Analysis

Climate finance: Funding a low-carbon global economy

  • 16 Jul 2015, 15:00
  • Sophie Yeo
Wall Street sign

Wall Street | Pixabay

Over the next decades, trillions of dollars will be required to tackle climate change.

Leveraging it is a question that concerns politicians and financial institutions alike. Largely, it has been a conversation that the two have held separately.

The political discussion centres around a promise made in 2009 at the UN's climate conference in Copenhagen, when developed countries committed to provide $100bn a year from 2020 to help poor nations reduce their emissions and adapt to the impacts of climate change, with a significant portion of this flowing through a Green Climate Fund.

Nations  reaffirmed that pledge at the Financing For Development conference in Addis Ababa this week, where the UN largely focused on the issue of how to finance its  post-2015 sustainable development agenda - a set of guidelines, to be finalised this September, on reducing poverty, hunger and climate change, among other issues.

$100bn may sound like a lot of money. It is. But the investment required to deal with climate change will likely cost trillions, as infrastructure and energy across the world reshape into a greener, more resilient form, compatible with a world where temperatures rise no more than 2C. Enabling this will require a rethink of how the financial system itself works.

Part 1: The $100bn-a-year promise

Unlike the vague trillions required for a low-carbon overhaul of the global economy, the $100bn is a precise figure embedded in a political agreement.

The text of the Copenhagen agreement states that this could come from a variety of sources: public and private, bilateral and multilateral, and alternatives. It also established a Green Climate Fund (GCF). This has been designed to channel a significant proportion of these funds, but by no means all of them.

Despite this, the GCF is often seen as synonymous with the $100bn pledge.

Green Climate Fund

Many poor nations are in a situation where their capacity to reduce their emissions is limited by a lack of funding. The GCF was established to ensure that developing countries have access to additional and predictable finance that will allow them to scale up their own efforts to tackle global warming.

Under intense pressure from campaign groups and developing countries, rich nations have already started to trickle public funds into the GCF. So far this amounts to $10.2bn, with much of this pledged at a  Berlin meeting in November 2014. Others, including  Australia, added to that sum at the UN conference in Lima.

To date, 58.5% of these pledges have been  signed off by the donor nations into actual contributions, surpassing the 50% threshold required for the GCF to start allocating resources through bodies that have been approved by the board.

As a new financial institution, the GCF remains a work in progress.

Since it was established, countries have been  debating issues such as what kind of projects it can fund (a complication that is exacerbated by the lack of an official definition of "climate finance"), who gets to disburse the money, and how it intends to manage financial risk.

Some observers are concerned about the  lack of an explicit ban on fossil fuel projects for the GCF, following the revelation that Japan had used its early climate finance contributions to  fund a coal plant in Indonesia.

Another challenge is ensuring that developing countries are ready to receive the funds. Héla Cheikhrouhou, executive director of the Green Climate Fund, said in a  speech last month at the UN that, although $6bn had been requested from the fund so far, only $500m of this was from funds that "look promising".

Private versus public

The extent to which the GCF will be publicly funded has become one of the most contentious issues in climate finance.

It is widely accepted that a portion of the $100bn will be from private sources, and the GCF has set up a  Private Sector Facility to enable this.

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Met Office: Wind data dispels doubt about cause of Heathrow high temperatures

  • 16 Jul 2015, 13:10
  • Roz Pidcock

Earlier this week,  The Telegraph claimed the Met Office was "forced to defend" the credibility of the record high July temperatures recorded at Heathrow airport during the recent UK heatwave.

But a quick look at the temperature and wind data and a chat with Dr Mark McCarthy, head of the Met Office's National Climate Information Centre, shows why claims that we shouldn't trust the data don't stand up to scrutiny.

McCarthy tells Carbon Brief:

"It would be wrong to reject observations on the basis of a hunch...In this instance there is no compelling evidence to suggest the measurement is incorrect."

Record high

On Wednesday, 1 July, a thermometer at Heathrow recorded a temperature of 36.7C, the highest anywhere in the UK on that day. 

The blue line below shows the air temperature recorded 1.5 metres off the ground at the Heathrow weather station for an hour-long period from 13:51pm-14:50pm on 1 July.

You can see a spike at 14:13pm when temperatures rose above 36C, leading the Met Office to  declare 1 July as the "hottest July day since records began and the hottest day since 2003".

Image Temp

Temperature (C) at Heathrow (blue) and Kew (red) on 1 July. For a longer time period, see the Met Office News Blog from 7 July. Source: Met Office data, plotted by Carbon Brief.

