The climate community is eagerly looking to Washington right now: At the annual meeting of the World Bank and IMF, countries are debating how the World Bank can better fight poverty – through more capital, but also more sustainability and climate action. That is why two of our analyses are focused on the World Bank and also on its favorite instrument: “leveraging”, with which private capital is supposed to increase tight public money. A good idea, but one that unfortunately hardly works, as we have found out.
At the same time, the G7 environment ministers in Japan are also struggling to keep their pledge to stop subsidizing fossil energies. The G7 are rather taking tiny steps here, as our chart of the week shows. In a position paper, German Environment Minister Steffi Lemke explains that resource security must be strengthened in the climate debate and that a circular economy must be built up.
Finally, we are looking to India. The country is currently replacing China as the world’s most populous nation. Is the world now in for a similarly steep rise of India’s emissions as it followed China’s rise to climate superpower status? The answer might surprise you.
The World Bank is paving the way for internal reforms aimed at more money to fight poverty and a focus on climate and sustainability. It wants to expand its mission by “promoting green, resilient, and inclusive development“. To do this, the Bank must evolve in response to “the unprecedented confluence of global crises that has upended development progress and threatens people and the planet”.
These are the core statements of an “Evolution of the World Bank Group” roadmap that the representatives of the countries as shareholders of the World Bank discussed in the Development Committee late Wednesday in the US capital Washington. The roadmap was presented by the Bank’s management. Among other things, the proposals aim to:
The roadmap is now to serve as a guideline for further consultations in the Bank and among the states. The reforms are to be decided at the fall meeting in Marrakech in October. The German delegation, which has long been pushing for reform, welcomed the direction, but said the new orientation must be more firmly anchored in the structures of the World Bank. “It is not enough to tweak two or three screws or set up a new trust fund,” said German Development Minister Svenja Schulze (SPD). Rather, the goal must be “a true transformation bank” for poverty reduction and the handling of global crises. Furthermore, global public goods should be “systematically taken into account in all areas and products of the bank” and all decisions, including in the Country Engagement Model (CEM), should “reflect the true economic, ecological and social costs“.
At the conference’s opening, outgoing World Bank President David Malpass warned that developing countries are facing the problem that investments are flowing away from them due to inflation and rising interest rates. This would increase inequalities and make countries vulnerable. IMF chief Kristalina Georgieva, in turn, said the cost of regressing on global trade could cost the world seven percent of economic output. “We project global growth to remain around 3 percent over the next five years,” the IMF chief said, adding that this would hinder the fight against poverty.
The meeting was accompanied by protests from environmental and development groups. Activists partially shut down traffic in front of the World Bank headquarters in downtown Washington and demanded that Ajay Banga, the designated new head of the World Bank, “clean up the mess” that Malpass is leaving behind. Malpass will leave his post prematurely at the end of June.
The development organization ONE published a ten-point program for the first 100 days of the new head to “make the World Bank the ‘World’s Bank’.” Among other things, they call for:
Even before the meeting began, the World Bank had taken a step towards greater climate action: Its private branch, the International Finance Corporation (IFC), declared in an update of its guidelines that it would with immediate effect no longer grant new loans for coal projects. Previously, the IFC had only required its clients, financial institutions in emerging and developing countries, to halve coal financing by 2025 and end it by 2030. Since 2019, these IFC counterparts have received about 40 billion dollars for projects, accounting for about half of IFC’s business. In the past, coal-fired power plants in Indonesia and Vietnam, for example, were realized with the IFC’s help.
Trillions of US dollars in investments are needed for the energy transition and climate adaptation in the Global South. The World Bank cannot finance this alone, said Ajay Banga recently, a candidate for the World Bank presidency. Therefore, the development bank would have to raise private capital. One of the tasks of a reformed World Bank would be to reduce the risk of climate investments in developing countries, thus enabling the private sector to invest in the climate sector “on a large scale”. For example, the World Bank could take a first-loss position on loans, Banga said. Loan defaults would thus hit the World Bank first, while private investors would have more security.
This “leveraging” of private capital is not a new concept. It is considered a panacea against the financial straits of public coffers. But the concept has so far failed to live up to its promise.
Billions of US dollars have also been pledged by private donors for the Just Energy Transition Partnerships (JETP) with Indonesia and Vietnam. The goal of the JETPs is to support a socially just energy transition in coal-dependent countries of the Global South and to quickly reduce carbon emissions. As public funds are not sufficient for this, investments by private investors are to be “leveraged” in the form of so-called blended finance. The investment risks for private investors are to be reduced through guarantees from the public sector.
At COP27, the Glasgow Alliance for Net Zero (GFANZ) pledged ten billion for the JETP with Indonesia. In December 2022, there was a pledge of 7.75 billion for the JETP with Vietnam – so the private sector wants to participate in the energy transition to a similar extent as the donor states. Germany participates via the German state-owned investment and development bank KfW in the so far operationalized JETPs with South Africa and Indonesia. KfW “considers the leveraging of private capital essential for achieving the enormous transformation tasks worldwide,” a spokeswoman told Table.Media.
In recent years, however, the participation of the private sector in blended finance in climate finance has declined. What does this mean for JETPs and blended finance in general?
“Blended finance has been struggling for years to mobilize the private sector investment needed for climate finance,” says David Ryfisch, International Climate Policy Team Leader at Germanwatch. Between 2019 and 2021, 14 billion US dollars were invested in blended climate finance, according to surveys by the organization Convergence. This represents a decline of a good 60 percent compared to the period 2016 to 2018 (36.5 billion US dollars).
