Tackling climate change will require major social, economic and technological changes, many of which are costly and will require large investments.
To achieve our climate objectives, it will be critical to integrate climate and development and identify projects at the country level that tackle mitigation and adaptation and channel appropriate sources and structures of financing toward these projects in a manner that maximizes impact.
This is a complex goal from both the financing and project side, and will need to build on mitigation and adaptation diagnostics that show the trajectory of emissions, the major vulnerabilities, and the best climate interventions. These are the pillars of the World Bank Group’s new Climate Change Action plan (CCAP), which we launched in April 2021, and in which we committed to increase our climate finance target to 35% of total commitments over the next five years, align our financing flows with the goals of the Paris Agreement, and achieve results that integrate climate and development.
The world community is committed to reducing greenhouse gas (GHG) emissions and taking more steps to adapt to climate change. We see this with countries announcing GHG reduction targets via their Nationally Determined Contributions (NDCs); financiers and investors announcing the alignment of their financing flows with the goals of the Paris Agreement; countries and corporations committing to net zero emissions goals; and announcements, such as China’s most recently, to stop building new coal-fired power plants abroad.
At the same time, fossil fuel subsidies are increasing, carbon is too lightly taxed, and bold decisions to decommission the existing fleet of coal-fired power plants and stop construction of new ones are rare. Many infrastructure assets are built with outdated standards, or no standard at all, and unmanaged urban development continues in at risk-areas, such as flood plains and coastal zones.
Furthermore, 760 million people—many of them living in the poorest countries and responsible for less than one tenth of global GHG emissions—remain without energy access. These countries need to grow and develop faster and in a low-carbon and resilient way. They also need large investments in adaptation and risk management, as they tend to be the most impacted by extreme weather events and natural disasters.
“Our CCAP prioritizes adaptation because climate change and natural disasters disproportionately affect the poorest and most vulnerable populations.”
Our new series of COP26 Climate Briefs unpacks the key priorities of our CCAP. We added to our set of core diagnostics the Country Climate Development Reports (CCDRs), which we are already rolling out in 25 countries. These reports will provide important data and diagnostics to identify and prioritize actions that meaningfully reduce GHG emissions and build adaptation and resilience.
Climate action needs to be country-owned, so our CCAP prioritizes supporting countries with their Nationally Determined Contributions (NDCs) and Long-term Strategies (LTSs), with the goal of helping countries have better linkages between their climate commitments and their development goals.
Our CCAP prioritizes adaptation because climate change and natural disasters disproportionately affect the poorest and most vulnerable populations. Our analysis finds that climate change may push over 130 million into poverty by 2030 and cause over 200 million people to migrate by 2050. Investing in adaptation to help countries and companies become more resilient is therefore critical.
On systems transitions, we are focusing on the highest emitting systems—energy, manufacturing, transport, agriculture and land use, and cities. With energy responsible for three-quarters of global emissions, our CCAP places emphasis on the energy transition, where we are supporting countries and private sector clients to move away from high-carbon energy systems via a just transition.
Climate action requires engagement across a spectrum of activities including policy support, creating the enabling environment for investment, project development and design, and, importantly, project finance. It requires matching, and where relevant blending, different pools of capital—commercial, concessional, and grants—to the appropriate component of each project undertaken.
As the world considers ways to ramp up climate finance, it is critical to develop high impact projects, and to consider the parameters of the exchange between providers and users of climate capital. Partnerships and coordination efforts, including through country platforms, and the development of innovative ways to pool resources from private foundations and companies looking to fulfill their net zero commitments will be critical to drive the available financing toward impactful results.
“Climate change may push over 130 million into poverty by 2030 and cause over 200 million people to migrate by 2050.”
The World Bank Group is a strong platform for supporting developing countries with their climate and development priorities. We are the largest provider of climate finance for developing countries, and over the last four years, we provided an annual average of over $21 billion in climate financing.
We are going further, and have committed to provide $25 billion annually on average, net of mobilization, over the CCAP period of FY21-25, through impactful projects and programs that reduce GHG emissions, foster adaptation, reduce poverty and inequality, and improve development outcomes. Tackling climate change is urgent, and our approach translates ambition into action.