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A
Looking to understand the geopolitical and global forces at play shaping our energy future. Then check out a new podcast series, the Future of Energy from Gzero Media and Imbridge, co hosted by JJ Ramberg and Greg Ebel. They dig into the biggest energy challenges and opportunities like AI policy and innovation with experts like Pulitzer winner Daniel Jurgin and Canadian Member of Parliament Lisa Raitt. Listen on Apple, Spotify or wherever you get your podcasts or or visit gzeromedia.com energygang hello and welcome to the Energy Gang, a discussion show from Wood Mackenzie about the fast changing world of energy. I'm Ed Crookes and this is the latest in our series of special episodes from the COP 29 climate talks in Baku, Azerbaijan. They're calling this conference the Finance COP because it's supposed to agree a global deal on climate finance involving capital flows of a trillion dollars a year or more. But as is often the case in these international climate negotiations, the meaning of commonly used terms is often unclear and often contested. To talk about what climate finance actually is and what the negotiations mean for the energy transition, I'm joined by Raquel Moses and of the Caribbean Climate Smart Accelerator.
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B
Hi, thank you so much.
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A
Great of you to join us. And it's also pleasure to be reunited with an old colleague, former Woodmacker Ben Attia, who is now a principal at Allied Climate Partners. Ben, great to see you again.
- [01:33]
C
Thanks so much for having me back, Ed. Great to be here.
- [01:35]
A
Before we get into the conversation, I wonder if we could just both talk a little bit about what it is you do and what your perspectives are on climate finance. I mean, Raquel, maybe to start with you. So, Caribbean Climate Smart Accelerator, you're based in training. Trinidad, I believe. What do you do?
- [01:51]
B
Great question. So I'm based in Trinidad, but the entity is domiciled in Barbados and we cover 29 territories. And we serve as a matchmaker, matchmaking sources of funding with projects across the region in a number of different ways. They're projects that we execute on our own, but they're also projects that are in search of funding that we match with funding, and that's essentially the work that we do.
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A
Got it, thanks. And Ben, tell us about Allied Climate Partners.
- [02:16]
C
Sure. Yeah. Allied Climate Partners is a philanthropic investing firm that's looking to address bottlenecks in climate finance in emerging markets, particularly related to climate infrastructure. And so we provide catalytic junior equity and we back local fund managers that can help raise and deploy capital against those bottlenecks.
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A
Right. And you're US based, aren't you, you're in Boston, but you operate all over the world, correct?
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C
Yeah, we're in all emerging markets, including the Caribbean. Yes, that's right.
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A
So as I was saying, I'm interested in the question of taking climate finance from the abstract, the huge numbers that people talk about, the trillions of dollars down into the concrete, what it actually means on the ground in terms of driving the energy transition. I mean, Raquel, perhaps you could talk about this a bit. What do you say is the practical significance of this talk about climate finance and what does climate finance mean in terms of what you're doing at the Caribbean Climate Smart Accelerator?
- [03:08]
B
That is such a great question. And I think for us and the thing that we've been advocating for above and beyond money is specificity around language. Because language is so important when you're talking about climate finance, because people think about climate finance. And when you say climate finance, I may understand you to say grants. Whereas somebody else may think equity and somebody else may be thinking commercial loans, somebody else may be thinking concessionary loans. And all of that money is very, very different and applicable in very different ways. And I think it's time we started having a really mature convers about disaggregating climate finance. There was a whole conversation about 100 billion a year and nobody said what kind of money that was. So for me, 100 billion is not meaningful unless I understand how do I get to use that money. For us, it is really important that we start de risking projects and get a lot of grant funding to prepare projects, to accept commercial funding. There is as much as you hear a lot of talk about, we need more climate finance at the moment in certain areas I have more money than I have projects to fill. If you have a well prepared commercial project in either energy or Blue Economy, I have a line of investors ready to invest.
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A
And sorry, just as a footnote, Blue Economy means anything to do with ocean.
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B
So any kind of ocean solution, it could be energy, it could be deriving proteins, it could be harvesting seaweed. But I have a line of investors waiting for properly prepared, commercially ready Blue Economy projects.
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A
And so Ben, what's your perspective?
- [04:49]
C
Yeah, so ECP totally agrees with that perspective. And I think we've identified that the availability of bankable projects and that pipeline is just way too small. Right. And it's true in the Caribbean and it's true elsewhere across the emerging world. Yeah, we totally recognize that bottleneck. And that's why the first stage of funds that we've deployed have been entirely focused on trying to solve the infrastructure development equity gap. And we're specifically deploying our capital to help buy down that early stage project risk. For a lot of these projects that don't reach the stage that Raquel is talking about, we can help those projects get over the line and we can get our capital returned at fid.
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A
So give me an example then of how that might work.
