Climate justice investment and the role of the private sector
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Climate Justice, Investment and the role of the private sector. Sheelagh O’Reilly 21 st November 2012 Aberdeen University . IF…….

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Climate justice investment and the role of the private sector

Climate Justice, Investment and the role of the private sector

Sheelagh O’Reilly

21st November 2012

Aberdeen University


Climate justice investment and the role of the private sector

IF…….

Climate justice is a vision to dissolve and alleviate the unequal burdens created by climate change. As a form of environmental justice, climate justice is the fair treatment of all people and freedom from discrimination with the creation of policies and projects that address climate change and the systems that create climate change and perpetuate discrimination.

AND IF

we recognise that there are finite limits to the planets resources either as inputs or outputs to an economic systems;


And if

AND IF

we recognise that we have responsibilities to enable other human beings (alive now and in the future) to a life that at least meets the basic rights to physical security, subsistence and liberty

AND IF

We recognise that we have responsibilities to enable the flourishing of non-human entities

THEN

Is low carbon energy generation part of the answer, and does this need to be tied to a) attention on human rights and b) issues of economic growth and measurement?


Climate change and human rights

Climate Change and Human Rights

  • Climate change mitigation requires a dramatic shift towards low carbon technologies in every walk of life – a shift that must ultimately take place globally.

  • Climate change adaptation is of greatest urgency in the developing world, where the worst effects of climate change are already being felt. Here too, access to technologies is critical.

  • If technology is critical then how is the ‘transfer managed’? What technology, when, by whom and how? There are a range of ethical and political dimensions which are rarely considered.


Investing in low carbon economy

Investing in Low Carbon Economy

  • OECD 2012 indicates that: Decarbonising the world’s energy system improving resource use efficiency and providing energy access for all require cumulative investment in green infrastructure at USD2 TRILLION per year to 2030 – 2% of global GDP per year. Currently only USD1 Trillion is invested.

  • Where is the finance to come from?


Role of institutional investors

Role of Institutional Investors

  • The OECD argues that:

  • Institutional investors (pension funds & insurance companies) have USD71Trillion in assets so that

  • These institutions could play a role in financing clean energy schemes that generate inflation adjusted, steady income streams;

  • Need investment grade counterparts i.e. States!


G20 low carbon economy index pwc

G20 Low Carbon Economy Index (PWC)

  • In sum, the 2011 PWC Low Carbon Economy Index shows that the G20 economies have moved from travelling too slowly in the right direction, to travelling in the wrong direction.

  • In 2012 the PWC Low Carbon Economy Index headlines: ‘This report shows that global carbon intensity decreased between 2000 and 2011 by around 0.8% a year. In 2011, carbon intensity decreased by 0.7%. The global economy now needs to cut carbon intensity by 5.1% every year from now to 2050. Keeping to the 2oC carbon budget will require sustained and unprecedented reductions over four decades.

    Governments’ ambitions to limit warming to 2oC appear highly unrealistic.


Use of public finance to leverage private finance

Use of public finance to leverage private finance

  • Public finance tools likely to be required to required in both

    • developed

      • Feed in Tariffs (and in UK Renewable Obligation Certificates)

      • Subsidies

    • developing countries

      • concession finance,

      • equity investment to write down risk,

      • early stage feasibility investment,

      • FITs

      • wider infrastructure investment

      • Technical Assistance to government & SMEs;


One process for technology transfer

One process for ‘technology transfer’

  • One key area for ‘technology transfer’ is for there to be international investment in the provision of modern energy services (for public and private consumption) as a way to:

    • Enable access to services quickly

    • Provide effective services and long term operations and maintenance through the financing of infrastructure

      IS THIS AN APPROPRIATE MECHANISM AND WHAT ARE THE IMPLICATIONS OF PRIVATE FINANCE PROVIDING SERVICES WITH HIGH LEVELS OF PUBLIC GOODS BENEFITS?


Investment grade renewable energy policy

‘Investment grade’ renewable energy policy

  • Clear, unambiguous policy objectives, with clear enforcement provisions

  • Policy and regulation streamlined across all factors within the boundary of the deal: from planning approval to delivery;

  • Carefully designed incentive or support mechanisms to achieve targets or objectives

  • Policy stability across a project-relevant durations (?20+ years)

  • Simplicity to reduce complexity and variables that might add risk

  • Near-term attention to infrastructure to ensure overall system is optimised for significant uptake of RE, and demand-side options.


The long loud and legal requirement from states

The ‘long, loud and legal’ requirement from STATES

Core characteristics of a policy to attract private finance i.e. what the STATE needs to do to attract private capital:

  • LOUD: incentives need to make a difference to the bottom line and improve the bankability of projects;

  • LONG: sustained for a duration that reflects the financing horizons of a project or deal

  • LEGAL: a clear, legal regulatory framework – binding targets or mechanisms to build confidence that regime is stable and provide for long-life capital investments.


Additional factors for developing countries

Additional factors for developing countries

  • Political risks – lack of stability & changing priorities

  • Legal and regulatory environment

  • Foreign exchange risks (volatility and actual devaluation for international companies)

  • Energy markets very weak (role of state owned enterprises)

  • General infrastructure (hard and soft)

  • Perceived risks around new technologies

  • Value chain for import of hardware and the value chain for spare parts as well as technical support


What are the responsibilities of the private sector

What are the responsibilities of the private sector?

  • How far do renewable energy companies engage with the current discourse on

    • human rights e.g. UN respect, protect & remedy approach for business & human rights;

    • financial standards e.g. Equator Principles for financing projects

    • Regarding technology transfer, ownership, IPRs etc

    • Labour standards

    • Environmental Information for decision making

    • Safeguards and standards (e.g. World Bank and IFC)


Some questions for consideration 1 of 2

Some questions for consideration (1 of 2)?

  • What is the role of the State (and its partners) in the provision of a basic service such as energy?

  • How do States with weak governance arrangements negotiate with international business to provide the ‘investment grade policies’? How are the rights of citizens factored in?

  • How are the roles and responsibilities of investors, states and consumers of the service as well as citizens laid out?

  • Are there other approaches to technology transfer in the field of climate mitigation that enables effective, and inclusive, social-economic development?


Some questions 2 2

Some questions (2/2)

  • Are the poorest being asked to pay the price (financially and physically) around both mitigation and adaptation for others prior and ongoing unwillingness to make changes in their lifestyle?

  • Is Climate Change just another opportunity for economic growth under the label of ‘A Green Economy? Of does addressing mitigation and adaptation at the local and the global levels require a different approach to reduce the risk of the a more than 2 degree rise?


Climate justice investment and the role of the private sector

  • OECD 2012: http://www.oecd.org/environment/WP_23_TheRoleOfInstitutionalInvestorsInFinancingCleanEnergy.pdf

  • World Bank Independent Evaluation Group regarding World Bank engagement on Climate Change:

    http://ieg.worldbankgroup.org/content/ieg/en/home/reports/climate_change3.html

    UN Secretary-Generals Special Representative on Business & Human Rights

    http://www.business-humanrights.org/SpecialRepPortal/Home

    Equator Principles: http://www.equator-principles.com/

    ICHRP: http://www.ichrp.org/files/reports/65/138_ichrp_climate_tech_transfer_report.pdf


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