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1 Climate and Development An Agenda for Action 2 Climate and Development An Agenda for Action © 2022 The World Bank Group 1818 H Street NW, Washington, DC 20433 Telephone 202-473-1000; Internet www.worldbank.org This work is a product of the staff of The World Bank Group with external contributions. “The World Bank Group” refers to the legally separate organizations of the International Bank for Reconstruction and Development IBRD, the International Development Association IDA, the International Finance Corporation IFC, and the Multilateral Investment Guarantee Agency MIGA. The World Bank Group does not guarantee the accuracy, reliability or completeness of the content included in this work, or the conclusions or judgments described herein, and accepts no responsibility or liability for any omissions or errors including, without limitation, typographical errors and technical errors in the content whatsoever or for reliance thereon. 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Cover design Brad Amburn3 Climate and Development An Agenda for Action 1. Contents Foreword . 4 Summary 6 1. Country Climate and Development Reports integrating climate change and development . 7 2. Climate change poses a major threat to long-term development objectives 10 2.1. Climate change has widespread, deep, and cascading effects across most sectors 10 2.2. Boosting resilience and adaptation is an urgent and integral part of development and poverty reduction, especially in low-income countries . 13 2.3. Even with adaptation, successful development and poverty reduction require accelerated mitigation action, especially from high-income countries and large emitters . 19 3. Climate objectives can be achieved without compromising development 21 3.1. Structural change and supportive policy environments are needed for successful and just climate action . 21 3.2. Sectoral transitions with private sector mobilization create opportunities to reduce GHG emissions while contributing to development 22 3.3. Most countries can follow development pathways that align with a just transition and the Paris Agreement without major trade-offs 33 4. Success requires urgent policy reforms and increased financial support from the international community .39 4.1. Innovative climate finance solutions to meet additional investment needs . 39 4.2. Consider the political economy in policy design 45 4.3. Building institutional capacity and improving governance and decision making 46 4.4. Accelerated innovation and scaling up key technologies for adaptation and mitigation . 47 4.5. A just transition preventing and managing impacts on people and communities 49 5. Prioritization and sequencing a requisite for success .51 5.1. Prioritizing what is good for development or urgent to achieve climate goals 51 5.2. Main recommendations in the CCDRs52 6. Conclusion 55 Acronyms CBAM Carbon Border Adjustment Mechanism CCAP Climate Change Action Plan CCDR Country Climate and Development Report CPAT Climate Policy Assessment Tool CSA climate-smart agriculture DRM disaster risk management EU European Union EV electric vehicle GDP gross domestic product GHG greenhouse gas GRID Green, Resilient, and Inclusive Development HIC high-income country LIC low-income country LMIC lower-middle-income country M strengthening institutions; accelerating diffusion of new technologies; and managing distributional outcomes. To be successful, all countries will require carefully designed policies and scaled-up financial support from richer economies. Low- income countries face higher investment needs, often exceeding 5 percent, and will need access to sustained levels of concessional resources, including grants. The CCDRs recognize that in each country, a government-led prioritization and sequencing exercise is an essential step to translate the diagnostic into a country-owned strategy and implementable investment plan. A CCDR can be an opportunity for governments and private sector investors, citizens, international financing institutions, and World Bank Group partners to engage on development and climate action, with better country-level coordination. Climate change poses a major threat to long-term development objectives, especially poverty reduction, and accelerated emission reductions are needed, particularly in high-income and other high-emitting countries. Reducing emissions can be done without comprising development taken together, CCDR low-carbon development strategies reduce emissions by 70, without significant impact on growth, provided that policies are well designed and financing is available. Financing needs average 1.4 percent of GDP, a manageable amount with appropriate private sector involvement. But in lower-income countries, financing needs can exceed 5, which will require more support from high-income countries, including increased concessional resources.7 Climate and Development An Agenda for Action 1. Country Climate and Development Reports integrating climate change and development Climate changecaused by greenhouse gas GHG emissions from human activitiesposes serious threats to countries’ ability to secure past developments gains and sustain improvements in living standards. Climate change, poverty, and inequality are defining challenges of our time and it is crucial that we tackle them together, acknowledging the interconnections between people, planet, and the economy. To this end, it is urgent that countries build the resilience and adaptation of their people and economies to the effects of climate change in their development strategies, while also reducing GHG emissions to mitigate damaging changes to the global public good that is climate. Integrating climate and development is at the heart of the World Bank Group’s Climate Change Action Plan CCAP 2021–25 and the World Bank’s Green, Resilient, and Inclusive Development GRID approach. 1 The World Bank Group has recently launched a new, core diagnostic tool the Country Climate and Development Report CCDR. Integrating climate change and development considerations, this diagnostic is jointly conducted by the World Bank, the International Finance Corporation, IFC and the Multilateral Investment Guarantee Agency MIGA, in close coordination with the International Monetary Fund. It aims to help countries prioritize the most impactful actions to boost resilience and adaptation and reduce GHG emissions, while delivering on broader development objectives. CCDRs are designed to analyze the connection between climate and development policies and identify concrete priority actions that support countries’ development goals as they improve climate resilience and lower emissions. Capturing the centrality of people in climate change policies, CCDRs assess how climate risks affect people, and how governments and the private sector can build resilience, considering the implications of physical and transition risks on poverty and jobs. The first set of 20 CCDRs published or in press covers 24 countries figure 1. 2 Building on the lessons learned from the inaugural year of the CCDR, we aim to roll out CCDRs to all our client countries over the next three to five years. CCDRs use a scenario approachconsidering country-specific resilient and low-carbon development pathwaysto explore three broad policy spaces. First, they look at sectoral and macroeconomic policies and investments that create synergies between climate action and short- to medium-term development objectives. For example, improving public transit can expand access to jobs and critical social services, particularly for women and the poor, reduce traffic congestion, and address local air pollution, all while reducing GHG emissions. Second, CCDRs examine potential trade-offs between climate and other development objectives and identify policies and investments that can prevent or manage these trade-offs. For example, decommissioning coal infrastructure reduces GHG emissions but could have adverse social impacts if not accompanied by targeted support for local communities and workers. Third, CCDRs explore opportunities, reforms, investments, and policy instruments to further leverage private sector resources and solutions for both climate change adaptation and mitigation and to better manage distributional impacts and the political economy, using a people-centric approach to the climate and development agenda. 1 https//openknowledge.worldbank.org/handle/10986/35799; https//openknowledge.worldbank.org/handle/10986/36322. 2 https//www.worldbank.org/en/publication/country-climate-development-reports.