But others were "not so sure", said  The Telegraph. The article centred on climate skeptic blogger Paul Homewood's claim that the Heathrow data had likely been skewed by passing aircraft or a change in wind. This came from his observation that the nearby Kew weather station (shown in red in the graph above) did not show a similar spike in temperature.

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Daily Briefing | Government faces black hole in budget to pay for clean energy supplies

  • 16 Jul 2015, 09:00
  • Carbon Brief Staff
Department for Energy and Climate Change

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Climate change is biggest cause of stress on world's oceans 
Stark new research shows the extent to which humans are affecting the oceans, with climate change causing more potential harm than commercial fishing, pollution or shipping.      Carbon Brief

Analysis: How much does the UK spend abroad on 'climate finance'? 
The UK contributes 0.7% of its gross national income to overseas aid. But how much of this goes towards climate finance, and how is it distributed? Carbon Brief looks at the data.     Carbon Brief 

Climate and energy news

Government faces multi-billion pound black hole in budget to pay for clean energy supplies - which could mean your electricity bill rises 
According to Whitehall sources, the Department of Energy and Climate Change has already overspent its budget by £1.5bn to support renewable energy projects over the next five years, due in part to a decline in the wholesale price of oil and gas and higher than expected installation of home solar panels. This opens up an unpalatable choice between loading yet more cost on to household electricity bills or scaling back renewable investments, says an Independent editorial. Analysis by the think-tank Policy Exchange suggests that the current overspend on renewables subsidies alone could add an additional £20 per year to household energy bills. Unless ministers increase the budget still further, the UK could struggle to meet its legally binding commitments to cut emissions, says The Guardian. Here's Carbon Brief's analysis of the government's renewables spending from earlier this week.     The Independent 

Green campaigners condemn review of Europe's emissions trading 
A planned restructuring of the Emissions Trading Scheme (ETS), unveiled on Wednesday, will see a reduction in the overall number of carbon permits but a free handout of credits worth £112bn to some of Europe's heaviest polluters, says The Guardian. The reforms to the ETS are aimed at driving up carbon prices from their present level of €7 a tonne, but have singularly failed to impress. Condemned as too weak by green campaigners, the package also left business groups dissatisfied, says RTCC. Gareth Stace, director of UK Steel, called yesterday's proposal "another flawed solution" that leaves European businesses at greater risk from foreign competition. Carbon Pulse summarises some key reactions from yesterday's reforms while The Guardian takes a look at 10 years of the ETS and its impact on business.     The Guardian 

SNP accused of hypocrisy over fracking 
Scotland's First Minister, Nicola Sturgeon, faced growing pressure last night to clarify her government's plans for fracking after a major industry leader said he had had private assurances that the SNP was "not against" the controversial technique. Ineos boss Jim Radcliffe told Scotland's Herald newspaper he believes the industry will be thriving within years, reports The Financial Times. Scotland stands on the brink of an energy decision that will affect the future of its economy for a generation, says a Times editorial.     The Times 

Scientists warn geo-engineering is not the answer to climate change 
A new EU-wide  analysis published yesterday by a group of 14 academic institutions says climate-engineering techniques, such as recapturing carbon dioxide from the atmosphere and reflecting solar radiation, will not help tackle climate change in the short term. Project leader Mark Lawrence said it would be "irresponsible" to expect climate engineering to significantly contribute to solving the problem of climate change, with many of the technologies facing technical challenges as well as serious concerns over their environmental and social impact.     BusinessGreen 

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Climate change is biggest cause of stress on world's oceans

  • 15 Jul 2015, 11:35
  • Roz Pidcock

Stark new research shows the extent to which humans are affecting the oceans, with only the most remote corners emerging relatively unscathed.

Nowhere is without human influence entirely, says the study in Nature Communications, and nearly the entire surface of the ocean (97.7%) suffers under more than one pressure.

Climate change "dominates humanity's footprint" on the oceans, coming in above commercial fishing, pollution and shipping, the authors conclude.

Stress-mapping

The study looks at 19 different ways human activity can cause damage to marine ecosystems, known as "stressors".

These include climate-related impacts - such as rising temperatures, acidifying oceans and exposure to UV radiation - as well as pollution, fertiliser run-off, marine traffic and fishing.

As the authors say in the paper:

"The ocean is crowded with human uses…Marine species and habitats have long experienced detrimental impacts from human stressors, and these stressors are generally increasing globally."