Only about half of this money comes from private donors – for example, institutional investors, financial institutions or asset managers – the other half comes from government development banks and agencies. The sums are far too small to adequately finance the energy transition in the Global South or adaptation measures. For the JETPs agreed so far alone, larger sums are needed – especially since the probably largest JETP with India is still being negotiated. According to estimates, African countries alone will require three trillion US dollars in climate financing by 2030.
What’s more, the GFANZ’s pledges for the JETPs are just promises so far. “It is still unclear how these funds will flow: Whether the private sector will participate directly in renewable energy projects through equity investments or whether the funds will only flow once sufficient guarantees have been given,” says Ryfisch. There is also the risk that “these commitments will not be kept at all or not completely”.
However, one reason for the decline could also be positive, according to Ryfisch: The reason for less blended financing could be the steep price drop for renewables. It could well be that investments in renewables in some countries no longer need to be backed by public funds because the investment volume no longer needs to be as high.
According to Convergence and a position paper by the Net-Zero Asset Owner Alliance, there are many reasons why there is no major investment in blended finance:
And the problem of a lack of private funding could worsen:
According to Phillip Golka, blended financing is also “questionable from a political-economic perspective“. The researcher at the Max Planck Institute for the Study of Societies points to “an overrepresentation of financial investors and capital providers from the Global North”. Locally affected people, civil society organizations and elected politicians are underrepresented, he said.
According to Ryfisch, coordination between donors in the JETPs has improved, which increases the chances of successful blended financing. He believes that the decisive factor for investors is whether sufficiently large renewable projects are planned: These are competitive and are preferred as large projects by private investors.
Moreover, JETPs are mostly signed with emerging countries and not with developing countries. These countries are more attractive for private investors because the investment risk is lower. Only six percent of leveraged private capital flowed into the least developed countries between 2012 and 2018, as reports by the OECD show.
Statistically, April 14 is the decisive day: According to UN figures, India will then overtake the current leader China as the most populous country. Other estimates suggest that this has already happened. Both countries have a lot in common: They are each home to a good 1.4 billion people, have recorded high economic growth in recent years and are regarded as future global growth engines.
So will CO2 emissions in India increase at a similar rate as they have been in China over the last two decades?
No, says Aniruddh Mohan, a researcher at Princeton University’s Andlinger Center for Energy and the Environment. “India’s emissions increase is unlikely to be as dramatic as China’s,” Mohan says. This is because in India “emissions per economic output are about half as large” as in China, according to an analysis by the Science Media Center.
This is mainly due to China’s higher level of industrialization. Chinese growth in recent decades has been largely based on industry, which accounts for a good 40 percent of GDP. In India, this figure is only 23 percent. Nevertheless, the trends show that even if India will not become a second China, its energy policy contributes massively to the climate crisis.
Consequently, CO2 emissions in China have risen since 2000, mainly due to high economic growth. Since 2012, the People’s Republic has managed to decouple growth from CO2 emissions: Emissions rose much more slowly than GDP per capita in the following years – although the population still grew slowly in these years.
China also reduced the energy intensity of its economy: Energy is used more efficiently, and sectors with less energy consumption grew faster than those with high energy consumption. Since the mid-2010s, the economy’s carbon intensity has also decreased – i.e. less CO2 was emitted per primary energy consumed.
India, on the other hand, has not yet managed to decouple growth from emissions. Although progress was made on energy efficiency: In percentage terms, less energy is used for growth than in the past. However, energy use has become more CO2-intensive over the last 20 years. This, together with population growth, negates progress made in energy efficiency from a climate perspective.
Even though India does not follow in China’s footsteps when it comes to emissions, the country’s size and growth prospects make it a key player in global climate policy. “Without action in and by India, global, dangerous climate change will not be averted,” says Miriam Prys Hansen, Head of the Global Orders and Foreign Policies research focus at the Giga Institute in Hamburg. Energy demand is “predicted to double between 2035 and 2040 compared to 2020,” according to the Science Media Center. Emissions will grow rapidly if India does not manage to expand renewables quickly.
The Indian government has set a target of at least 500 gigawatts of renewable capacity by 2030. Mohan calls these expansion targets “extremely unrealistic”. The target of installing 175 gigawatts of renewables by 2022 has already been “missed by about 30 percent”. He says the additional rate needed for the 2030 target is hardly achievable for many reasons:
Added to this: India’s coal-fired power plants are still very young. Their planned lifespan is 40 years. To decommission them earlier, “a huge amount of political and financial capital is needed”, says Mohan. Without access to low-cost credit, “coal remains much cheaper than clean energy in India”, Mohan concludes.
India is also not doing enough in other areas to curb greenhouse gas emissions, says Prys-Hansen, for example “in forest protection and land use“. India has “the highest CO2 growth rates among the major emitters at the moment”, says the GIGA scientist – especially because the country still relies heavily on coal and is pushing ahead with large infrastructure projects.
The energy transition is also becoming a major socio-economic challenge. “It is estimated that over 21 million people are employed in the fossil fuel sector in India,” says Prys-Hansen. Employment is highly regionally concentrated – two factors in which India has great similarities with China.
Tilmann Altenburg claims decoupling economic and population growth in India from CO2 emissions “will take longer than in richer countries, including China.” A JETP with India for an equitable energy transition would have to be developed largely by India itself, he said. ” Any plans developed from outside will be of little use here and will be unlikely to be politically enforceable,” Prys-Hansen is convinced.
