House of Commons - International Development Committee

Sustainable Development in a Changing Climate - International Development Committee Contents

Written evidence submitted by the Department for International Development (DFID)

EXECUTIVE SUMMARY

The UK believes that sustainable development and good environmental management are key to poverty reduction and meeting the MDGs. We take a multi-disciplinary approach to sustainable development, which we are integrating across our international work.

The UK has worked both at country level and through partnerships internationally to support better environmental management and better governance of environmental resources such as water, forests, fisheries, biodiversity and land. We have learnt a lot about what works well and why. We have learned that for development to be sustainable, there needs to be sound governance systems in place, services supplied by the environment that are valued and costed and political will and leadership.

Climate change is an additional layer of stress on developing countries, magnifying existing threats and stresses, exposing the dependence of the poor on natural resources, making the achievement of sustainable development even harder, and threatening to push great numbers of people into poverty.

For the UK, the changes—environmental, social, economic and political—brought about by climate change have meant a shift in the way we organise ourselves, in the way we approach sustainable development, and in the way we work. This memorandum outlines our approach, which is:

— To play a leadership role internationally on climate change negotiations—to agree to a credible, fair and ambitious deal in Copenhagen in 2009, which puts an understanding of development and the needs of developing countries at the heart of an international agreement.

— To facilitate the transition to a low carbon global economy and ensure that this does not slow the growth of developing countries and that poverty reduction is sustainable in a carbon-constrained world.

— To help protect the most vulnerable from the inevitable impacts of climate change—both through international fora and through our bilateral work at country level.

— To renew our emphasis on environmental management and sustainable development—with a particular focus on agriculture, water management and forest management—building on lessons learned and new political spaces/opportunities created by climate change.

We have only a year to reach an agreement on a framework for climate change once the Kyoto protocol ends. This is a momentous challenge, which the UK has risen to, expanding considerable efforts and resources. We work closely with our international partners, recognising that this is a new challenge for all of us that requires constant learning as we progress.

LIST OF ACRONYMS

AUC African Union Commission

BRICS Brazil / Russia / India / China / South Africa

CASM Communities and Small Scale Mining Initiative

CBFF Congo Basin Forest Fund

CCAA Climate Change Adaptation in Africa

CCSAP Climate Change Strategy and Action Plan

CDM Clean Development Mechanisms

CEIF Clean Energy Investment Framework

CGIAR Consultative Group on International Agricultural Research

CIFs Climate Investment Funds

ClimDev Climate for Development in Africa Programme

CO2e Carbon Dioxide Equivalents

CTF Clean Technology Fund

DANIDA Ministry of Foreign Affairs, Denmark

DECC Department of Energy and Climate Change

DEFRA Department for Environment, Food and Rural Affairs

DFID Department for International Development

DRC Democratic Republic of Congo

EBRD European Bank for Reconstruction and Development

ECOSOC UN Economic and Social Council

EITI Extractive Industries Transparency Initiative

ESMAP Energy Sector Management Assistance Programme

ESPA Ecosystem Services for Poverty

ETC European Travel Commission ETF Environmental Transformation Fund

ETS Emissions Trading System

EU European Union

FCO Foreign and Commonwealth Office

FCPF Forest Carbon Partnership Facility

FLEGT Forest Law Enforcement, Governance and Trade

GEF Global Environment Facility

GHG Emissions Green House Gas Emissions

GLOFAC Global Carbon Finance

GoB Government of Bangladesh

GPAF Global Partnership for Agriculture and Food

HMG Her Majesty's Government

ICTSD The International Centre for Trade and Sustainable Development

IFC International Finance Corporation

IFI International Financial Institutions

IIED International Institute for Environment and Development

IISD The International Institute for Sustainable Development

IPCC Inter-Governmental Panel on Climate Change

IPR Intellectual Property Rights

JPOI Johannesburg Plan of Implementation

KPCS Kimberley Process Certification Scheme

LDCs Least Developed Countries

LDCF Least Developed Countries Fund

LICs Lower Income Countries

MDBs Multilateral Development Banks

MDGs Millennium Development Goals

NAPAs National Adaptation Programmes of Action

NGO Non Governmental Organisation

OCC Office of Climate Change

PATA Pacific Asia Travel Association

PPCR Pilot Programme for Climate Resilience

RECCs Regional Economics of Climate Change Studies

REDD Reduced Emissions from Deforestation and Degradation

SAWI South Asia Water Initiative

SCCF Special Climate Change Fund

SCF Strategic Climate Fund

UNDP United Nations Development Programme

UNECA United Nations Economic Commission for Africa

UNEP United Nations Environment Programme

UNFCCC United Nations Framework Convention on Climate Change

VPA Voluntary Partnership Agreement

WWF World Wildlife Fund

WSSD World Summit on Sustainable Development

WTO World Trade Organisation

WTTC World Travel and Tourism Council

SECTION 1: SUSTAINABLE DEVELOPMENT IN A CHANGING CLIMATE

The UK's approach to sustainable development

1. The UK can claim a long standing commitment to the environment and sustainable development. At the 2002 World Summit on Sustainable Development (WSSD), the UK was instrumental in making the case for greater integration of the environment with development objectives. The Summit clearly articulated that the poor are dependent on the environment for their livelihoods and that they are particularly vulnerable to environmental change, such as floods, droughts and other natural disasters.