The team of 11 researchers hail from the University of California, the Hawaii institute of Marine Biology, Scripps Institution of Oceanography, the US National Oceanic and Atmospheric Administration (NOAA), Conservation International and Imperial College London in the UK.

The study is the first to map how different types of stress caused by human activity add up in different parts of the world's oceans, and how quickly things are changing.

The scientists assigned an impact "score" to each part of the world, according to how vulnerable different types of marine habitat (eg. saltmarsh, coral reefs, mudflats) are to each human stressors. Then, they added the scores together to get a total impact score.

Human -impacts -ocean -map

Total human impact on the world's oceans. Data taken from Halpern et al., (2015) and adapted by Rosamund Pearce, Carbon Brief. Click to enlarge.

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Analysis: How much does the UK spend abroad on 'climate finance'?

  • 15 Jul 2015, 09:55
  • Sophie Yeo

Flickr | DFID

In the world of climate finance, 2020 is an important year. By this point, as was agreed at the Copenhagen climate conference in 2009, developed countries are expected to "jointly mobilise" $100bn per annum for developing nations.

The agreement didn't identify exactly how this money should be raised. The final accord said: "This funding will come from a wide variety of sources, public and private, bilateral and multilateral, including alternative sources of finance." As is the case with other developed countries, pressure is growing on the UK to play its part.

Between now and 2020, there are no formal requirements on the UK to donate. But without proof that rich countries will contribute and have a credible plan to scale up funds between now and the end of the decade, many commentators say it will be difficult to strike a meaningful deal at the UN's climate conference in Paris this December.

The UK, which contributes 0.7% of its gross national income to overseas aid, is one of the most generous donors.

But how much of this goes towards climate finance, and how is it distributed? Carbon Brief looks at the available data.

Climate -finance -tree

Source: Rosamund Pearce for Carbon Brief

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    Daily Briefing | UK faces second winter with dearth of spare power capacity

    • 15 Jul 2015, 09:00
    • Carbon Brief Staff
    Operating oil and gas well profiled on sunset sky

    Oil & gas well | Shutterstock

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    Global risk of wildfires on the rise as the climate warms, study says 
    A new study finds that the number of days wildfires are likely to burn each year is increasing as global temperatures rise. Researchers estimate that between 1979 and 2013, the wildfire season has lengthened by an average of 19% for more than a quarter of the Earth's vegetated surface.     Carbon Brief 

    Climate and energy news

    UK faces second winter with dearth of spare power capacity 
    Britain's electricity system faces a second winter with a slim safety cushion of spare power capacity, says a new report for power generators from the National Grid. The gap between total electricity generating capacity and peak demand is predicted to be just 1.2%, says The Telegraph - the tightest level for a decade. To ensure the lights stay on, the National Grid will pay firms like Centrica and SSE to keep power plants in reserve, reports BBC News. The Grid is also paying large energy users, such as Tata Steel, to switch off. This will take the margin up to 5.1% this winter, a little higher than last year's 4%. The tighter margins this winter are due to the closure of power stations, reports The Guardian. The National Grid has also released a series of four scenarios for how the UK's energy system could look in the future. But of the scenarios, only one, in which green ambition is not restrained by financial limitations and new technology is embraced by society, will see the UK meeting its targets to cut emissions and tackle climate change. Under the "Gone green" scenario, output from renewable sources of electricity generation by 2025/26 will be comparable to that of conventional power stations, reports BusinessGreen.     The Financial Times 

    Fracking: government has 'failed to implement' key safety recommendation
    Ministers have failed to implement a crucial recommendation of the flagship Royal Society report into fracking safety, designed to ensure wells don't leak dangerous chemicals, says Lord Smith, the chair of a new industry "Task Force on Shale Gas". Smith said ministers had implemented most of the Royal Society's recommendations but for one "glaring exception" - compulsory independent monitoring of wells after fracking takes place to check for potential leaks. Smith says It is too soon to say whether shale gas fracking would be a "good thing" for the UK, reports The Guardian, but the Task Force's report finds that fracking is safe, for human health and the environment, though only if properly regulated. The report also recommends that Britain should steer clear of using deep injection wells, says Reuters.     The Telegraph 

    Human impact on the oceans is growing - and climate change is the biggest culprit 
    Nearly two-thirds of the world's ocean is experiencing an increase in "stress" from man-made impacts - and climate change is the worst of all. Scientists mapped the impacts of 19 different types of human activity that have harmed the ocean over a span of five years. While overfishing and pollution are also causing damage, the global impact of climate change makes its the most serious, the study says. Climate Central also has the story.     The Washington Post 

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    Global risk of wildfires on the rise as the climate warms, study says

    • 14 Jul 2015, 16:00
    • Robert McSweeney

    Bushfire | Shutterstock

    An average of 3.5m square kilometres of land go up in smoke each year as a result of wildfires. Annual carbon dioxide released in these infernos can exceed half the emissions from humans burning fossil fuels.

