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A conversation with Lord Stern
As part of the EBRD 2016 Annual Meeting and Business Forum, Lord Stern, President of the British Academy and a former EBRD Chief Economist, joined Josué Tanaka, EBRD Managing Director for Operational Strategy and Planning, Energy Efficiency and Climate Change, to discuss the issues that have emerged following COP21 and the signing of the Paris Agreement.
The agreement put green finance firmly front and centre of the world stage. It revealed the great opportunities presented by making the transition to a low-carbon economy. It also demonstrated the urgency of taking action now on climate change.
“The Paris Agreement’s greatest achievement was bringing 195 countries together to acknowledge and understand the scale of the risks and the attractiveness of low carbon pathways as the most sustainable route to lasting development and overcoming poverty,” said Lord Stern.
“The next 20 years are crucial, and this is a new and shared sense of direction.”
Nearly six months on, the challenge is to ensure the Paris agreement translates into decisive and swift steps forward.
“Scale and speed matter. It’s going to be hard but we can already see strong movements. Though it is still too slow, there are grounds for optimism,” Lord Stern observed, citingChina and the US as recent examples.
“People are ready to think bigger and are starting to press on their governments to deliver.”
In this regard, multilateral development banks (MDBs) such as the EBRD have a vital role to play in stepping up green finance and encouraging the governments of the countries where they invest to make the transition to low-carbon economies.
“The presence of an MDB brings extra confidence in policy, skills and the appropriate mix of equity, long-term loans and other types of finance,” said Lord Stern.
The Paris Agreement placed a major emphasis on the transfer of finance to support climate investments in emerging and developing economies in order to meet the targets set by the Agreement, as well as the United Nations Sustainable Development Goals (SDGs) set last September.
This is particularly relevant to the EBRD. Our region’s average carbon intensity continues to be high – almost five times higher than the EU-28 average.
As a result, the Bank has been scaling up its climate finance activity over the past year. Cumulative EBRD climate finance since 2006 has reached close to €20 billion and 1,100 projects, with a private sector share of 67 per cent.
The EBRD is continuing to support the countries where it operates in implementing their Intended Nationally Determined Contributions under the COP21 accord – which are the steps they are planning in order to reduce their own carbon emissions.
The sustained focus of the Bank’s investment remains on energy efficiency improvement in cities, industries and utilities where the fastest carbon emissions reduction can be achieved.
The EBRD is also an important investor in the development of renewable sources of energy while at the same time increasing its activity in climate adaptation finance.
In order to achieve its ambitious climate finance goals, the EBRD launched its Green Economy Transition approach with the goal of green finance comprising 40 per cent of total Bank investments by 2020.
This is the highest target share across MDBs and reflects the EBRD’s commitment to make a major contribution to addressing urgent environmental challenges.
“The EBRD is all about building and improving markets and, through its purposes, instruments and the great skills it has built, the Bank can be a leader of this next transition,” said Lord Stern.
Lord Stern is IG Patel Professor and Chair of the Grantham Research Institute on Climate Change and the Environment at LSE and President of the British Academy.
From 1994-99 he was Chief Economist at the EBRD and from 2005-07 was adviser to the UK Government on the Economics of Climate Change and Development, reporting to the Prime Minister and the Chancellor of the Exchequer, and Head of the Stern Review on the Economics of Climate Change.
He is also the author of Why Are We Waiting? The Logic, Urgency and Promise of Tackling Climate Change (MIT, 2015).