2. The UK's White Paper on International Development[1], published in July 2006, emphasises the centrality of sustainable development and good environmental management to DFID's overarching goals of poverty reduction and meeting the MDGs. It integrated the principles of sustainable development across a broad range of DFID's work include governance and building effective states, conflict prevention, and promoting sustainable growth. In his preface to the White Paper, the Secretary of State wrote that "the most important challenge of all will be managing our world sustainably and fairly".

3. Sustainability has many dimensions—economic, social, environmental and institutional—all of which are important. For the UK, sustainable development enables "all people throughout the world to satisfy their basic needs and enjoy a better quality of life, without compromising the quality of life of future generations"[2]. Our approach to sustainable development is multi-disciplinary to reflect the complex and diverse realities faced by poor people. Livelihoods are sustainable when they:

— are resilient in the face of external shocks and stresses (eg food prices, rainfall variability, etc.),

— are not dependent upon external support,

— maintain long term productivity of natural resources,

— do not undermine the livelihoods of others.

4. The UK's priorities for sustainable development are set out in its Sustainable Development Strategy "Securing the Future" (2005) and DFID has further articulated them with respect to international development in its Sustainable Development Action Plan (June 2007). Securing the Future includes five core principles:

1) Living within environmental limits.

2) Ensuring a strong, healthy and just society.

3) Achieving a sustainable economy.

4) Promoting good governance.

5) Using sound science responsibly.

Progress towards Sustainable Development

5. There have been successes for the UK and the international community as more people have been lifted out of poverty since the 1992 Rio Earth Summit than perhaps any 16 year period in world history. Yet progress towards MDG 7 on environmental sustainability has been mixed. Evidence suggests that there is still a long way to go before we reverse the loss of environmental resources.

6. The UK has worked both at country level and through partnerships internationally to support better management of environmental resources such as water, forests, fisheries, biodiversity and land. We have learnt a lot about what works well and why. We have made significant progress in particular in managing environmental information and knowledge, strengthening environmental governance, addressing underlying institutional challenges and providing specific sectoral support to "what works well" (this is explored in section 5).

7. We have found that investing in getting the right information to the right people can have a much higher return for our funds than more traditional projects. The UK is therefore investing heavily in making information transparent and in voluntary codes of conduct.

BOX 1: EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE (EITI)

One highly successful example is the Extractive Industries Transparency Initiative (EITI), which we initiated in 2002. This supports verification and full publication of company payments and government revenues from oil, gas and mining. It currently works in more than 20 countries helping to ensure that some of the three and a half billion people who live in natural resource-rich economies get a greater share of this wealth. With leadership from the government of Azerbaijan, the UN General Assembly officially recognised the importance of this work this year.

8. We have also been successful in helping poor people gain better access to land rights, which is critical for the effective management of local resources. For example, in Cambodia, where 80% of rural households do not have formal land title, DFID supported the introduction of land rights which have been shown to increase agricultural productivity by as much as 60%.

9. We have developed effective "Sustainable Rural Livelihoods" programmes, based on an analysis of the capital assets (physical, social, human, natural and financial) from which the rural poor derive their livelihoods, and taking into consideration the vulnerability and risks that people face, local policies and constraints and the institutional environment (see Box 2).

BOX 2: RURAL LIVELIHOODS PROGRAMME IN INDIA

DFID's rural livelihoods programme in India (£142.5 million) works with the governments of Andhra Pradesh, Orissa, Madhya Pradesh and West Bengal. It supports poor rural communities to strengthen local governance and to manage resources, access assets, services and opportunities to generate income and reduce vulnerability and risk. Women and socially excluded tribal and caste groups living in remote areas are particularly targeted.

This programme has been very successful. In Andhra Pradesh for example, it has contributed to lifting 1.3 million out of poverty.

10. The UK has also invested in research to fill the knowledge gap in critical areas for sustainable development and to support developing countries in addressing the challenges that face them (see Box 3).

BOX 3: UK SUPPORT TO KNOWLEDGE GENERATION

Tackling global sustainable development is at the heart of DFID's Research Strategy (2008-13), which focuses on sustainable agriculture, health, growth and addressing conflict in fragile states.