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C
Yeah, so our capital, because it's deployed at the earlier stages of the project, an investor who's trying to develop a project might say, you know, it might actually be 5% or 10% of the total project cost, maybe even less in some cases that they need to spend to actually develop the project. Clear some of these binary risks early on, and our capital helps address that gap in the early stages.
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A
And this will be what, for something like renewable energy? This could be for a solar project, wind, what kind of.
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C
Yeah, broad climate infrastructure. So, yeah, renewable energy, electric vehicles or charging infrastructure, you know, all sorts of things in the industrial decarbonization space. Yeah, right.
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A
So to pick up on that, I think that's a really fascinating insight then from both of you. As you say, the issue may not be fundamentally shortage of funds, but shortage of projects. As you say, bankable projects. What underlies that then? What are the issues that mean that there aren't the opportunities there? Because, I mean, the need is obviously there, right? I mean, there's huge need for infrastructure of all kinds in low income, middle income countries. There is a huge opportunity for renewable energy. Anything that can provide increased energy supply at a low and competitive cost. There are clearly lots of places where that investment could be effective. So what is the constraint? Raquel, what do you think?
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B
I think there's a fundamental mismatch between the kinds of projects that are available and the kind of money that's available to service those projects. And I do see ACP playing a really key role in helping to close that gap. And I'm not advocating for less climate finance. I want to make that clear. But if you.
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C
I certainly not.
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B
But if you don't address the bottleneck that is taking place between the availability of funding and the projects being able to access that funding, you are just increasing the pool of frustrated investors who can't get access to good projects. And you're not increasing the flow of funding to those projects. So we have to start moving up the funnel which ACP is doing. We are certainly also doing a lot more project preparation. There are 29 project preparation facilities for Innov alone in our region, and still we're not seeing enough bankable Projects getting to the point of commercial close.
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A
And to be clear though, what is the problem and what is the reason for that? As I say, given that the need is clearly there.
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B
Right, sure. So the problem is that the projects in their early stages don't have access to any funding because people are not willing to invest when it's still risky and uncertain. But that's when they need the money to properly prepare the project for commercial close. And once they get to that point, there is no end of investment available. But, you know, doing the studies and preparing the project and preparing the financials for the project and securing the location and all of those things that have to take place, investors aren't getting involved at that point.
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A
Right. And so that's where a big international investment fund or an international investment bank just won't commit that capital because what they say is too risky because they might invest that money and the project doesn't end up going ahead. And so that's then where you come in, is it, Ben? Because that's something where you can say you're prepared to take that high risk. You do not have directly or purely commercial objectives. You said earlier, right, you're a philanthropic organisation.
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C
That's right.
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A
So you don't mind if what, things occasionally don't work out.
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C
Exactly. Yeah. So we're a public purpose entity, we take no fees, we don't pay ourselves a single dime in the process. And the idea is to buy down exactly those risks that we're. Raquel was talking about, because the capital doesn't start flowing until the likelihood of the project actually reaching fid, you know, crosses certain thresholds. Right. And in the early stages of project development for all forms of infrastructure, there are these sort of binary risks, like will you be able to get a permit? And, you know, is this really the right site for your renewable project? And things like that. And the cost of mitigating those risks is actually pretty low in most cases, especially as a share of the total project cost. But the availability of capital for those early stage needs is extremely scant. And that's where ACP sees, you know, a very critical bottleneck in the system.
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B
And they also address first loss. And that is something that you're not finding anybody like, lining up to take.
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C
That's right, right.
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A
And so in terms of what could come out of COP 29 then, in terms of really making a difference to capital flows to these countries to support climate mitigation and adaptation, it's that kind of financing that would be really crucial. Is it in particular that Kind of essentially non commercial money which is prepared to take that first loss is not looking for the certainty of returns that commercial funding would be looking for.
- [10:05]
B
Yes. And the beautiful thing about it is if you get that gap filled, there is no end of commercial returns available on the other side. But you have to unlock all of that potential and we're not doing that. And we keep having the same conversations and doing the same things as though that's not the definition of crazy.
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A
So when I hear you talk about it like this, it seems exactly.
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B
Like.
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A
A no brainer for people who are listening to us. Raquel just made a gesture. Exactly. It seems like a no brainer. And when I hear about something that sounds as much of a no brainer as that, you know, maybe that's my trust issues, my lack of ability to believe in these things, it makes me think that there's clearly then a problem there. Right. If as you say, the logic of what you've both been saying is incredibly compelling and yet it hasn't happened and yet people are still going to be arguing about this. There's no certainty at all they will actually manage to reach a decision on climate finance at this cop. What is the problem there then? Why is it that this is still apparently a very contentious issue?
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C
If I could just weigh in here, I think one of the things we need to separate is the negotiations happening across the hall, which are critically important and the role that that public capital that they're negotiating can actually play. And I think we need to just be a little bit more nuanced about sort of where that public capital belongs in the stack and where it is now. And I think, you know, the MDBs and the DFIs are critically important institutions and.