In Germany, commercial power generation from nuclear power will definitively come to an end on April 15. The last reactors in Isar 2, Neckarwestheim 2 and Emsland will be shut down. In other EU countries, however, energy from nuclear fission is considered a low-carbon energy source for combating the climate crisis. And the entire EU continues to invest in fusion technology, which, however, will not contribute to decarbonization by 2050.
The ITER nuclear fusion reactor will cost at least 22 billion euros. The reactor is being built in Cadarache, southern France, and is intended to pave the way for power generation from nuclear fusion. “By the end of this century, as fossil fuels will be phasing out of the energy mix, fusion could become a suitable complement to energy from renewables,” wrote the EU Commission in a 2017 communication. The EU is digging deep into its pockets for this purpose. The financing of the test reactor alone is provided for in the financial framework for 2021-2027 at the cost of 5.6 billion euros.
The ITER project dates back to an agreement between US President Ronald Reagan and Soviet State President Mikhail Gorbachev in the 1980s, which was formalized in 2006. In addition to Euratom, Russia, the USA, China, Japan, India and South Korea are participating in the project.
The EU is responsible for 45 percent of funding. Since 2019, it has been recording these funds as climate financing, as decided by the Council. “Although ITER does not directly contribute to energy and climate goals in the short and medium term, the potential for decarbonizing the energy landscape after 2050 is very significant,” reads the draft EU budget plan for 2023.
To highlight the added value of ITER, the European Commission has spent around 1 million euros on various studies in recent years. A 2018 study on the impact of ITER activities in the EU states: “Even though ITER aims to contribute to the development of commercial fusion technology, this is so far in the future that it is not the decisive driver.” And: “It is not realistic to expect ITER and DEMO – the demonstration reactor that is to be built after ITER – to make a significant contribution to the 2050 energy and climate goals.”
The reasons why Brussels still counts ITER funds as climate expenditure may lie elsewhere. Even under the last financial framework, the EU was unable to achieve the goal of 20 percent climate spending that it set for itself. This was criticized by the European Court of Auditors in a report in 2022. The auditors expressed concern that the EU would also not meet the climate goals of the current financial framework (30 percent, or 37 percent under the Next Generation EU coronavirus recovery fund).
“To be climate-relevant, the budget must be closely linked to the reduction of greenhouse gas emissions,” the auditors concluded. They did not comment on whether this applies to ITER, as in the last financial framework, contributions were not yet considered climate financing. The above-mentioned EU-funded studies do not see ITER as a climate project: They recommend classifying ITER as a science project.
Unlike conventional fission reactors, where energy is produced through nuclear fission, nuclear fusion does not use uranium but rather tritium, which becomes less radioactive after twelve years. However, there is still a risk that the radioactive hydrogen may be released during reactor operation and enter the environment.
Nevertheless, the hope for a clean energy mix after 2050 is attached to ITER, according to Hartmut Zohm, a physicist at the Max Planck Institute for Plasma Physics. Zohm specializes in tokamak reactors. “If we assume that we will not be able to cover 100 percent of our global needs with wind and solar energy, then we need a non-fossil source for base load. That leaves nuclear fission and nuclear fusion.”
However, Zohm also says, “ITER is primarily a scientific project.” It will show that plasma can sustain itself once it has been ignited. The experimental reactor will never generate electricity. Only the energy balance in the plasma will be positive. ITER is expected to release ten times more fusion energy than is needed to start the fusion reaction, demonstrating scientifically that plasma is burning, according to Zohm. “If you then want to generate electricity with it and extract net energy, you have to increase fusion power.” This is achieved, for example, by enlarging the machine or increasing the magnetic field.
Meanwhile, the cost simulation for ITER is based on an outdated estimate from 2016. A new calculation regarding cost and schedule is in progress, confirms an ITER organization spokesperson. In recent years, significant delays have occurred, not least due to the COVID-19 pandemic. According to the last official timeline, the first plasma was scheduled to be ignited in December 2025, and the experiments with tritium and deuterium were scheduled for 2035. However, this timeline is no longer realistic, according to the spokesperson.
Electricity is expected to be generated only by the DEMO reactor, which is planned to be built after the ITER project. Date: uncertain. Charlotte Wirth
The G7 countries still invest billions in international projects promoting fossil energies. This is according to a report by the organizations E3G and Oil Change International. They state that Germany and Japan have not yet adopted political plans to fulfill the pledges they made at COP26 and at last year’s G7 summit. At the time, the countries pledged to stop funding new, international fossil fuel projects after the end of 2022.
Italy has submitted insufficient plans. The plans of Canada, France and the United Kingdom to invest billions of US dollars in green energies rather than fossil fuel projects in the future are highlighted positively.
The report found that the G7 countries invested at least 73.5 billion US dollars in fossil fuel projects between 2020 and 2022 – including, for example, investments via development finance institutions and export credit agencies. Only a small portion of this money went to low-income countries. Fossil investments were a good 2.5 times higher than those in clean energy:
When it comes to environmental protection, many people first think of clean rivers, blooming meadows, and nature reserves. When it comes to climate action, wind farms, EVs, and heat pumps come to mind. Undoubtedly, renewable energies and nature conservation are central building blocks for making our country climate-neutral and preserving natural living conditions. However, another building block is often forgotten: the many things that are manufactured, sold, and consumed every day.