We are investing up to £1 billion on development research over the next five years, to help to address global challenges likely to affect poor countries and poor people the most—such as climate change, population movements, and rising oil and food prices. This will include research into the valuation of natural resources as well as looking at how political processes, policy reform and institutional issues affect natural resources management.

The DFID-supported Ecosystem Services for Poverty Alleviation (ESPA) research programme will tackle complex problems associated with the sustainable management of ecosystems, for poverty reduction. The work builds on the findings of the Millennium Ecosystem Assessment. It will help developing countries to formulate and manage successful research projects, and develop better tools to assess ecosystem services and their impacts on human well-being.

The challenge of Growth and Valuing Environmental Assets

11. Despite these successes, we know that, as a planet, we are living beyond our environmental means[3]. The world today is facing more environmental stress than ever before. Economic growth, which is the single most powerful means of lifting people out of poverty, and which, accounts for 80% of all poverty reduction over the past quarter century, has often been built on naturally-derived wealth and associated with environmental degradation—which can offset and surpass the welfare gains from growth, leaving the poor worse off. As the international Commission on Growth and Development noted, it is a myth that developing countries can grow now and worry about the environment later[4].

12. Yet, it is important to note that it is not growth per se that causes environmental degradation, but poor policies and practices, such as ineffective regulation, taxation or property rights.

13. The means of addressing the demands of economic growth on the environment—eg through appropriate regulation—are well understood. However these are more often not applied or implemented, in part because the range of valuable services supplied by the environment have not been fully understood or costed. Many environmental services—clean water and air, fertile soil and other services provided by natural systems—have been perceived as freely available by those who consume them the most.

14. The UK has looked for opportunities to encourage our developing country partners to better understand the economics of natural resources management and to build sustainable growth strategies (see Box 4). For natural resource dependent countries in particular, this has meant:

— Significantly increasing the amount of quality information available to policymakers on how natural resources and environmental services support economic growth;

— Providing specific and practical policy advice on measures necessary to sustain economic growth in the medium to long term;

— Strengthening both the amount and quality of the dialogue between Ministries of Finance and Environment/Natural Resource Ministries.

BOX 4: EXAMPLES OF UK WORK ON VALUING ENVIRONMENTAL RESOURCES AND GROWTH

In Tanzania, the UK worked with UNDP to help the Government to better integrate environmental management in its National Strategy for Growth and Poverty Reduction. As a result, 14 per cent of targets across key areas of the Strategy relate to environmental management.

The DFID/World Bank-supported economic assessment of the contribution of natural resources to Ghana's growth has led to a long-standing engagement with the Ministry of Finance on the costs of environmental degradation. Natural resources were found to generate 25% of government revenues. This initiative led to constructive engagement with the Ministry of Finance on the costs of environmental degradation—calculated to be 10% of GDP per year—and on the importance of using natural resources sustainably for improved long-term growth prospects.

15. Despite these efforts, national systems for environmental management remain largely under-funded in national budgets. DFID is making the case for more environmental funding through the budget process. The shift towards aligning donor support behind developing country priorities presents specific opportunities to do this.

The threat of climate change

16. Climate change is putting extra pressure on the sustainability of eco-systems and other natural resources that are already suffering the consequences of growing global demand driven by rising consumption and population growth. Climate change is exacerbating environmental degradation, further exposing the dependence of the poor on the natural environment and compromising their resilience and ability to adapt. Climate change impacts are likely to push greater numbers of people into poverty. The 2007 Human Development Report argues that, unless serious action is taken to prevent and prepare for climate change over the next decade, by the second half of the this century we may no longer be talking about how to speed up progress towards reaching the MDGs, but how to slow reversals.

17. Climate change is an additional layer of stress on developing countries, magnifying existing threats and stresses, and making the achievement of sustainable development even harder. The impacts of climate change will be exacerbated by other, simultaneous, stresses such as conflict, state fragility, population growth and exposure to global economic shocks.

The urgency and opportunity of climate change

18. It is evident that climate change, environmental degradation and development are inter-connected and necessitate action both specifically on climate change and on wider environmental issues. For example:

— Mitigation of greenhouse gas emissions through avoided deforestation needs to complement sustainable forest management and help deliver co-benefits, especially biodiversity, as well as sustainable livelihoods;

— Land use change and agriculture unless done in an environmentally sustainable manner can contribute to increased emissions, and add to water stress.

19. While climate change is the biggest long term threat to the environment, it is also an opportunity to put environmental sustainability firmly back on the agenda. Various studies on climate change—and notably the Stern Review—have galvanised political interest and created the political space to take forward some pressing environmental issues across developed and developing countries. Climate change is a significant opportunity to conserve forests, for example.

