteria across all funding sources.
The OECD measures development finance flows every year, so it is probably best placed to establish whether money is leaving the ODA account and moving into climate finance, she said. There is no evidence that this is happening at the moment, she added.
But Kyte does envisage a future where the dividing line between climate finance and development aid becomes more blurred.
Poorer nations' climate finance needs — as outlined in their intended nationally determined contributions (INDCs) under the Paris deal — should be treated as investment opportunities, rather than funding requests, she said.
"Understanding INDCs as a first-generation prospectus is really important. The private sector and policy makers need to look at the INDCs as an investment pathway for each of the countries that filed them."
China's INDC equates to \\$6.5 trillion of required investment and could create 30mn jobs, according to Beijing. And India needs \\$2.5 trillion worth of investment to meet the targets in its submission.
"The question is, where does that finance come from? That is not a climate finance debate or a development debate, it is a global economic growth debate," Kyte said.
"We are going to have to provide substantial amounts of concessional finance to help the most vulnerable improve their resilience and keep pace with climate impacts," she said.
The OECD study highlights that it is possible to leverage private-sector finance using public climate finance — but much more is needed and adaptation funding needs to be ramped up significantly, Kyte said.
The vast bulk of the \\$62bn climate finance in 2014 went towards mitigation, while only 16pc was allocated for adaptation, the report showed. That is perhaps unsurprising given that the bigger deals are for big power and infrastructure projects in the more developed markets, Kyte said.
Private-sector spend on adaptation is woefully inadequate, as industries with assets and infrastructure at risk have not internalised the adaptation risk to their business, she added
Many firms have not started to consider potential climate disruptions to their supply chain or how to improve their climate resilience, she said.
"But we have a very real issue — we need to boost the amount of finance for adaptation massively, especially to the least developed countries (LDCs) and small island states."
Kyte thinks that the Paris deal should mention carbon pricing, as it is "a necessary if insufficient policy tool" for sending a consistent message across the economy that "we are in the business of low-carbon growth".
But it is not for a negotiated UN Framework Convention on Climate Change (UNFCCC) text to determine the most effective way to price carbon in any given economy, she said.
The World Bank, the IMF, the OECD and the Paris-based IEA are all arguing for putting a price on carbon, Kyte said. The World Bank would prefer carbon to be priced explicitly — either through a tax or a trading system.
"We believe that there is a benefit from an explicit pricing mechanism in that you get a faster, more unequivocal signal through the economy about the direction of travel," Kyte said.
But countries face different constraints and opportunities, and for those where emissions come predominantly from one sector of the economy, they may prefer other implicit carbon pricing measures, such as efficiency standards.
"I do not think that we should be in the business of dictating — we should be in the business of supporting countries to do it. The most important thing is that they do it sooner rather than later," she said.
The voluntary rules that govern the rapidly growing green bond market will evolve into a robust regulatory framework, she added, dismissing concerns that they are too weak to ensure financial stability or environmental integrity.
In financial markets, voluntary principles are "a tried and tested way of tracking innovation, and it takes some time for regulation to catch up", Kyte said, adding that it was usual for "a new market to be more fluid and volatile" than in its more developed successor.
Kyte further highlighted the fact that green bond principles are now managed by the International Capital Markets Association (ICMA) and that green bonds are verified by the Centre for International Climate and Environmental Research and other independent entities.
Retail investors are starting to be able to buy bonds that get them access to real green assets in developing countries through financial intermediaries, Kyte said. "We are trying to join up capital that cares with assets that are really green — and that is beginning to emerge," she said.
Kyte, who is the World Bank's vice-president for sustainable development, was speaking on the side-lines of London-based think-tank Chatham House's Building Agreement Towards 2°C, Paris and Beyond conference.
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