Implementing NDCs: How the private sector is engaging

The first day of the Global NDC Conference ended in Berlin with a powerful thunderstorm cooling an unseasonally hot day (33°C). It’s far worse in Delhi where it hit a record-breaking 48°C on 12th June. At the conference the message is clear that action on climate change has to happen now and not in the future.

Thankfully, at least in my own country – the UK – that message appears to be understood, driven by actors across the private and public sector. This week, the British government has announced its intention to legislate for a net-zero emissions target by 2050. A bold aim and many actions, reframed policies and redirected finance will be necessary to get us there. Reflecting this challenge globally, today’s conference sought to address how, in practice, all Parties to the Paris Agreement can deliver on ambition through implementation and financing of their NDCs.

Private finance is critical to meeting the ambitions of the NDCs. An African Development Bank study has indicated that over $3 trillion by 2030 is needed to achieve Africa’s current NDCs and that domestic resource mobilisation from public and private sources will be needed to meet more than half of this. Yet, most countries in the region have scarcely started to leverage private investment on climate action. It is well established that clear, predictable and transparent policies can encourage private investors into new renewable energy projects and start to fill the above financing gap – but risks are often too high and finance goes to other sectors or geographies.

Funded by Germany’s International Climate Initiative (IKI) in Kenya, Philippines and Vietnam a different approach has been taken engaging with private businesses already on the ground and supporting them to invest in climate actions, but shaping public policy at the same time. Facilitated dialogue with private sector stakeholders in these countries is accelerating policy actions and the implementation of the NDCs in clean cooking and renewables.

Intermediary organisations such as research institutions, consultants or NGOs are supporting coalitions of interested private businesses, undertaking diagnosis and building capacity to enable new investment. In addition, as private businesses are often modest in scale, coalitions of interested stakeholders have been set up in order to aggregate demand for finance, technology and policy change; the 120 energy utilities operating across the Philippines can be more effective at driving investment in renewables together rather than as individual companies.

Today’s conference heard of practical project-based approaches to climate action that are building on existing business operations but need supportive policy changes, such as reduced Value Added Tax and import tariffs on cleaner fuels to enable implementation at scale.  Policies that permit subsidies on fossil fuels work in the opposite direction to such tax adjustment and limit investment in cleaner technologies in many countries. However, adjusting subsidy levels on one energy source cannot be addressed in isolation from other subsidies across the energy sector.

Vested interests to maintain the status quo will frequently block ambition for NDC implementation if climate change is addressed only as a technical challenge. Critically, the political economy of the changes will need to be addressed in the distinctive moment and context. Much has been learnt (see UNEP’s Emissions Gap Report 2018) about ways to manage carbon pricing schemes, tax and subsidy adjustments in a way that avoids negative social impacts and manages opposition (e.g. recycling revenue to households and businesses from British Colombia’s carbon tax).

Accelerating the flow of funding towards “nature-based solutions” to the NDCs is being promoted partly in response to alarming levels of biodiversity loss driven in part by climate change; nature could provide 30% of the required effort to achieve the Paris goals. But natural capital provides value through a range of livelihood, social, cultural and health benefits beyond climate mitigation and adaptation – and more needs to be done to capture the value. Private investment can play a role in nature-based solutions. However, it is likely that blended finance will be needed that mix funds from public and private sectors, including concessional elements from the Green Climate Fund and multilateral development banks, alongside private philanthropy, venture funding or equity.

Participants at the Global NDC Conference expressed impatience at the need for urgent action and investment in NDCs. Lessons from practice indicate potential for scalable policy change and investment, but achieving the transition to net-zero emissions will involve a range of actors: policy makers, private sector and investors. Urgent yet careful policy design is necessary to manage the politics and to ensure that the poor are not adversely affected.   Beyond this, the urgency of climate action and requirements for the second round of NDCs shows the need to get investments into existing NDCs underway.

 

Sam Bickersteth reporting, CDKN, 12 June 2019

This blog is a rapid round-up of discussions at the Global NDC Conference as they unfold each day. Watch this space for the official ‘key messages’ from the conference organisers, which will be published after the concluding session.

Photo: Martin Magunia/Mettle/NDC