20. For the UK, the changes—environmental, social, economic and political—brought about by climate change have meant a shift in the way we work and in the way we approach sustainable development. Our approach has been:

— To renew our emphasis on environmental management and sustainable development—with a particular focus on water management and forest management—building on lessons learned and new spaces created by climate change.

— To play a leadership role internationally on climate change negotiations—working to ensure that any global agreement on climate change is "development-friendly".

— To lead the way in trying to understand what low carbon development can mean for developing countries and to help them begin to respond to the challenge.

— To help protect the most vulnerable from the inevitable impacts of climate change and to ensure that all of our bilateral programmes are "climate-resilient".

21. For the UK, the imperative of climate change has further reinforced that we need to work coherently across sectors and government departments. The policies that we implement domestically on issues such as trade, migration, or national carbon emissions have a major impact on sustainable development in developing countries.. We have a strong cross-Whitehall partnership that helps us shape all UK policies in the service of sustainable development (see next section).

A transformation across HMG

22. Climate change has required a shift in the way the UK thinks about and "does" sustainable development, so that it supports a low carbon and climate resilient path. It has also required a step change in the resources and efforts we expand on working on sustainable development in general and on climate change in particular. This is a vast challenge—and an ever-evolving one as the science and knowledge-base are expanding and the tools/mechanisms for addressing this are being designed and refined. We work closely with our partners in developed and developing countries to make this happen and we are all learning as we progress.

23. In recognising the importance of climate change and its link to energy supply, the Government has announced important changes to the responsibilities of DEFRA, and to BERR, and created a new Department of Energy and Climate Change (DECC). DECC leads on climate change and international negotiations and coordinates the Whitehall effort on international climate change.

24. In recognition of the need for inter-departmental coordination on policy, strategy and programmes, the government has set up a series of official and ministerial-level working groups and boards that address all aspects of international climate change. The Cross Whitehall Board for the Environmental Transformation Fund is a very good example of cross Whitehall working (see Box 4a).

BOX 4A: CROSS-WHITEHALL WORK ON THE ENVIRONMENTAL TRANSFORMATION FUND

The day to day management of the Environmental Transformation Fund—International Window (ETF-IW) is led by a secretariat, made up of DFID and DECC officials, which prepares project plans and policy papers and coordinates the UK's engagement with the Climate Investment Funds (see box 8).

A Cross-Whitehall working level virtual team provides strategic and technical advice on the day-to-day running of the programme and meets weekly.

The ETF-IW is governed by a cross-Whitehall senior officials' board, made up of DFID, DECC, HMT, FCO and Defra. Cabinet Office and No.10 are invited as observers.

25. DFID, as the department responsible for international development, is cascading climate change objectives through its planning and monitoring tools; right from the White Paper and Public Service Agreement down to individual work plans.

BOX 5: DFID'S DEPARTMENTAL STRATEGIC OBJECTIVE (DSO) AND INDICATORS ON CLIMATE CHANGE AND ENVIRONMENTAL SUSTAINABILITY

DSO2: Promote climate change mitigation and adaptation measures and ensure environmental sustainability

Indicator 6: Policies and programmatic approaches developed for effective climate change mitigation and adaptation measures in developing countries, along with coherent international support for both.

Indicator 7: Environmental sustainability integrated into programmes

26. DFID's Climate Change Implementation Plan further sets out what each division and region will do in policy and programme terms on adaptation and low carbon development. As a minimum, DFID's policies and programmes should be climate resilient. DFID has developed a tool for assessing climate risks to its programmes. We have conducted assessments of its programmes in Bangladesh, India, China and Kenya, and how to address the risks identified. We are sharing lessons from this process with other donors, including the multilateral development banks.

27. DFID has significantly scaled up its efforts on climate change by setting up a new department called the "Climate and Environment Group" in its Policy and Research Division. It has built teams around the global framework, low carbon development, and adaptation, and it has brought in specialists from other government departments and upgraded generalist and specialist skills in DFID through tailored learning and development. These new pools of capacity act as a hub within DFID and partner organisations to develop policy, strategy and drive change internationally and within each organisation.

28. To further integrate an improved understanding of sustainable development and climate change in the way that we work, DFID is launching a "Making DFID climate smart" initiative, which will integrate thinking about low carbon and climate-resilient development throughout the work of the department. This initiative will ensure that DFID has the right resources, systems and communications in place to deliver on climate change and that DFID staff systematically make the link between climate change, sustainable development and poverty reduction.

29. Through this initiative, DFID will work to ensure that it has the right skills in the Department to take forward work on low carbon and climate-resilient development, and that all staff are able to access the information, training, policy advice and operational guidance they need to mainstream climate change thinking in their work.

