Enhancing India’s Readiness to Climate Finance

More documents

Recommendations

Info

Enhancing India’s readiness to access and deliver international climate finance *All funds in USD millions 3.2.3 India’s experience with CDM finance The CDM is a flexible mechanism of the Kyoto Protocol aimed at achieving emissions reductions and technology transfer in developing countries, through the generation and trading of Certified Emission Reduction units (CER). The CDM has been one of the largest formal international arrangements to encourage private sector investment in climate-related activities. India is the second largest recipient of CDM finance, hosting 1497 of 7496 (20%) registered CDM projects. 28 This is second only to China, which hosts 3749 (50%) projects. In India, 77% of CDM investment has targeted the renewable energy sector – focusing on wind, biomass, hydro, and solar energy. A further 11% of projects have focused on energy efficiency, while the remaining projects are split across fuel switching, methane emissions avoidance, cement, reforestation, transport, landfill gas, and HFC reductions. Across all of these sectors, it is estimated that India has received $5-6 billion in private sector financing under the CDM. 29 The main destinations for projects have been in Tamil Nadu, Maharashtra, Gujarat, Rajasthan, Karnataka, and Andhra Pradesh, respectively. While the CDM has played an important role in India in encouraging private sector investment, evidence suggests that India will need to look for new sources of private sector climate finance in the future. With uncertainty over the future of CERs under the second Kyoto Protocol commitment period, new restrictions for CER trading under the EU Emission Trading System, the resulting decline of the global carbon price, and a focus on operationalising the new Private Sector Facility of the GCF, CDM funding has slowed down considerably in India. Figure 3.2 shows the number of CDM projects registered in India from 2003 to 2013. The figure illustrates a sharp decline in the number of CDM projects being registered in India in the second half of 2012, coinciding with the end of the first Kyoto Protocol commitment period. With investment in CDM projects drying up, India will need to look to new and innovative sources of private sector finance to help deliver climate-compatible development. However India can be confident from the CDM experience that private sector investment will flock to the country once new institutional arrangements are set up to incentivise private investors under the GCF, and that this finance will be able to help the country meet the goals laid out in the NAPCC. Figure 3.2: Decline of CDM investment in India Source: UNEP Risoe CDM Pipeline Analysis and Database 28 All CDM data from UNEP Risoe CDM Pipeline Analysis and Database, May 1st 2014 29 Estimates based on internal calculations. There is no authoritative source on total volumes of finance and co-finance for CDM projects, even in major recipient countries such as India and China. Ref: Ricardo-AEA/R/ED59216/Final Report 15
Enhancing India’s readiness to access and deliver international climate finance 3.3 Comparison with peer countries India has been able to attract large volumes of international public climate finance, and has often been more successful than its peer countries in securing international funding. Table 3.5 provides an analysis of the main multilateral funds operating in India, showing that India cumulatively receives higher disbursements than Brazil, China, Indonesia, Mexico, South Africa and Thailand. A comparison of bilateral climate finance performance between India and its peers yields similar results. Table 3.6 outlines the funding each country received in 2012 using the adaptation and mitigation tags of the OECD/DAC’s Rio Markers. Table 3.5: Comparing climate finance access in India’s peer countries Funding Source 30 India Brazil China Indonesia Mexico South Africa Thailand CTF 349.91 - - 324 465.09 450 170 GEF 4, 2006-2010 113.67 34.59 135.78 22.4 41.33 18 14.56 GEF 5, 2010-2014 75.23 20.68 107.06 23.03 21.75 16.33 4 ICF (UK) 3.63 56.41 - 23.66 - 1.03 - ICI (Germany) 52.18 67.23 73.59 23.95 39.68 30.13 29.41 Total: 594.62 178.91 316.43 417.04 567.85 515.49 217.97 Source: Climate Funds Update All figures in USD millions. Figures are cumulative volumes of funding approved from each fund, 2003-2014 (unless otherwise specified). Pledges for each of these funds to a given country may be higher as these funds only refer to approved funds. Correspondingly, dispersals may be lower as individual projects may not yet be at implementation stage. Table 3.6: Comparison of bilateral climate finance received by India’s peer countries, 2012 Rio Marker India Brazil China Indonesia Mexico South Africa Thailand Mitigation 594.78 1176.07 289.71 138.16 352.50 204.96 10.80 Adaptation 332.96 47.62 62.22 106.66 23.86 17.89 6.31 Total: 927.74 1223.69 351.93 244.82 376.36 222.85 17.10 Source: OECD StatExtracts Database. All figures in USD millions. Volumes pertain to flows from all 28 members required to report to the OECD DAC, excluding Japan. Bilateral climate finance received for mitigation and adaptation in each country refer to the cumulative ‘principal’ and ‘significant’ flows received, using the OECD’s Rio Marker criteria. The data from these two tables show that in absolute terms, India received more climate finance from multilateral climate funds and bilateral assistance than any of its peer countries. While this is an important finding, there is evidence to suggest that India still needs to improve its ability to access international climate finance. Figure 3.3 provides data from the Climate Policy Institution, the International Energy Agency, the World Bank, and Vivid Economics, which shows that – unlike China and Latin American countries like Brazil – India is not attracting climate finance in sufficient volumes relative to the country’s future adaptation and mitigation needs. This analysis is consistent with the CDM analysis and Tables 3.5 and 3.6, which demonstrate that India is not attracting volumes of climate finance near the estimated $7 billion per year needed to meet the NAPCC’s funding gap. 30 The main funding sources correspond to the main multilateral and bilateral sources of climate finance in India. The methodology for selecting these funds is detailed in Annex I. The Adaptation Fund is excluded from Table 3.5 as none of the countries have received any AF finance at the time of writing. Ref: Ricardo-AEA/R/ED59216/Final Report 16
Page 1 and 2: Enhancing India’s readiness to ac
Page 5 and 6: Acknowledgements Enhancing India’
Page 9 and 10: STRENGTHS Enhancing India’s readi
Page 33: Enhancing India’s readiness to ac
Page 39 and 40: 4.2 Readiness Framework overview En
Page 55 and 56: 5.5.2 Detailed scoring of Tier 1 in
Page 85 and 86:
Enhancing India’s readiness to ac
Page 87 and 88:
Page 89 and 90:
Page 91 and 92:
Page 93 and 94:
Page 95 and 96:
Page 97 and 98:
Page 99 and 100:
Page 101 and 102:
Page 103 and 104:
Page 105 and 106:
Page 107 and 108:
Page 109 and 110:
show all

Enhancing India’s Readiness to Climate Finance

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?