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A
Sorry, just going in there. So multilateral development banks and international financial institutions. So this is things like the Inter American Development bank and also the World bank, the IMF and so on.
- [11:45]
C
Yeah, exactly. And so some of the climate finance that has been allocated towards the previous goal before this new one that's being negotiated now, which was $100 billion a year by 2020, the OECD countries met it about two and a half or three years late. And it's critically insufficient. You know, we know that those needs today are about a trillion dollars now and about $2.4 trillion for a net zero world by 2030. And you know, we have about 600 billion or so dollars of climate finance in all its forms flowing to EMDEs today. And so the part of that capital is going to be public and DFI And MDB money. And certainly there are lots of conversations and we can get into it on critical reforms for those institutions to allow them to take more risk and expand their balance sheets. But also there is a part of this risk curve that they're not really well suited to take. And that's the role of organizations like ACP where we can sort of fill that need early on in the project development process and then particularly for that, that sort of risk on capital.
- [12:42]
B
Yeah. And to explain it even simpler, you know, where are we with climate change? Right. Everybody knows what the problem is and somehow we keep talking about it and we're not solving it because everybody's waiting for somebody else to do something first. And we're in the same problem with climate finance. Everybody wants the cream off the top, nobody wants to be the coffee. And at some point somebody thank goodness for acp, but you know, we are going to need enough of that to be able to get these deals to flow. And everyone will win and everyone will benefit, but we have to have a few first movers, philanthropic funding, willing to take the risk of preparing these projects.
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A
And to be clear though, Ben, from what you're saying, you mean that official financing actually is never going to be able to play the kind of role that a philanthropic organization like ACP can play?
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C
I don't know that I would say that it never could or never should. What I would say is that, you know, we have a very clear role early on in the risk on part of the capital development process. And there's a clear role for, for the public sector. And then there's a trillion dollars of institutional capital, as Raquel said, is hungry for these opportunities. But things need to fall in order. And I think to one sense, one of the things I think that we sort of overlook occasionally is the role of equity in the capital formation process. And without equity you have no debt and without debt you have no project. And so I think it again, another gesture from Raquel. But I think without the sort of capital formation happening at those early stages, these other organizations and institutions that have a critical role to play can't play their roles 100%.
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B
And we get so many, I can shake a stick and drown in debt. I have no end of access to debt, especially debt at commercial rates that is available all day long and twice on Sunday. But the fact is equity in our region, and we looked at it, I think we have probably a third the level of access per capita to equity as other markets and we have a risk averse market on top of that so you're just not seeing the projects getting the early stage support that they require in order to make it to the debt.
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A
And do you think then that anything that happens at COP 29 could actually make a difference to that equity financing or is that just going to be eternally a problem?
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B
No, I think that there is a possibility because we're seeing so much more focused on the private sector now and the private sector getting involved. But the private sector needs to understand specifically what the needs are and the nuances of the market versus just saying, listen, you know, if you have a deal that is absolutely perfect with all of every T crossed and every I dotted, that makes me commercial returns and delivers impact. And nobody's factoring in the cost of that impact because just creating impact and measuring impact has a financial cost to it. But all of the commercial enterprises want to layer impact on as a free layer of extra on a deal. And fundamentally it's not fair.
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A
What about the countries that are seeking to attract this kind of investment of all kinds? Is there a lot more that they could be doing to, for instance, get private sector investors to commit more equity?
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B
Yes and no. I think that countries are doing as much as they can with the capacity that they have. One of the things that we aren't doing that is an opportunity is aggregating deals across jurisdictions. And that would make a big difference because our deals are very complex, but our deals are very small. And typically that's not a good marriage. Right. Because the higher the complexity, the greater the return that you're expecting. And so you have a great deal of complexity with not a great deal of return because the deals are small and then nobody's interested. So if we could start looking at again, like ACP bringing a lot of deals together under a single fund, then it starts to get interesting. And so we need more of that.
- [16:32]
C
Yeah, and I would totally agree. I think there's a wide consensus that the reforms like what's proposed in the Bridgetown agenda would be widely needed. But really a lot of these countries don't have a lot of options. There's a cyclicality between sovereign debt, climate change and adaptation and resilience as well as natural degradation. And that's very, very real. And a lot of these countries don't have the fiscal space to make domestic investments in these projects or to sort of mature the capital market such that institutional capital could bring in capital at scale for larger tickets.
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B
And what compounds that problem is that when you look at what is necessary for adaptation, right, there are no cash flows or very few options available for adaptation. And all of these countries are facing the impacts now. So when they're thinking about, oh, do I invest in this mitigation? Our carbon emissions are so small. Yes, these things are necessary, but look at all that I have to do. Then you get into this push pull where they're not sure what, where they need to send those funding flows. So as long as there's a commercial opportunity in mitigation, so investing in renewable energy solutions, then as much as possible, let us get those commercial, those commercial solutions and make those available so that again, where countries don't have any options but to borrow or, but to use their cash on hand, let them use that for adaptation.