Valuable resources are consumed wherever something is produced, whether it’s sneakers, cell phones, or single-family homes. And it is increasing every year. Between 1970 and 2017, the consumption of natural resources worldwide tripled. Without appropriate measures, it would double again by 2060.
Raw materials for goods must be mined, pumped from the ground, and in many cases, separated from rock or processed with chemicals. They must be transported, further processed and packaged – all with high energy consumption and CO2 emissions and sometimes massive burdens on soils, waters, flora and fauna. According to calculations by the International Resource Panel (IRP), at least half of all greenhouse gas emissions and about 90 percent of biodiversity loss and global water problems are due to the extraction and processing of resources.
If we want to make our economy carbon-neutral and environmentally friendly, resource conservation is the sleeping giant. It needs to be awakened.
The goal must be to consume significantly fewer primary raw materials – i.e., raw materials that enter the economic cycle anew – and to close material cycles. This has been agreed by the federal government in the coalition agreement. Nature sets an example for us; it is a single cycle: Leaves fall to the ground in a forest. Insects, fungi and microorganisms decompose them, forming valuable humus that nourishes trees and plants.
Nature should be a model for us. Raw materials that are already in circulation must be given a second, third, and fourth life as secondary raw materials. This goes far beyond recycling. Products must be designed from the beginning to be durable, easy to repair and disassemble, and their components recyclable. Only then does the circle close to a circular economy that ends resource waste. In times of scarce and expensive raw materials, we also secure the resilience and competitiveness of our economy.
As Minister of the Environment, I am committed to placing even greater emphasis on resource protection in addressing global environmental crises.
To this end, I want to use the upcoming meeting of G7 environment ministers on April 15 and 16 in Japan. The major industrialized nations are also major consumers of resources and therefore bear a special responsibility. Last year, under the German presidency, the G7 countries recognized the connection between resource consumption and the global triple crisis of biodiversity loss, climate crisis and environmental pollution. In the Berlin Roadmap, we agreed on a work plan for a more gentle approach to resources.
Based on this, we want to adopt principles for businesses in Japan. These principles should support companies in conserving resources and implementing the principle of a circular economy in their corporate policies – because it is the companies that can actually do something practical against resource waste, for example, through sustainable supply chains or durable product design.
I would like to anchor resource conservation and the circular economy wherever major environmental crises need to be tackled: at climate conferences, at world nature conferences, in the implementation of Agenda 2030. At the last UN climate conference, for example, Germany initiated cooperation between the Intergovernmental Panel on Climate Change (IPCC) and the World Resources Council (IRP). We will consistently continue along this path.
The German Ministry for the Environment is currently developing a national circular economy strategy. The strategy creates a new framework for using resources sparingly and replacing them with recycled materials. Details will be discussed and developed from April onwards in intensive exchange with other ministries and experts from business, science and civil society.
To tackle the climate crisis, extinction of species, and environmental pollution, we should use all our options. Resource consumption is inseparably linked to all these crises. Resource conservation and a circular economy are, therefore, indispensable parts of their solution.
The New Development Bank (NDB) is gaining a high-profile boss: Brazil’s ex-president Dilma Rousseff. The 75-year-old arrived in Shanghai last week to take up her post at the helm of the development bank. The BRICS countries Brazil, Russia, India, China and South Africa jointly founded the NDB in 2015.
The institute, also known as the BRICS Bank for this reason, is arguably the most successful project that the confederation of states has launched to date. It is an alternative to existing Western financial institutions such as the International Monetary Fund (IMF) and the World Bank.
For Rousseff, a party colleague of the new old president Luiz Inácio Lula da Silva, the new post means an unexpected comeback. Her presidency in Brazil, which she started as Lula’s successor, ended in 2016 after an impeachment process. At the time, Rousseff allegedly manipulated the budget to increase her chances of re-election. Her government faced numerous allegations of corruption; however, her tenure was also marked by efforts to combat poverty in the country. Born in Belo Horizonte, Rousseff comes from a middle-class family herself: Her father was a lawyer who immigrated to Brazil from Bulgaria, and her mother was a teacher. She worked for Lula from 2002, and initially became energy minister after his election victory.
Brazil already took over the rotating, five-year chairmanship of the BRICS bank in 2020. The fact that Rousseff is now being given another chance in Shanghai despite her controversial past is due to the changed political conditions in her home country: Lula returned to the presidency a few months ago. And while the previous head of the bank, Marcos Troyjo, belonged to the camp of Brazilian ex-president Jair Bolsonaro, Lula preferred to see the post filled by his close confidante Rousseff. She can now lead the bank until 2025. Then Brazil will pass on the presidency.
In her relatively short time in office, Rousseff faces difficult tasks. On the one hand, the NDB can certainly boast successes: According to its own figures, it has provided 32.8 billion US dollars for the financing of 96 projects in the member countries over the past nine years. It also has lofty goals when it comes to climate financing: Between 2022 and 2026, the NDB aims to put 40 percent of its funds into climate financing; in 2021, it invested just 10 percent in climate. In addition, four additional countries – Bangladesh, the United Arab Emirates, Egypt and Uruguay – have been won as members.
However, the Russian war of aggression in Ukraine has put the BRICS bank in a difficult position. In order to continue raising money on the international capital markets, all new projects involving member state Russia have been put on hold. Nevertheless, Fitch, for example, downgraded NDB’s rating from “A+” to “A”. The reason given was that around 13 percent of loans to date had gone to Russian projects and that Moscow was one of the founding members. Russia’s prominent role in the NDB “deter future members from joining the bank,” Fitch warns. Jörn Petring
The climate community is eagerly looking to Washington right now: At the annual meeting of the World Bank and IMF, countries are debating how the World Bank can better fight poverty – through more capital, but also more sustainability and climate action. That is why two of our analyses are focused on the World Bank and also on its favorite instrument: “leveraging”, with which private capital is supposed to increase tight public money. A good idea, but one that unfortunately hardly works, as we have found out.