30. DFID also is also increasing the number of staff working specifically on climate change issues, with eleven new posts in country offices in Bangladesh, Brazil, Caribbean, China, Ethiopia, India, Mozambique, Nepal, South Africa, Tanzania/Kenya and Vietnam. DFID is also looking longer term at the mix of skills needed across the international development community and the role of training, secondments and recruitment of experts on sustainable development and climate change in meeting these.

31. A key part of the FCO's work is reframing the international debate on climate change. In order to do this, the FCO has developed a large network of attaches specifically working on climate and energy in posts across the world. It has also set up six campaigns aimed at creating the political conditions for an equitable deal in Copenhagen in December 2009. These campaigns include the Equity campaign, which seeks to ensure that the voices of the most vulnerable countries are heard more clearly in the global debate on international climate change negotiations. The FCO has also created the post of UK Climate Security Envoy for Vulnerable Countries, which is co-located in DFID. The FCO and DFID have joint offices working on climate change in a number of countries, including India and Brazil.

SECTION 2: NEGOTIATING A FAIR AND EQUITABLE CLIMATE DEAL

32. An immediate priority for the UK is to achieve a fair and credible global deal on climate change in Copenhagen in December 2009. The deal agreed in 2009 will frame ensuing work on climate change, as emissions targets agreed and agreements on financing in particular will impact on developing countries' development options.

33. However, the challenge of delivering an effective global approach to tackling climate change goes beyond the treaty itself. The right policies, incentives, capacity and knowledge also need to be in place to help developing countries participate in securing and implementing the deal.

34. The UK has five key sustainable development objectives for the global deal, namely:

— A long-term goal with credible near-term targets that keeps any temperature rise to below 2 degrees C;

— A way of sharing greenhouse gas emissions that is fair and equitable;

— Support for developing countries to build their resilience and adapt to climate change;

— Support for technology development and transfer that benefits developing countries based on their needs and circumstances;

— A reformed carbon market that expands the reach and impact of carbon finance.

Agreeing a long term goal and credible interim targets

35. A long term goal sets the ambition for all climate policy. It provides clarity on the degree of action required and the risks (ie scale of impacts) we are prepared to accept. It can be used to guide mitigation and adaptation efforts, and provide predictable signals for investors.

36. The UK is seeking to agree, at the UNFCCC meeting in Copenhagen in December 2009, a comprehensive, global and long-term framework for addressing climate change that puts us on a pathway compatible with limiting the global average temperature increase to no more than 2°C above pre-industrial levels. This translates into peaking of global emissions by 2020 and reducing emissions by at least 50% by 2050, compared to 1990 levels.

37. A failure to achieve an ambitious goal would be a terrible outcome for developing countries: a significant rise in temperatures would lead to even greater costs in terms of adaptation.

Allocating the Global Stabilisation Target

38. Because there are many different potential trajectories that can be used to reach the same goal, agreement on the long term goal needs to be supported by an agreed-upon emissions trajectory—with a fair and effective balance of efforts required between different countries.

39. The UK's Office of Climate Change (OCC) has estimated that, on their Business-as-Usual trajectory, by 2030 developing country emissions alone will exceed the global total consistent with a stabilisation trajectory. There is no doubt that, to stabilise global emissions at a safe level, developing countries will need to mitigate[5].

40. However, developed countries will need to take the lead and take on binding commitments to reduce their emissions by 25-40% by 2020 compared to 1990 levels. The more of mitigation developed countries commit to, the less developing countries will need in time to undertake. If all developed countries committed to reducing their emissions by 80% by 2050, it would allow developing countries' emissions to peak later and fall by less.

41. Different allocation rules do not benefit all developing countries equally. Reaching agreement on an allocation will be a major political challenge. The UK's position is based on the principle of common but differentiated responsibilities and respective capabilities. Work is underway in Whitehall on the developmentally optimal approach to allocating the global emissions reduction effort consistent with "safe" climate change. The more a methodology is based on current levels of emissions, the less space developing countries will have for their emissions to grow. This risks extending current inequalities into the future. It is important that emissions allocations do not limit poor countries' potential to grow their economies.

A fair deal on adaptation[6]

42. Climate change is already a reality, and so adaptation must be considered a priority and be part of the Copenhagen agreement. Adaptation needs to be integrated into both private and public investment decision-making at all levels—local, national and global. Provision for adaptation in a future framework should be consistent with the principle of "common but differentiated responsibilities".

— Developing countries should produce climate resilient plans and budgets, recognising the need to prioritise cost effective adaptation measures; ensure an enabling environment to promote climate resilient investment; ensure that assistance is available to the poorest and most vulnerable; and share knowledge, experiences and data within and between regions to help other countries adapt.