- [17:53]
A
If you're curious about how the global energy transition will shape our future, check out the Future of Energy. It's a new podcast series from Gzero Media and Enbridge, co hosted by JJ Ramberg and Enbridge's CEO Greg Ebel. They dive into critical global conversations around energy innovation, climate change and geopolitics. With expert guests like Pulitzer Prize winner Daniel Jurgin, former Canadian Member of Parliament Lisa Raitt, former Congressman Tim Ryan, and Microsoft's Ulrich Homan. You'll get insights from people at the forefront of energy evolution, topics like economics, the impact of AI, and how indigenous communities are shaping energy. Tune in on your favorite podcast platform or by visiting gzeromedia.com energygang that's gzeromedia.com Energygang yeah, that's very interesting. I was at a talk that someone was giving yesterday where they were talking about, I think, the largest ever private sector investment in adaptation in a developing country, and the amount of that was $300 million. So on the scale of these things, just not really very large at all. And that does tell you it's just really difficult to get the private sector to invest in that. Probably a subject to go into in detail another time, but it did strike me as very interesting, important thing to think about. So, Ben, I wanted to go back to something you just talked about. You talked about the Bridgestone Initiative and the significance of that. So this is something which has been led by Mia Motley, Prime Minister of Barbados country, where your institution is based. Raquel, could you talk a little bit about. Well, first of all, what is it? Right? I mean, why is that initiative important and why are people talking about it and what's its relevance to this whole debate about climate finance?
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C
Raquel, why don't you start?
- [19:36]
B
Absolutely. So the Bridgestone Initiative, I think, is brilliant, and it's brilliant For a couple of reasons. 1 Rarely do you find that small island developing states and the global south are leading on any of these initiatives and talking about it from our perspective and what we want. And so from that perspective, I was already like, yes, absolutely, whatever it is, I'm on board. But it talks about things like reforming the global financial systems. So looking at things like many of our countries don't have access to concessional finance because we are considered high income or middle income countries based on our GDPs per capita. And that's silly because it doesn't take into consideration our vulnerability, which is now something that is changing. And I think this Bridgetown Initiative is changing the way that we think about these things, but it's also advocating for greater access to climate finance. So, you know, how do we provide more debt relief and debt restructuring and use some of that debt for the changes that we know need to take place. But also how do we increase the fairness in the distribution of the funding? Because you know, with all of these things we try to say, okay, well you know, GCF is providing all of these funds and it's equally accessible to everybody. Well, is it equally accessible to everybody if you're not as well resourced? It's very, very difficult to access.
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A
Sorry.
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B
GCF being Green Climate Fund, it's a global initiative that mostly the primary access to large scale climate finance right now, but it's also asking for things like special drawing rights or what happens after a disaster and how can you get debt relief following a disaster. So I think it is a brilliant program that addresses a lot of the specific issues that we face, but also I think is globally applicable. So it's not just on behalf of sids, but it definitely is from a SIDS perspective.
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A
And SIDS being small island developing States.
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B
Small island developing states, indeed.
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A
A lot of acronyms in this business.
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C
Yeah. And just to add to that, I think the latest iteration of the Bridgetown agenda came out just a few weeks ago and it specifically calls out a role for philanthropies like where I am. And basically two of those roles are first, to pool our capital from philanthropic sources for two major issues. One is this project preparation and early stage project development issue that we've talked about. And the second is foreign exchange. And foreign exchange is a really woolly question. And there's been a ton of proposals flying around here in Baku this week that have been super exciting, but I don't think that anyone has really cracked this nut as of yet. And that's something that's very much top of the agenda this week.
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A
Right. And that's something that I've heard quite a bit from people in the private sector is when they think about investing in emerging markets, developing economies, particularly in renewable energy, that exchange rate risk is a huge deterrent to them. And it's something that people think is a real issue is they might potentially lose large proportion of the value of their investment of a local currency falls in value. I mean, you're saying that it's a nebulous issue and it's hard to kind of get a grip of. Are there concrete ideas for how you might solve that problem?
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C
Yeah, I've heard a lot this week, and I definitely wouldn't say I'm a deep expert in this subject, but one thing that became very clear to me over the last few days is that you need institutions that can operate countercyclically. So when an economy is on the downturn or a currency is on its way south, there is a way for certain institutions like MDBs and DFIs to basically lend against that. Right. And they can provide some hedges that are not just on pure commercial returns and may be able to help sort of at least smooth some of the volatility. But, yeah, I think it's. It's something that there is no easy answer to.
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B
Well, you know, I think that the risk is sometimes exaggerated. Right. Because countries like Barbados and Trinidad are local. Exchange rate is pegged to the US at a particular rate, and it has been that rate for decades. Countries like Jamaica that float their dollar, you do deals in US dollars in those markets. So I think it is rare that you will find a Caribbean market where the dollar's just wild, out of control, and they're not doing the transaction in US dollars. So I do think that it is a lack of understanding about the region that causes that worry to take place.