At the same time, the G7 environment ministers in Japan are also struggling to keep their pledge to stop subsidizing fossil energies. The G7 are rather taking tiny steps here, as our chart of the week shows. In a position paper, German Environment Minister Steffi Lemke explains that resource security must be strengthened in the climate debate and that a circular economy must be built up.
Finally, we are looking to India. The country is currently replacing China as the world’s most populous nation. Is the world now in for a similarly steep rise of India’s emissions as it followed China’s rise to climate superpower status? The answer might surprise you.
The World Bank is paving the way for internal reforms aimed at more money to fight poverty and a focus on climate and sustainability. It wants to expand its mission by “promoting green, resilient, and inclusive development“. To do this, the Bank must evolve in response to “the unprecedented confluence of global crises that has upended development progress and threatens people and the planet”.
These are the core statements of an “Evolution of the World Bank Group” roadmap that the representatives of the countries as shareholders of the World Bank discussed in the Development Committee late Wednesday in the US capital Washington. The roadmap was presented by the Bank’s management. Among other things, the proposals aim to:
The roadmap is now to serve as a guideline for further consultations in the Bank and among the states. The reforms are to be decided at the fall meeting in Marrakech in October. The German delegation, which has long been pushing for reform, welcomed the direction, but said the new orientation must be more firmly anchored in the structures of the World Bank. “It is not enough to tweak two or three screws or set up a new trust fund,” said German Development Minister Svenja Schulze (SPD). Rather, the goal must be “a true transformation bank” for poverty reduction and the handling of global crises. Furthermore, global public goods should be “systematically taken into account in all areas and products of the bank” and all decisions, including in the Country Engagement Model (CEM), should “reflect the true economic, ecological and social costs“.
At the conference’s opening, outgoing World Bank President David Malpass warned that developing countries are facing the problem that investments are flowing away from them due to inflation and rising interest rates. This would increase inequalities and make countries vulnerable. IMF chief Kristalina Georgieva, in turn, said the cost of regressing on global trade could cost the world seven percent of economic output. “We project global growth to remain around 3 percent over the next five years,” the IMF chief said, adding that this would hinder the fight against poverty.
The meeting was accompanied by protests from environmental and development groups. Activists partially shut down traffic in front of the World Bank headquarters in downtown Washington and demanded that Ajay Banga, the designated new head of the World Bank, “clean up the mess” that Malpass is leaving behind. Malpass will leave his post prematurely at the end of June.
The development organization ONE published a ten-point program for the first 100 days of the new head to “make the World Bank the ‘World’s Bank’.” Among other things, they call for:
Even before the meeting began, the World Bank had taken a step towards greater climate action: Its private branch, the International Finance Corporation (IFC), declared in an update of its guidelines that it would with immediate effect no longer grant new loans for coal projects. Previously, the IFC had only required its clients, financial institutions in emerging and developing countries, to halve coal financing by 2025 and end it by 2030. Since 2019, these IFC counterparts have received about 40 billion dollars for projects, accounting for about half of IFC’s business. In the past, coal-fired power plants in Indonesia and Vietnam, for example, were realized with the IFC’s help.
Trillions of US dollars in investments are needed for the energy transition and climate adaptation in the Global South. The World Bank cannot finance this alone, said Ajay Banga recently, a candidate for the World Bank presidency. Therefore, the development bank would have to raise private capital. One of the tasks of a reformed World Bank would be to reduce the risk of climate investments in developing countries, thus enabling the private sector to invest in the climate sector “on a large scale”. For example, the World Bank could take a first-loss position on loans, Banga said. Loan defaults would thus hit the World Bank first, while private investors would have more security.
This “leveraging” of private capital is not a new concept. It is considered a panacea against the financial straits of public coffers. But the concept has so far failed to live up to its promise.
Billions of US dollars have also been pledged by private donors for the Just Energy Transition Partnerships (JETP) with Indonesia and Vietnam. The goal of the JETPs is to support a socially just energy transition in coal-dependent countries of the Global South and to quickly reduce carbon emissions. As public funds are not sufficient for this, investments by private investors are to be “leveraged” in the form of so-called blended finance. The investment risks for private investors are to be reduced through guarantees from the public sector.
At COP27, the Glasgow Alliance for Net Zero (GFANZ) pledged ten billion for the JETP with Indonesia. In December 2022, there was a pledge of 7.75 billion for the JETP with Vietnam – so the private sector wants to participate in the energy transition to a similar extent as the donor states. Germany participates via the German state-owned investment and development bank KfW in the so far operationalized JETPs with South Africa and Indonesia. KfW “considers the leveraging of private capital essential for achieving the enormous transformation tasks worldwide,” a spokeswoman told Table.Media.
In recent years, however, the participation of the private sector in blended finance in climate finance has declined. What does this mean for JETPs and blended finance in general?
“Blended finance has been struggling for years to mobilize the private sector investment needed for climate finance,” says David Ryfisch, International Climate Policy Team Leader at Germanwatch. Between 2019 and 2021, 14 billion US dollars were invested in blended climate finance, according to surveys by the organization Convergence. This represents a decline of a good 60 percent compared to the period 2016 to 2018 (36.5 billion US dollars).