Stepped Up Support on Technology

43. The development, diffusion and deployment of low carbon and climate resilient technologies are essential to both mitigation and adaptation efforts—this will require an unprecedented global partnership involving developed and developing countries. The most effective way to drive investment in new and existing low carbon technologies, and stimulate the transfer of know-how and technological capacity, is the creation of a global carbon market combined with ambitious caps on emissions and policies to drive investment towards low carbon technology.

44. In support of the above, action needs to be taken to ensure scaled up, predictable, mobilised and better oriented financial flows to support mitigation and adaptation.

How will the UK achieve this?

45. Climate change is a political problem as much as an economic, security, environmental and development problem. We need leadership to articulate this as a "grand project" that is imperative—but also achievable. The UK is working hard to ensure that the political and economic conditions are in place by December 2009 that will enable us to secure a successful outcome in Copenhagen. UK officials are integral members of the European Union working groups that work up the EU position for the UNFCCC negotiations. We have also sought for climate change to be raised in Environment, Finance and General Councils.

46. Developing countries need a strong voice in the UN climate change negotiations to ensure they get a fair deal, and the international community can support them to engage effectively. Without this voice, high level targets will be set by the major emitters rather than those most at risk. The UK is supporting the European Capacity-Building Initiatives, which supports negotiators from developing countries to engage effectively in the negotiations process. However, developing countries' ability to shape the negotiations remains weak. So we are scaling up our support, in particular, by providing developing country decision makers and negotiators with neutral, unbiased information to help them develop country-specific/regional positions; supporting LDC negotiators to engage fully in the negotiations; and supporting developing country journalists and NGOs to attend and report on the negotiations. We have also supported developing country negotiators bilaterally, for example by funding a group of experts to advise the Pakistani government on negotiating positions, or through funding additional experts to delegations in Bangladesh and Nepal.

Financing—issues and opportunities?

47. The private sector will deliver the bulk of the funding for mitigation activities, primarily through the carbon market (see below). But there is a clear role for public money in filling the gap until the market can deliver, creating the right investment climate, and supporting adaptation.

48. Public finance will be particularly crucial for adaptation, as there is no inherent market mechanism to drive private investment into adaptation activity in developing countries. Some of the costs of adaptation are likely to be met from domestic sources. But this will need to be supported by international finance, especially for the poorest and most vulnerable countries. We therefore expect public money to play a larger role in supporting adaptation than in supporting mitigation—now and for the foreseeable future.

49. Action needs to be taken to ensure scaled up, predictable, mobilised and better oriented financial flows to support mitigation and adaptation. This needs to be done efficiently, effectively and equitably. We need to bring in International Financial Institutions, the private sector and finance ministries into discussions, learning from existing initiatives such as the Global Environmental Facility (GEF) and the Climate Investment Funds (CIFs).

50. The real challenge will be ensuring that climate finance is integrated with finance for development—both for low carbon growth and for adaptation. A number of countries have put forward proposals for ways of raising new public money—the UK is looking at these proposals carefully. We are also considering different types of instruments for delivering finance for climate change, and their governance. The key will be to develop a delivery model that can deliver at the scale and pace required, with governance that is representative, legitimate and competent.

Carbon trading

51. The UK government considers a global carbon market is the key to securing the long term shift to low carbon economies. By placing a price on carbon and reflecting the true cost to society of greenhouse gases, emissions trading will drive global emission reductions at lowest cost (key to making ambitious goals politically acceptable), and stimulate business to innovate and to invest in low carbon technology and energy efficiency by rewarding those who take action. In only a few years we have built the foundations of a global carbon market which encompasses many developed countries and much of the developing world. According to World Bank figures, the carbon market is now worth approximately $64 billion per annum, of which $7.5 billion flows directly to developing countries through the Clean Development Mechanism.

52. The EU Emissions Trading Scheme (ETS) is a cap and trade scheme covering around 50% of the EU's CO2 emissions. It is currently the major source of demand and the driver of the growth in private sector participation in the market. It is the cornerstone of the EU's policies to meet its emissions reduction targets under the Kyoto Protocol. The scheme covers the largest emitters such as power stations and energy intensive industries such as iron & steel production.

53. Developing country participation in the carbon market is through the Clean Development Mechanism. The CDM enables rich countries to meet their targets at least cost by investing in emissions reductions projects in developing countries; and it promotes sustainable development in developing countries. There are currently over 1,200 registered projects with a further 4200 projects in the pipeline which are projected to reduce over 2.9 GtCO2e of emissions by 2012. CDM projects occur across a wide range of sectors and gases, with 64% of reductions coming from projects involving renewable energy, fuel switching and energy efficiency. The World Bank estimates that in 2007 alone the CDM has leveraged $33 billion for investment in clean energy.