    A new study finds that the number of days wildfires are likely to burn each year is increasing as global temperatures rise.

    Researchers estimate that between 1979 and 2013, the wildfire season has lengthened by an average of 19% for more than a quarter of the Earth's vegetated surface.

    Weather and wildfires

    From the 600 fires that claimed more than 50 lives in Russia in 2010, to the series of major bushfires in Australia in 2013 that caused $9.4bn of damage, wildfires affect much of the world's surface.

    Wildfires play an important role in flammable ecosystems, such as forests, grasslands, savannas, and shrublands. They can be managed to disperse plants, clear forests and promote grazing, or suppressed to protect human lives and property.

    Most wildfires are triggered by humans - as much as 90% in the US, for example - while natural causes include lightning and lava. But the weather is the biggest driver of how much area that wildfires actually burn. Temperature, humidity, rainfall and wind speed all play a role in providing the right conditions for a fire.

    A new study, published in Nature Communications, finds that changes in these different weather variables are conspiring to increase the risks of wildfires.

    Fire season length

    Researchers analysed three global weather datasets to develop a metric for "fire weather season length" - the number of days per month where conditions create a high fire danger. They then worked out how the season length had changed between 1979 and 2013 for vegetated areas across the world. You can see the results in the graphs below.

    Jolly Et Al 2015 Fig 2c

    Graphs show a) Global average wildfire season length (expressed as a standardised anomaly), and b) Total global average area experiencing 'long' wildfire seasons (as a % of global vegetated area) - both from 1979 to 2013. Source: Jolly et al. (2015)

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    Daily Briefing | Climate change threat must be taken as seriously as nuclear war - UK minister

    • 14 Jul 2015, 09:00
    • Carbon Brief Staff

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    Climate and energy news

    Climate change threat must be taken as seriously as nuclear war - UK minister 
    A stark new report commissioned by the UK foreign office warns of tripling food prices, unprecedented migration, high terrorist alerts and lethal heat if global temperatures continue to rise unchecked. In a foreword to the report, Baroness Joyce Anelay, minister of state at the Commonwealth and Foreign Office, said security threats and other indirect effects from climate change could have a greater impact than direct effects, such as flooding, and that climate change should be assessed in the same comprehensive way as nuclear weapons proliferation. Sir David King, former UK chief scientific adviser and lead author on the report, said ministers had taken worst-case risks into account when dealing with bird flu almost a decade ago, reports The Financial TimesThe Express and RTCC also have the story.      The Guardian 

    UK to cut funding for household energy efficiency 
    Funding for household energy efficiency and renewable heat schemes are expected to be cut in the autumn spending review as the government seeks savings from the Department for Energy and Climate Change (Decc) budget. Carbon Brief's recent analysis of the way Decc spends its money revealed little scope for cuts, with £2.2bn (65%) devoted to managing the UK's civil and military nuclear waste and decommissioning legacy. Energy regulator Ofgem says, "DECC's budget will be set out by the chancellor and any estimates before that are pure speculation."        The Financial Times 

    Extreme weather FUELS global warming as planes spend longer in the air 
    A new paper suggests strong winds caused by extreme weather are causing planes to spend longer in the air, creating a warm feedback loop that further fuels rising temperatures. The study finds that if the total round-trip flying time of all commercial flights per day in the US changed by one minute, the planes would be in the air approximately 300,000 hours longer per year - equivalent to an extra 10 billion kg of carbon dioxide. The Independent and Scientific American also cover the new research.       Mail Online 

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    Q&A: Has the UK blown its green power budget?

    • 13 Jul 2015, 12:35
    • Simon Evans
    Man installing alternative energy photovoltaic solar panels on roof

    Solar panels | Shutterstock

    The government's Levy Control Framework (LCF) spending cap for green power subsidies will be breached, according to new official forecasts from the  Office for Budget Responsibility.