Only about half of this money comes from private donors – for example, institutional investors, financial institutions or asset managers – the other half comes from government development banks and agencies. The sums are far too small to adequately finance the energy transition in the Global South or adaptation measures. For the JETPs agreed so far alone, larger sums are needed – especially since the probably largest JETP with India is still being negotiated. According to estimates, African countries alone will require three trillion US dollars in climate financing by 2030.
What’s more, the GFANZ’s pledges for the JETPs are just promises so far. “It is still unclear how these funds will flow: Whether the private sector will participate directly in renewable energy projects through equity investments or whether the funds will only flow once sufficient guarantees have been given,” says Ryfisch. There is also the risk that “these commitments will not be kept at all or not completely”.
However, one reason for the decline could also be positive, according to Ryfisch: The reason for less blended financing could be the steep price drop for renewables. It could well be that investments in renewables in some countries no longer need to be backed by public funds because the investment volume no longer needs to be as high.
According to Convergence and a position paper by the Net-Zero Asset Owner Alliance, there are many reasons why there is no major investment in blended finance:
And the problem of a lack of private funding could worsen:
According to Phillip Golka, blended financing is also “questionable from a political-economic perspective“. The researcher at the Max Planck Institute for the Study of Societies points to “an overrepresentation of financial investors and capital providers from the Global North”. Locally affected people, civil society organizations and elected politicians are underrepresented, he said.
According to Ryfisch, coordination between donors in the JETPs has improved, which increases the chances of successful blended financing. He believes that the decisive factor for investors is whether sufficiently large renewable projects are planned: These are competitive and are preferred as large projects by private investors.
Moreover, JETPs are mostly signed with emerging countries and not with developing countries. These countries are more attractive for private investors because the investment risk is lower. Only six percent of leveraged private capital flowed into the least developed countries between 2012 and 2018, as reports by the OECD show.
Statistically, April 14 is the decisive day: According to UN figures, India will then overtake the current leader China as the most populous country. Other estimates suggest that this has already happened. Both countries have a lot in common: They are each home to a good 1.4 billion people, have recorded high economic growth in recent years and are regarded as future global growth engines.
So will CO2 emissions in India increase at a similar rate as they have been in China over the last two decades?
No, says Aniruddh Mohan, a researcher at Princeton University’s Andlinger Center for Energy and the Environment. “India’s emissions increase is unlikely to be as dramatic as China’s,” Mohan says. This is because in India “emissions per economic output are about half as large” as in China, according to an analysis by the Science Media Center.
This is mainly due to China’s higher level of industrialization. Chinese growth in recent decades has been largely based on industry, which accounts for a good 40 percent of GDP. In India, this figure is only 23 percent. Nevertheless, the trends show that even if India will not become a second China, its energy policy contributes massively to the climate crisis.
Consequently, CO2 emissions in China have risen since 2000, mainly due to high economic growth. Since 2012, the People’s Republic has managed to decouple growth from CO2 emissions: Emissions rose much more slowly than GDP per capita in the following years – although the population still grew slowly in these years.
China also reduced the energy intensity of its economy: Energy is used more efficiently, and sectors with less energy consumption grew faster than those with high energy consumption. Since the mid-2010s, the economy’s carbon intensity has also decreased – i.e. less CO2 was emitted per primary energy consumed.
India, on the other hand, has not yet managed to decouple growth from emissions. Although progress was made on energy efficiency: In percentage terms, less energy is used for growth than in the past. However, energy use has become more CO2-intensive over the last 20 years. This, together with population growth, negates progress made in energy efficiency from a climate perspective.
Even though India does not follow in China’s footsteps when it comes to emissions, the country’s size and growth prospects make it a key player in global climate policy. “Without action in and by India, global, dangerous climate change will not be averted,” says Miriam Prys Hansen, Head of the Global Orders and Foreign Policies research focus at the Giga Institute in Hamburg. Energy demand is “predicted to double between 2035 and 2040 compared to 2020,” according to the Science Media Center. Emissions will grow rapidly if India does not manage to expand renewables quickly.
The Indian government has set a target of at least 500 gigawatts of renewable capacity by 2030. Mohan calls these expansion targets “extremely unrealistic”. The target of installing 175 gigawatts of renewables by 2022 has already been “missed by about 30 percent”. He says the additional rate needed for the 2030 target is hardly achievable for many reasons:
Added to this: India’s coal-fired power plants are still very young. Their planned lifespan is 40 years. To decommission them earlier, “a huge amount of political and financial capital is needed”, says Mohan. Without access to low-cost credit, “coal remains much cheaper than clean energy in India”, Mohan concludes.
India is also not doing enough in other areas to curb greenhouse gas emissions, says Prys-Hansen, for example “in forest protection and land use“. India has “the highest CO2 growth rates among the major emitters at the moment”, says the GIGA scientist – especially because the country still relies heavily on coal and is pushing ahead with large infrastructure projects.
The energy transition is also becoming a major socio-economic challenge. “It is estimated that over 21 million people are employed in the fossil fuel sector in India,” says Prys-Hansen. Employment is highly regionally concentrated – two factors in which India has great similarities with China.
Tilmann Altenburg claims decoupling economic and population growth in India from CO2 emissions “will take longer than in richer countries, including China.” A JETP with India for an equitable energy transition would have to be developed largely by India itself, he said. ” Any plans developed from outside will be of little use here and will be unlikely to be politically enforceable,” Prys-Hansen is convinced.
