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Green Bonds for low-carbon energy transition and global climate funding?

Green Bonds for low-carbon energy transition and global climate funding?. Workshop on “Innovative solutions for climate finance” CIRED and IASS Potsdam, CIRED, Paris, 8-9 July 2014. Asbjørn Torvanger CICERO. What is a Green Bond?.

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Green Bonds for low-carbon energy transition and global climate funding?

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  1. Green Bonds forlow-carbon energy transitionand global climate funding? Workshop on “Innovative solutions for climate finance” CIRED and IASS Potsdam, CIRED, Paris, 8-9 July 2014 Asbjørn Torvanger CICERO

  2. What is a Green Bond? • Abond is an instrument of indebtedness of the bond issuer to the holders. It is a debt security, under which the issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay them interest and/or to repay the principal at a later date (from Wikipedia) • Bonds are suited for climate change projects: • Provide up-front capital for infrastructure projects • Guaranteed returns are attractive to large institutional investors • A Green Bond (GB): Supports sustainable development, low-carbon growth and climate change resilience • GB motivation for investors: social responsibility; image building; prepare for future markets

  3. Technologies/project types; review • Reduced emissions of carbon dioxide; improved energy efficiency; higher share of renewable energy sources • Waste treatment and recycling; Transportation infrastructure; Sustainable (energy-efficient) buildings; Water management; Climate risks and adaptation • Red flag – avoid: Long-term ‘lock-in’ effects; fossil fuel based energy production • A second opinion: An independent environmental quality review of a green bond issuer’s framework for selecting projects and investments to be eligible for green bond funding. (CICERO has a major share of this market)

  4. Actors

  5. Green bonds on target to double in 2014

  6. Big green potential $100 billion = 0,13% of total bond market

  7. Global climate agreement EU Green Climate Fund Low carbon energy transition Private climate finance Public climate finance De-risking * Impact * Greenness Green Bonds

  8. Green Bonds: Greenness and impacts • GB as bottom-up based nudging. Exist and is fast growing! • But do GB make a difference? Is the BaU GHG emission path bent downwards? • What are impacts of GB on sustainability – e.g. in terms of low-carbon energy transition? (Deep green, medium green, light green?) • How do investors react to green labeling in the bond market? • Will reduced investments in brown activities increase profitability and attract other investors, thus evaporating effect on GHG emissions?

  9. Green Bonds: Contribute to global climate finance? • Linking public and private funding: Big gap in required global funding – combine with - Large private GB funding • Can GB facilitate private climate financing, e.g. of the Green Climate Fund? • How can governments incentivize private sector finance towards climate finance (especially in DCs)? • Is government de-risking efficient and feasible? What risk-mitigation instruments to use? • How can the Green Climate Fund mobilize private sector finance, e.g. through GB?

  10. Extra slides

  11. Green bonds on target to double in 2014 WB goal = 20 Bill. USD Q1

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