    The cap limits spending on renewables and other low-carbon electricity schemes. It is the government's way of trying to provide the certainty investors need to open their wallets, while limiting the financial impact on those who will ultimately foot the bill.

    After years of insisting the cap would not be breached despite a range of voices arguing the contrary, the government appears to have finally admitted there could be a problem. Carbon Brief explains the purpose of the LCF and explores whether the budget really has been blown.

    What's the LCF for?

    Announcing the £7.6bn LCF cap for 2020/21 back in 2012, the coalition government  said:

    "It will provide certainty to investors in all generation technologies and provide protection to consumers."

    The idea was that investors would be given the reassurance of a highly visible pot of money, agreed in advance. Meanwhile, concerns over rising energy bills would be acknowledged and the impact on households limited through the cap on spending.

    Unfortunately it has always been hard to predict the cost of green power subsidies in advance. Uncertainties include how many people would decide to install solar panels on their roofs, how many large renewable schemes would be built, how much power they would generate and how much wholesale electricity would cost in future.

    This uncertainty risks undermining both aims of the LCF. If ministers prioritise cost controls, amending policy to limit spending, the promised investor certainty evaporates. If they attempt to avoid spooking investors by holding policy steady, household bills could suffer and the budget agreed with the Treasury could be busted. A worst-case scenario would combine both problems.

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    Daily Briefing | Gas overtakes coal at US power stations

    • 13 Jul 2015, 09:00
    • Carbon Brief Staff
    Generating Station in the morning in New York

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    Scientists: 2015 is a critical year for 'bold action' on climate change 
    On the concluding day of the Our Common Future climate change conference in Paris, we speak to some of the leading scientists who attended and look at the closing statement issued by the organisers.    Carbon Brief

    The Carbon Brief Interview: Prof Chris Field 
    Our in-depth interview with the co-chair of the Intergovernmental Panel on Climate Change's (IPCC) working group two and US nominee for the chair of the IPCC. Field discusses, among other things, carbon budgets, negative emissions, mitigation vs adaptation and scientists as advocates.    Carbon Brief 

    Climate and energy news

    Gas overtakes coal at US power stations 
    A frontpage article in the FT reports that the US generated more of its electricity from gas than from coal for the first time ever in April - in a "sign of how the shale boom is putting mounting pressure on the country's mining industry". Plunging prices for natural gas, which have fallen alongside oil since last summer, led to it being used to generate 31% of America's electricity in April, while coal contributed 30%. The FT adds that US coal production is expected to fall by 7.5% this year, according to the government's Energy Information Administration. US coal mining companies' shares and bonds have plunged, with shares in Peabody Energy, the largest US coal producer, down 98% since April 2011.    Financial Times 

    Benefits far outweigh costs of tackling climate change, says LSE study 
    The economic benefits for a country from tackling climate change easily outweigh the costs, according to a study that seeks to highlight the incentives for individual nations to take urgent action to cut emissions. Countries stand to gain more than they would lose in economic terms from almost all of the actions needed to meet an agreed global warming limit of no more than 2C above pre-industrial levels, according to the paper published by two research institutes at the London School of Economics. It is the latest research to underscore the apparent economic gains from limiting emissions, which include new jobs and improved health, even before the benefits of preventing dangerous climate change are taken into account. BusinessGreen also carries the story.    The Guardian 

    Clean energy bank 'seeks legal advice' after Coalition pulls plug on wind and solar projects 
    In Australia, the Clean Energy Finance Corporation (CEFC) is seeking legal advice after the government instructed it to halt investment in wind power and small-scale solar projects. On Sunday, the federal government confirmed that wind and rooftop solar projects would no longer be financed, instead insisting the CEFC focus on funding "new and emerging technologies". It is believed that existing investment in small-scale solar and wind projects will not be affected even if the directive goes through, but rather that it would apply to future funding opportunities. In a comment piece for the Guardian, Giles Parkinson, the editor of Reneweconomy.com.au, describes the Australian government's decision as "bizarre, contradictory, risky nonsense".     The Guardian 

    Nuclear industry confident over long-term prospects 
    Britain's nuclear programme is shrouded in "fog" but a new generation of power stations will be built, says the chief of a company planning a plant in Cumbria. Tom Samson, the chief executive of NuGen, said: "We're waiting for the fog to lift so we can see the path ahead...All parties will want to learn lessons from Hinkley Point." NuGen's proposed £15bn plant at Moorside, near Sellafield in Cumbria, could be generating by the mid-2020s, he says.     Financial Times 

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