In Germany, commercial power generation from nuclear power will definitively come to an end on April 15. The last reactors in Isar 2, Neckarwestheim 2 and Emsland will be shut down. In other EU countries, however, energy from nuclear fission is considered a low-carbon energy source for combating the climate crisis. And the entire EU continues to invest in fusion technology, which, however, will not contribute to decarbonization by 2050.
The ITER nuclear fusion reactor will cost at least 22 billion euros. The reactor is being built in Cadarache, southern France, and is intended to pave the way for power generation from nuclear fusion. “By the end of this century, as fossil fuels will be phasing out of the energy mix, fusion could become a suitable complement to energy from renewables,” wrote the EU Commission in a 2017 communication. The EU is digging deep into its pockets for this purpose. The financing of the test reactor alone is provided for in the financial framework for 2021-2027 at the cost of 5.6 billion euros.
The ITER project dates back to an agreement between US President Ronald Reagan and Soviet State President Mikhail Gorbachev in the 1980s, which was formalized in 2006. In addition to Euratom, Russia, the USA, China, Japan, India and South Korea are participating in the project.
The EU is responsible for 45 percent of funding. Since 2019, it has been recording these funds as climate financing, as decided by the Council. “Although ITER does not directly contribute to energy and climate goals in the short and medium term, the potential for decarbonizing the energy landscape after 2050 is very significant,” reads the draft EU budget plan for 2023.
To highlight the added value of ITER, the European Commission has spent around 1 million euros on various studies in recent years. A 2018 study on the impact of ITER activities in the EU states: “Even though ITER aims to contribute to the development of commercial fusion technology, this is so far in the future that it is not the decisive driver.” And: “It is not realistic to expect ITER and DEMO – the demonstration reactor that is to be built after ITER – to make a significant contribution to the 2050 energy and climate goals.”
The reasons why Brussels still counts ITER funds as climate expenditure may lie elsewhere. Even under the last financial framework, the EU was unable to achieve the goal of 20 percent climate spending that it set for itself. This was criticized by the European Court of Auditors in a report in 2022. The auditors expressed concern that the EU would also not meet the climate goals of the current financial framework (30 percent, or 37 percent under the Next Generation EU coronavirus recovery fund).
“To be climate-relevant, the budget must be closely linked to the reduction of greenhouse gas emissions,” the auditors concluded. They did not comment on whether this applies to ITER, as in the last financial framework, contributions were not yet considered climate financing. The above-mentioned EU-funded studies do not see ITER as a climate project: They recommend classifying ITER as a science project.
Unlike conventional fission reactors, where energy is produced through nuclear fission, nuclear fusion does not use uranium but rather tritium, which becomes less radioactive after twelve years. However, there is still a risk that the radioactive hydrogen may be released during reactor operation and enter the environment.
Nevertheless, the hope for a clean energy mix after 2050 is attached to ITER, according to Hartmut Zohm, a physicist at the Max Planck Institute for Plasma Physics. Zohm specializes in tokamak reactors. “If we assume that we will not be able to cover 100 percent of our global needs with wind and solar energy, then we need a non-fossil source for base load. That leaves nuclear fission and nuclear fusion.”
However, Zohm also says, “ITER is primarily a scientific project.” It will show that plasma can sustain itself once it has been ignited. The experimental reactor will never generate electricity. Only the energy balance in the plasma will be positive. ITER is expected to release ten times more fusion energy than is needed to start the fusion reaction, demonstrating scientifically that plasma is burning, according to Zohm. “If you then want to generate electricity with it and extract net energy, you have to increase fusion power.” This is achieved, for example, by enlarging the machine or increasing the magnetic field.
Meanwhile, the cost simulation for ITER is based on an outdated estimate from 2016. A new calculation regarding cost and schedule is in progress, confirms an ITER organization spokesperson. In recent years, significant delays have occurred, not least due to the COVID-19 pandemic. According to the last official timeline, the first plasma was scheduled to be ignited in December 2025, and the experiments with tritium and deuterium were scheduled for 2035. However, this timeline is no longer realistic, according to the spokesperson.
Electricity is expected to be generated only by the DEMO reactor, which is planned to be built after the ITER project. Date: uncertain. Charlotte Wirth
The G7 countries still invest billions in international projects promoting fossil energies. This is according to a report by the organizations E3G and Oil Change International. They state that Germany and Japan have not yet adopted political plans to fulfill the pledges they made at COP26 and at last year’s G7 summit. At the time, the countries pledged to stop funding new, international fossil fuel projects after the end of 2022.
Italy has submitted insufficient plans. The plans of Canada, France and the United Kingdom to invest billions of US dollars in green energies rather than fossil fuel projects in the future are highlighted positively.
The report found that the G7 countries invested at least 73.5 billion US dollars in fossil fuel projects between 2020 and 2022 – including, for example, investments via development finance institutions and export credit agencies. Only a small portion of this money went to low-income countries. Fossil investments were a good 2.5 times higher than those in clean energy:
When it comes to environmental protection, many people first think of clean rivers, blooming meadows, and nature reserves. When it comes to climate action, wind farms, EVs, and heat pumps come to mind. Undoubtedly, renewable energies and nature conservation are central building blocks for making our country climate-neutral and preserving natural living conditions. However, another building block is often forgotten: the many things that are manufactured, sold, and consumed every day.