- [23:53]
A
I take your point. But then I do also think, as I'm hearing you talk here, that it makes the climate challenge seem like peeling the layers of an onion or something like that, or untangling a ball of wool. You know, when you kind of pull on one thread, a whole lot of other stuff comes up. When you start thinking about. Really, we're not just thinking about energy, and we're not just thinking about financing a few projects for wind and solar power. We're thinking about the entire global financial architecture, the way the entire international economic system operates. And changing that then comes to seem like a really daunting challenge. And this kind of feeling that you actually can't Fundamentally fix the problem unless you kind of fix everything in the world economy. Seems kind of dispiriting, really, in terms of actually getting to grips with the climate challenge. Is that an exaggeration? Is that excessively pessimistic a viewpoint?
- [24:47]
B
Yes, in a word, yes. The reality of this situation is all of it is difficult, but it's difficult worth doing. And what's necessary is that you understand the market that you're operating in. One of the things that we do is we've produced a Climate Smart Map that presents data to potential investors. And that's something that's not widely available in our region. It's the Climate smart map@map.caribbeanaccelerator.org we list projects there, but we also list demographic data that people can, you know, get for with the region and understand what it looks like if you're trying to create economies of scale. And that's the biggest problem that we face. Right. When people are thinking about complexity and they're like, Caribbean or Africa, Caribbean or Asia, and then they're like, yeah, well, let me go with Africa or Asia because they have more scale. But the reality of the situation is that there are opportunities in these smaller markets. And if you're willing to do the work, spend the time, get to know the market, peel back the onion, as you're saying, there is a lot of to be gained from doing it that way.
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A
And just going back to the Bridgetown Initiative agenda, how much progress is being made on that then? Is that something that's now kind of gathering widespread global support? Might we see some of that actually being agreed on and implemented at this cop?
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B
I would imagine that we will see progress on the Bridgetown Initiative at this cop for sure. Mia Motley, the Prime Minister of Barbados, is a force to be reckoned with. And what happens is when she talks about this in global terms, there are deals being made on the sidelines on behalf of Barbados as well as on behalf of the rest of the region, because she's elevated the conversation about what the challenges are that we face in a way that people just didn't understand it before. So I do think that, yes, we look to what are the major announcements coming out of cop, but we don't discount the conversations that are happening person to person that are making a difference where we're coming together and we're having a conversation, we're agreeing to do something that then turns into a deal. And you don't hear about those as often.
- [26:48]
C
Yeah. And just to add, I think someone I deeply respect, Amit said that the problem of climate finance is a problem of water flowing downhill, not uphill. And I think that's very well said because ultimately a lot of these risks that kind of hold back capital today, a lot of them, as Raquel was saying earlier, there is a gap between the real risks and what's perceived by the market. And that's sort of the low hanging fruit that's easier to erode and it comes with understanding and spending the time and aggregating projects and things like that. But then also a lot of these other risks that are real are correlated. Right. And so things will all start moving in the same direction. And I think, you know, there are some key unlocks and some key bottlenecks in the climate finance landscape. You know, we're working on some of those now, but there's others doing a lot of work on those topics as well. And I think, you know, this is the kind of thing where there's, there's top down action on the NCQG and how much is it and what kind of capital is it and who's paying and what's it for and those types of big questions. But at the end of the day, when there are commercially investable opportunities, as Raquel said at the outset, there's a line of investors waiting and ready for these projects. And so I think there's some small nudges that can go a big way. And you know, Archimedes says that give me a lever large enough and you can move the earth. And I think from our perspective, there are some of these small nudges that can end up having big changes.
- [28:01]
A
What, if anything, should we learn from the experience of the past goals for climate finance? As you were saying, Raquel, earlier, there was that 100 billion a year that was meant to flow. That was agreed, I think back in 2009, climate finance flows finally got to that 100 billion a year level I think in 2022 and probably I think again in 2023. But it seemed like it was a difficult and arduous and slow process. And so then now we're talking about numbers. I don't know what numbers you're hearing, But I've heard 1 trillion, 1.3 trillion as being kinds of figures that are being banded around. Would you have any confidence that the world would actually get to that kind of trillion dollar plus number given how difficult it was apparently to get to 100 billion?
- [28:45]
B
Yes, but I have to, I have to believe I can't wake up and do this work every day if I Don't believe that it's possible. So even if I'm completely delusional, I have to believe it's possible. But what's more than that, what you see is that it reaches a tipping point, right? So it's slow, it's slow, it's slow, there's no movement. It looks like it's impossible. And then all of a sudden the water starts to flow downhill. So I think that it is that we just have to continue to pressure the system and understand that the devil is in the details. It is around the specificity, around what is necessary. You know, we were looking at, for example, loss and damage and one of the data points that we have is 700 million has been pledged in our region. We have already counted 17 billion that is needed for loss and damage. And that is with 55% of the countries that we represent reporting. What that means is that we need the data, we need to be able to access the information so that we are clear on what our needs are and can respond to this is what we require. It is specifically this kind of funding at this rate and then figure out how we meet in the middle.