54. Despite its successes, the CDM is burdened by problems including an unequal geographic distribution of projects, high transaction costs, and difficulties in proving that projects are additional. Given that this is an entirely new and innovative market created solely through regulation, there is an ongoing process of evolution and learning by doing. Countries with large volumes of emissions available at lowest cost eg China, India, and Brazil have been the most successful at attracting carbon finance flows. Low income countries have been less successful at attracting CDM investments in part due to their low emissions profiles, limited capacity to implement projects, weak institutions and poor investment climates.

55. Africa accounts for only 2% of the project pipeline—less than their share of developing country emissions (4-5%). In recognition of this the Nairobi Framework was launched as a multi agency effort to scale up carbon finance in Africa. The UK government is supporting this effort in Africa through working with the UK private sector to establish AfriCarbon—an initiative intended to work closely with local project developers to get projects off the ground. Other initiatives to improve the operating environments in LICs such as the Investment Climate Facility are also important for this. For carbon finance to deliver real long term benefits for LICs, it needs to be aligned to their energy access needs.

56. As a project based offset mechanism, the CDM does not deliver any additional emissions reductions beyond the rich countries' targets and it is difficult to scale up. The UK government is working closely with partners to develop proposals to scale up emissions reductions and carbon finance flows post 2012. The intention is to closely align carbon finance with national development plans, to increase participation by LICs through moving from a project to programmatic level, and to expand the sectors covered by the market.

BOX 6: REDUCING EMISSIONS FROM DEFORESTATION AND DEGRADATION (REDD)

An agreement on an incentive mechanism for reducing emissions from deforestation and degradation (REDD) under the UNFCCC, offers the opportunity for cost-effective mitigation and low carbon economic growth in tropical forest developing countries. The UK is working with other countries and key stakeholders, including the World Bank and the UN, to mobilise support for early demonstration activity and to help ensure a successful decision on a mechanism to incentivise REDD in Copenhagen in 2009. The UK has committed £15 million to supporting demonstration efforts under the World Bank's Forest Carbon Partnership Facility (FCPF). The FCPF aims to build developing countries' capacity to engage in a future REDD mechanism and tests ways of making payments in return for emissions savings through the sustainable management of forests, in the period up to 2012.

SECTION 3: LOW CARBON DEVELOPMENT

57. We need to promote patterns of international development that are consistent with the challenges that climate change will present for developing countries.

58. Low carbon development refers to patterns of development that achieve economic and social development while ensuring a reduction in greenhouse gas emissions consistent with stabilising global emissions at a safe level.

59. This matters for all countries, even the poorest countries with emissions below 3 tons CO2 per capita since carbon constraints in the rest of the world will have an impact on their trade opportunities, the sort of foreign investments that can be attracted and their potential to sell future emissions rights.

60. There can be no blue-print for what this pattern of low carbon development will look like. It will vary a country's level of development, its distribution of poverty and vulnerability, the structure of the economy, the anticipated impacts of climate change and the particular vulnerability or resilience the economic, social and political structures are to these impacts, and anticipated future sources and opportunities for cost-effective abatement.

61. HMG's understanding of low carbon development takes as a given developing countries' need for sustainable economic growth: low carbon development cannot be at the expense of sustained economic growth, particularly in the poorest countries. Economic growth not only has a critical role to play in reducing poverty[7] but also in helping poor countries adapt to the impacts of climate change. As such, low carbon development must enable economic growth consistent with both mitigation and adaptation: low carbon growth and climate resilient growth. As a minimum low carbon development should not leave countries more vulnerable to the inevitable impacts of climate change and, ideally, should help increase their resilience to these impacts.

  62.  Yet conventional economic growth has historically been associated with an increase in greenhouse gas emissions that drive climate change. The UK is therefore working to understand, identify and support patterns of economic growth that break this link between growth and rising emissions. This is a very new area of work, and very little information exists. The UK has taken a lead in funding research into what low carbon growth can look like in developing countries, and what policy frameworks are needed to bring this about (see Box 7). Our approach is to focus on opportunities opened up by low carbon growth and to support developing countries to seize those opportunities.

BOX 7: UK-FUNDED RESEARCH AND ANALYSIS ON LOW CARBON GROWTH

—  The UK has funded studies in China, India and Brazil through the Centre for Clean Air Policy
http://www.ccap.org/docs/resources/62/CCAP_Developing_Country_Project-Synthesis_Report_Nov_2006_.pdf]

—  The UK has contributed £3.4 million to the World Bank's trust fund for the CEIF and much of this has contributed to the cost of the studies in China, Brazil, India, Mexico and South Africa organised by the World Bank.

—  The UK has funded the Regional Economics of Climate Change Studies (RECCS), which have been seeking to explore alternative mitigation scenarios for key countries and developing regions and the costs and benefits of adaptation.