Valuable resources are consumed wherever something is produced, whether it’s sneakers, cell phones, or single-family homes. And it is increasing every year. Between 1970 and 2017, the consumption of natural resources worldwide tripled. Without appropriate measures, it would double again by 2060.
Raw materials for goods must be mined, pumped from the ground, and in many cases, separated from rock or processed with chemicals. They must be transported, further processed and packaged – all with high energy consumption and CO2 emissions and sometimes massive burdens on soils, waters, flora and fauna. According to calculations by the International Resource Panel (IRP), at least half of all greenhouse gas emissions and about 90 percent of biodiversity loss and global water problems are due to the extraction and processing of resources.
If we want to make our economy carbon-neutral and environmentally friendly, resource conservation is the sleeping giant. It needs to be awakened.
The goal must be to consume significantly fewer primary raw materials – i.e., raw materials that enter the economic cycle anew – and to close material cycles. This has been agreed by the federal government in the coalition agreement. Nature sets an example for us; it is a single cycle: Leaves fall to the ground in a forest. Insects, fungi and microorganisms decompose them, forming valuable humus that nourishes trees and plants.
Nature should be a model for us. Raw materials that are already in circulation must be given a second, third, and fourth life as secondary raw materials. This goes far beyond recycling. Products must be designed from the beginning to be durable, easy to repair and disassemble, and their components recyclable. Only then does the circle close to a circular economy that ends resource waste. In times of scarce and expensive raw materials, we also secure the resilience and competitiveness of our economy.
As Minister of the Environment, I am committed to placing even greater emphasis on resource protection in addressing global environmental crises.
To this end, I want to use the upcoming meeting of G7 environment ministers on April 15 and 16 in Japan. The major industrialized nations are also major consumers of resources and therefore bear a special responsibility. Last year, under the German presidency, the G7 countries recognized the connection between resource consumption and the global triple crisis of biodiversity loss, climate crisis and environmental pollution. In the Berlin Roadmap, we agreed on a work plan for a more gentle approach to resources.
Based on this, we want to adopt principles for businesses in Japan. These principles should support companies in conserving resources and implementing the principle of a circular economy in their corporate policies – because it is the companies that can actually do something practical against resource waste, for example, through sustainable supply chains or durable product design.
I would like to anchor resource conservation and the circular economy wherever major environmental crises need to be tackled: at climate conferences, at world nature conferences, in the implementation of Agenda 2030. At the last UN climate conference, for example, Germany initiated cooperation between the Intergovernmental Panel on Climate Change (IPCC) and the World Resources Council (IRP). We will consistently continue along this path.
The German Ministry for the Environment is currently developing a national circular economy strategy. The strategy creates a new framework for using resources sparingly and replacing them with recycled materials. Details will be discussed and developed from April onwards in intensive exchange with other ministries and experts from business, science and civil society.
To tackle the climate crisis, extinction of species, and environmental pollution, we should use all our options. Resource consumption is inseparably linked to all these crises. Resource conservation and a circular economy are, therefore, indispensable parts of their solution.
The New Development Bank (NDB) is gaining a high-profile boss: Brazil’s ex-president Dilma Rousseff. The 75-year-old arrived in Shanghai last week to take up her post at the helm of the development bank. The BRICS countries Brazil, Russia, India, China and South Africa jointly founded the NDB in 2015.
The institute, also known as the BRICS Bank for this reason, is arguably the most successful project that the confederation of states has launched to date. It is an alternative to existing Western financial institutions such as the International Monetary Fund (IMF) and the World Bank.
For Rousseff, a party colleague of the new old president Luiz Inácio Lula da Silva, the new post means an unexpected comeback. Her presidency in Brazil, which she started as Lula’s successor, ended in 2016 after an impeachment process. At the time, Rousseff allegedly manipulated the budget to increase her chances of re-election. Her government faced numerous allegations of corruption; however, her tenure was also marked by efforts to combat poverty in the country. Born in Belo Horizonte, Rousseff comes from a middle-class family herself: Her father was a lawyer who immigrated to Brazil from Bulgaria, and her mother was a teacher. She worked for Lula from 2002, and initially became energy minister after his election victory.
Brazil already took over the rotating, five-year chairmanship of the BRICS bank in 2020. The fact that Rousseff is now being given another chance in Shanghai despite her controversial past is due to the changed political conditions in her home country: Lula returned to the presidency a few months ago. And while the previous head of the bank, Marcos Troyjo, belonged to the camp of Brazilian ex-president Jair Bolsonaro, Lula preferred to see the post filled by his close confidante Rousseff. She can now lead the bank until 2025. Then Brazil will pass on the presidency.
In her relatively short time in office, Rousseff faces difficult tasks. On the one hand, the NDB can certainly boast successes: According to its own figures, it has provided 32.8 billion US dollars for the financing of 96 projects in the member countries over the past nine years. It also has lofty goals when it comes to climate financing: Between 2022 and 2026, the NDB aims to put 40 percent of its funds into climate financing; in 2021, it invested just 10 percent in climate. In addition, four additional countries – Bangladesh, the United Arab Emirates, Egypt and Uruguay – have been won as members.
However, the Russian war of aggression in Ukraine has put the BRICS bank in a difficult position. In order to continue raising money on the international capital markets, all new projects involving member state Russia have been put on hold. Nevertheless, Fitch, for example, downgraded NDB’s rating from “A+” to “A”. The reason given was that around 13 percent of loans to date had gone to Russian projects and that Moscow was one of the founding members. Russia’s prominent role in the NDB “deter future members from joining the bank,” Fitch warns. Jörn Petring