- [29:57]
C
Just to add there, I think one of the things that's important to remember is that $100 billion number was actually pretty arbitrarily determined. It was mostly a political decision rather than a needs based decision. And so there's a big push right now within this process that has led up to the negotiations for the new collective quantified goal to make sure that we're actually taking a tally of what is needed and what kind of capital is needed. Because the first time around of that hundred billion, almost 80% of it was structured as debt. And most of that debt was market rate debt. This is the public side only, right. And so if we actually think about what is needed, what type of capital is it, where does it need to go, what kind of constraints do we need to consider? Like the debt issues that we spoke about earlier and then who's on which side of that transaction, right. I mean last time around it was sort of the OECD markets that were sort of ring fenced to be the contributors. And then I think the other thing that needs to be a lesson learned is just around the accounting process. And this sounds a little bit boring, but there's been some really great research done on this question. What counted as climate finance towards that $100 billion goal? It was actually a very loose definition and it was left up to the countries and they were allowed to choose what they report. And there's a really great study, it was from one.org where they were saying that actually some of the projects that were reported as climate finance, there were things like a romantic movie set, a chocolate factory and a hotel, and random things like that that are clearly not climate projects. And so I think, you know, having a much more rigorous accounting structure and reporting structure to make sure that whatever that new number is and whatever the carve outs for lost and damage or for adaptation and resilience are, that it's very clear what counts for what.
- [31:29]
A
So final thought then. How optimistic or otherwise are you about the COP process overall? I mean, it seems that because of Donald Trump's victory in the US elections last week, it's clear that there is a lot of concern about that here. And obviously everyone's thinking about this very much an issue that's overshadowing the talks. He rejects the whole kind of UN process for addressing climate change. He's going to take the US back out of the Paris Agreement. I noticed that Argentina withdrew its delegates from these specific Talks, from the COP 29 talks the other day. There is a sense that the international effort on climate is becoming more difficult for various reasons. And so there's kind of more pressure on COP 29 to reach some kind of successful outcome. And if fails to do that, then clearly that perception of the process as having stalled will grow. What are your expectations, hopes, fears? Do you think we're going to see something that will count as a success here or not? Raquel, what do you think?
- [32:39]
B
I do think that this COP will have some useful outcomes, but I'm not putting all of my eggs in that basket. You know, what comes out of the negotiation sometimes for me is neither here nor there, because the action that needs to take place, a lot of it is run by non state actors. So it is about, and you saw, I think it was yesterday or sometime this week, the CEO of Exxon asked for the incoming administration to not pull out of the Paris agreement, which was mind blowing. You know that you have the head of an oil company saying, come on, let's get real. So I have great faith that eventually we'll get it right. I am certain that we will not fall over the precipice. How close we get to that precipice. However, clearly it's gonna be like the nice edge. And I hope that we figure it out soon enough. I think that we have a marketing problem, we have a how do we package this problem in how we talk about climate to make sure that people are Understanding what's at stake and are not paralyzed by fear, but encouraged by opportunity. Because this will mean that everything will change. But there's so many opportunities, right? This is the next Like.com era. This is the next thing that everyone will eventually be investing in. And so people just need to get involved and the opportunity will. Will redound to your ultimate success.
- [34:10]
C
Yeah, I totally agree. I think the COP process is a useful one, and I think it's become more useful over time. And it may be because the negotiations and the negotiated outcomes of COP every year are now only part of the story. COP has become a much larger thing than it used to be. And I think, you know, in the recent years, maybe some people forget that this used to be like a really backwater, like, UN negotiations thing that no one paid attention to. And there's 50,000 people here, and this is a small one. Right. And so I think it's important to keep in mind that there are negotiated outcomes and there are also transactional outcomes. And I think the role of those transactional outcomes, especially in the last few cops, has become increasingly large and increasingly significant. That has real impact on economies and markets. And I think we need to, first order, keep that in mind. And I think to second order, I think that there is real progress. That's part of the story, what's happening across the hall from us here. But I think we need to keep in mind too, that, you know, as Raquel said, this is the climate and the energy transition. This is the greatest wealth creation opportunity of our time. And we need to make sure that that's not just happening as quickly as humanly possible, but also that it's happening in a fair and just way. And I think that's the marriage where the public negotiations and the private sector activity need to come together. And I think the understanding between these two worlds, which were previously quite far apart, is increasing. And these two types of communities are learning how to speak to each other in a way that I think is very powerful.
- [35:34]
A
Yeah, yeah, I think that's a really great point. But for now, unfortunately, we do have to leave it there. But it's been great talking to you, Raquel. Moses Bennett here. Thanks both very much.
