x Abu Dhabi, UAEThursday 27 July 2017

World Bank backs investment climate

Humanity faces its most complex developmental challenge in at least a century as it grapples with the impact of climate change.

The looming environmental crisis also presents rich opportunities for entrepreneurs and investors, says the World Bank
The looming environmental crisis also presents rich opportunities for entrepreneurs and investors, says the World Bank

Humanity faces its most complex developmental challenge in at least a century as it grapples with the impact of climate change, with far reaching consequences for global food, water and energy security, according to the World Bank. But the looming environmental crisis also presents rich opportunities for entrepreneurs and investors, as well as a rare impetus for regional co-operation on a range of politically controversial development issues.

"Climate change has moved from being purely an environmental issue to being a development and financial issue," said Jamal Saghir, the bank's director for energy, transport and water. "At the beginning you just had environment ministers sitting around the table. Now you have finance ministers discussing how much this is going to cost, and they are worried." A draft report on a continuing World Bank study on the economics of adaptation to climate change puts the global cost of adapting to a 2°Celsius increase in the world's average temperature at US$75 billion (Dh275.47bn) to $100bn per year between next year and 2050.

"This sum is of the same order of magnitude as the foreign aid that developed countries now give developing countries each year, but it is still a very low percentage of the wealth of countries as measured by their GDP," the bank said. But Julia Bucknall, the bank's lead natural resources specialist for the MENA region, and one of the co-authors of its recent world development report on climate change, said she expected much of that investment to come from the private sector instead of governments.

"There is already funding available and some of it is private," she said. "Ten years ago, there was barely any carbon financing. Now there's a plethora, and there are entrepreneurs out there brokering those deals," Ms Bucknall added, referring to projects aimed at cutting emissions of greenhouse gases such as carbon dioxide. "The challenge is not so much finding the money as finding mechanisms that are attractive to both the financiers and the agencies."

Mr Saghir said entrepreneurs were "hungry" for business opportunities in the wake of the recession, but that governments still had a key role to play in managing initiatives to combat climate change and in providing appropriate incentives to direct investment to the most productive areas. More international co-operation would be needed, Ms Bucknall said. "We cannot afford for each country to develop its own solutions. We need to make much more effort to take the best solutions we can find from wherever they are available."

While there was a clear need for the developed world to take the lead in addressing climate change, it was less obvious but equally important that every country should take action, she added. "The moment any country gets out of the game, the marginal costs go up." But avoiding that outcome would entail persuading a number of developing countries, including Saudi Arabia, to change their attitudes. Recently, the world's biggest oil exporter joined poor countries in lobbying the UN for financial assistance with adapting to global warming.

At UN climate talks in Bangkok last week, Mohammad al Sabban, the head of the Saudi delegation, suggested the kingdom would lose $19bn a year under a climate treaty proposed to replace the Kyoto Protocol - which expires in 2012 - and needed more time for economic diversification. "Many politicians in the western world think these climate change negotiations and the new agreement will provide them with a golden opportunity to reduce their dependence on imported oil," he said. "That means you will transfer the burden to developing countries, especially to those highly dependent on the exploitation of oil."

But Mr Saghir said Saudi Arabia and other Middle Eastern oil exporters should seize the opportunity to become leaders in solar power development. "I could see electricity exports from Jeddah up to Europe." Mr Saghir and Ms Bucknell are visiting Abu Dhabi for the inauguration today of an Arab Water Academy and for the regional launch of this year's world development report. @Email:tcarlisle@thenational.ae