- [35:40]
C
Thanks for having me.
- [35:41]
B
Thank you so much for having me.
- [35:42]
A
Great conversation. Thank you. Now, some of the most important building blocks in constructing routes for these large international flows of capital are the multilateral development banks. These include the World bank, the European bank for Reconstruction and Development, and the aiib, the Asian Infrastructure Investment Bank. JP Tier is the lead economist for the AIIB and I talked to him about the particular challenges of trying to drive the energy transition in a region that includes some of the world's most populous, fastest growing and highest emitting countries. Hello jp, how are you?
- [36:15]
D
Welcome to the energy gang, Emin, thanks for having me.
- [36:18]
A
Yeah, thanks very much for joining us. So before I get into the subject of climate finance, which is a big issue for discussion of this cop, probably useful just to get you to talk a little bit about the AIIB and what it is that you do. So it's a Multilateral Development Bank. Right. An MDB as they call it in the jargon. So many acronyms in this business. Could you just talk a little bit about what it is that you do, where you lend and what your mission is?
- [36:43]
D
Thank you very much. You're right. AIIB stands for Asian Infrastructure Investment Bank. We are a multilateral development bank. We started operations in 2016. Currently we have 110 members. In terms of membership we are only second to the world Bank. So our mission is to finance infrastructure for tomorrow and obviously climate change financing, mitigation adaptation, these are huge themes for our bank. Our mission is really to finance this infrastructure so as to uplift the socio economic conditions of our member countries. I'd like to emphasize that even though our name is Asian Infrastructure Investment Banks, we do lend to African Latin American countries as part of our global reach. Of course those lending to non regional members are a little bit smaller, but still we do those projects.
- [37:30]
A
And what are your particular challenges then as the Asian Infrastructure Investment Bank? Your region is one where you have the world's largest emitter, China, world's third largest emitter, in India, world's most populous countries, many of the world's fastest growing countries as well. And with their economies growing, their emissions are growing as well. The challenges there are enormous, aren't they? I mean, how is it possible for you to really make a difference to the trajectory of emissions in those countries?
- [37:59]
D
So every time we speak to our Asian members, we say that you guys are large emitter most. Two reflexive response. The first one is that historically we are not large at all.
- [38:10]
A
And that's true, they're right to say that.
- [38:13]
D
And second point is that on a per capita GDP basis we are probably one fifth of that of Americans or Europeans emission.
- [38:23]
A
And that's true of many countries, not true of China nowadays. Right. Where on a per capita basis China's kind of getting up.
- [38:28]
D
Still low. Still low. Still low, yeah. Even though it's the largest emitter, it's ahead of the US in terms of total emission, you must remember US has 350 million people, China has 1.4. So the denominator is just the numbers, right? We're not trying to play around with the fact that it's just the numbers. But what I think is that if you have a climate conversation without a development conversation with the Global south, you're not going to get anywhere. So the climate compensation has to be paired up with the development story. So take for example China, right? So even though it is a large emitter, it is also scaling up renewable energy faster than any G7 or any developing economies, Right. I have seen for myself the kind of windmills, the kind of solar deployment you fly over the airplane, you fly over the provinces. In Shaanxi, for example, you can see mountains and mountains and so on, or windmills, right? And that is great. And the economic opportunity goes beyond just greening the energy system, for example. We may have to talk about this, right? China has leapfrogged the world in terms of EVs, in terms of batteries. So when you have a conversation about the climate paired with the developmental story, it goes much better down the political economy, the population of the Global South. And that is the way to get people involved and excited and committed to climate change mitigation.
- [39:48]
A
That's really interesting. So in other words, you're not asking people sort of to be altruistic. You're not saying make sacrifices now for the good of the rest of the world. You're saying there are real concrete benefits that they can gain from investing these technologies in the near term.
- [40:03]
D
That's right. So fundamentally, I believe that the future of competitiveness lies in sustainability. I believe that firmly that sustainability will become a competitive advantage. If you are not green, I think in the world 30 years time, nobody's going to do business with you. You may as well change first before the world goes around you and not trade with you and so on. So I believe that there's no inconsistency. The only inconsistency now, the only trade off that I would say is timing how to reach there. I think that is the difficult conversation because there is no long run contradiction. Like I said, you have to be sustainable to be competitive. But in the short run, the adjustment is painful. So that is the kind of conversation we need to have.
- [40:45]
A
And again, presumably a lot of countries in Asia will say we can't put sustainability at the top of our agenda because we have so many other needs. We have large and sometimes growing populations, we have relatively low incomes. There is an urgent need for economic development. There's an urgent need for energy supplies to meet that development, to raise standards of living and so on. So, I mean, as you say, you hear people make those judgments. When I hear people from Asian countries talk about the way they view energy in particular, you will often hear them say they can't put those sustainability objectives first.
- [41:26]
D
That's right.
- [41:27]
A
Other objectives have to be more important.
- [41:28]
D
That's right. I'm hoping that in terms of the actual things that the US Is doing is not going to backslide. The States are doing a really good job. For example, Texas now has a large share of renewable energy. But again, the kind of political messages coming from the advanced economy must be consistent. You cannot have a situation whereby the Global south is asked to do the sacrifice, whereas somehow the fossil energy, because of the need, because of geopolitical reasons, it just shoots up. It just doesn't make sense at all for the Global south to hear these kind of messages. Right.
- [41:58]
A
So there has to be a sense that the whole world is moving to.
- [42:01]
D
That's right. Like in Solidarity for a Green World, the theme of this year's Corp.
- [42:05]
A
Right. Which is written on the walls of the room where we're sitting right now. Indeed. Indeed. I mean, you raised that point about the US and possible backsliding from the US what reaction are you seeing to the election victory for President elect Donald Trump? He's clearly said that he plans to take kick the US out of the Paris climate agreement. Is that going to have a ripple effect, do you think, around the world? Is that going to change people's views in Asia about what they need to be doing on climate action as well?
- [42:33]
D
It's too early to tell. So far, based on my own analysis and based on the people I speak to, most of us are adopting a wait and see attitude. So with regards to Paris Agreement, with regards to tariffs and so on, it's too early to tell. But we are still hopeful that even if US is not fully on board, the world has moved on. I think everybody else will go on the sustainability green type of transition and maybe after four years, US will come back again. So who knows, right? So there will be bumps along the way, but I think the trajectory is pretty much to a better place.
- [43:07]
A
And what are your expectations for the COP then? And perhaps, I guess, what would you really like to see come out of the cop? And one of the things that's been striking in the first few days of this conference is there's been quite a bit of tension over the issue of trade and tariffs. And in particular, so Europe is introducing the carbon border adjustment mechanism. This is essentially going to be charging imports into the EU according to their carbon content, if they haven't already paid some kind of carbon price. And I think the way this is being presented in Europe, Europe is it's sort of a device to encourage the transition. It's to encourage the world to move towards lower carbon technologies so they can avoid having to pay this cost. But we've seen strong criticism here from India and China, a few other countries saying they think this is creating a problem for kind of global solidarity. As you say, that sense of the world moving together to address climate change, how do you think that's going to play out? Do you think that the countries of the world are going to be able to agree some kind of collective goal on climate finance, even though there are some pretty fundamental differences of opinion on issues like trade?
- [44:20]
D
Again, you raise a very huge and complex question. I'll just try to unpack and I'll give you our own analysis and my own take on all boils down to the intent. So if the carbon border tax adjustment or carbon border adjustment mechanism is true to its, its intent, it is meant to actually target only the pollutive sectors. Right. And in fact, there's a very easy way around it. If the developing countries, they also impose a carbon tax on themselves, collect revenue and in fact they shouldn't be paying the kind of border adjustment when they export to the eu. And in fact, developing countries can raise revenue by taxing their own polluters. So if seabam is true to its intent, if the implementation is there according to the good intent, I think the world can come to an adjustment and may even be better for the world, better for EU and better for the Global south and so on to accelerate the green transition, it may even strengthen the fiscal positions of the south, like I said, by just getting away fossil fuel subsidy and having a tax on the carbon. However, this is a big but. However, today's conversation about trade goes beyond sea bam goes beyond carbon. So for example, the EU imposed tariffs on electric vehicles in China. The US has imposed tariff on solar from China. Right.
- [45:48]
A
And is threatening a lot more under a Trump administration as well. Yeah.
- [45:52]
D
So in the broader environment of imposing tariff on everything else. Right. It dilutes the goodwill of actually talking about just taxing carbon. Right. So how does the Global south trust the advanced economy when all they see is all these kind of market protection mechanism messages, movement tariff policies coming out of the North? It seems an obvious market denial kind of a move as opposed to talking about carbon. Now, that is where my worry as a trade economist, as a development person in aiib, we are worried about the larger development and we hope not to see the worst outcomes.
- [46:35]
A
Very interesting. Certainly a delicate job for negotiators then to kind of build international agreement and consensus in these conditions.
- [46:43]
D
Exactly. Exactly. Yeah. So again, the key message is it's okay to tax carbon, but you cannot just throw in everything that denies a market access to the South.
- [46:54]
A
Yeah, that's a really fascinating and important point. JP Tier, thanks very much. Great talking to you.
- [46:58]
D
Thank you very much. Thanks a lot.
- [47:02]
A
Thanks also to Raquel Moses and Ben Attia. And that's all from us for today. Thanks to our producers, Dan Cottrell, Harry Weston Cottrell and Matt Walters. And above all, many thanks to all of you for listening. We really value your feedback, so please do keep it coming. And we'll be back very soon with all the latest from COP 29. Until then, goodbye.