Developing Country Challenges

63. A certain amount of mitigation—through improving energy efficiency—will actually help promote economic growth and so low carbon development. Beyond that, developing countries face uncertainties working out what the optimal low carbon trajectory is for them. Developing countries do not know how much mitigation is in their own interests and how soon or by how far they may be called upon to mitigate[8] (see section 2 on negotiations). Countries are concerned that many actions or technologies to reduce their emissions are very costly, and that unless they can find external finance to cover these additional costs, then mitigation would require them to reduce spending that could otherwise promote or sustain economic growth.

64. This leaves developing countries, and middle income countries in particular, with a dilemma. They are reluctant to mitigate sooner than they need to because it may well be at the expense of economic growth. Moreover, it may also be more expensive than later mitigation, as they can expect the cost of new technologies to fall. But, pursuing business as usual patterns of growth risks locking them into high carbon infrastructure (in eg power or transport sectors) which have economic lives typically lasting decades. If, as many can expect, they need to take action on their emissions in coming decades, then this new, high carbon infrastructure will call for costly retrofitting or early retirement.

65. Much of the UK's work on low carbon development will help developing countries better understand the dilemma they face and so help them make better informed decisions.

Promoting low carbon growth through technology and trade

66. The extent to which developing countries can promote low carbon growth will be dependent upon the technology available to them. Whereas some countries will develop their own technical solutions, most will have to attract and diffuse technology from other countries. It is expected that much technology transfer and diffusion will take place between private companies. Both carbon finance and, potentially, international trade are therefore relevant to this.

Technology

67. Many of the technologies needed to decouple emissions from economic growth already exist. Most, however, currently cost more than conventional fossil fuel based options, although this difference decreases when lifetime costs are considered.

68. The World Bank estimates that the additional cost of lower carbon technologies in the power sector alone will be in the region of $30 billion a year in non-OECD countries. At present the additional private and public costs to developing country economies are met by IFI and donor grants and loans, carbon finance (such as through the Clean Development Mechanism), domestic borrowing or increased prices for consumers, but these are unlikely to be sufficient on their own.

69. The importance of technology policy to long-term climate change mitigation objectives is increasingly recognised. Both developed and developing countries need to develop, adapt and deploy a wide range of new and existing low carbon technologies, many of which will create new growth and job opportunities for developing countries. However, the technology debate within the UNFCCC negotiations is focused primarily on the issue of "technology transfer", with highly polarised views between developed and developing countries on what this means. At one end is the view that developed countries should provide unconditional support for financing new pieces of kit in developing countries. At the other end is the expectation that developed countries should have total control over all financial expenditure in developing countries.

70. The UK's work on this area aims to reframe the debate on technology transfer by developing a clearer understanding of the importance of technology policy in achieving our long-term mitigation objectives, and the role of developing countries, and development institutions, in delivery. Lord Stern argues that alongside getting a robust international price for carbon, technology policies are needed to incentivise private sector-led innovation, demonstration and rapid deployment of existing new technologies. The UK is working closely with development partners to bring forward fresh ideas for what a future technology agreement should look like, and how it can be made to benefit developing countries. This will need to cover issues such as the coordination of global RD&D (particularly for technologies considered to represent a significant "global public good", such as CCS), greater collaboration with developing countries on new technology development, treatment of intellectual property rights (IPR), and greater progress on international product standards.

International Trade

71. One of the most fundamental ways in which the UK can support environmentally sustainable development is through reforms to international trade policy. Most goods traded with developing countries are derived from natural resources, providing opportunities to promote the sustainable use of those resources while also ensuring a fair deal for the poor.

72. Trade has a significant role to play in low carbon development by facilitating and accelerating the development and diffusion of low carbon goods, services and technologies. The liberalisation of the global market for low carbon technologies and other environmental goods and services can minimise transaction costs for users of these technologies and incentivise investments. For example, the WTO Committee on Trade and Environment associated with the Doha Development Agenda is looking at ways to reduce tariff and non-tariff barriers for a range of low carbon products, such as wind turbine parts and photovoltaic cells. Removing tariff and other barriers encourages diffusion of sustainable technologies, the skills needed to use them and further innovation.

73. The UK is working to ensure that the global framework of trading rules is consistent with the development of a low carbon economy, by ensuring a clear and consistent relationship between global trading rules and international environmental rules and agreements, including a post-2012 framework. In taking forward the trade and climate change work, the UK has a three pronged approach:

— Expanding the global knowledge base on trade and climate change through research programmes with i) Chatham House research on border tax adjustment, standards, IPR, special economic zones technology needs of non-BRICS; ii) The International Institute for Sustainable Development (IISD) on fossil fuel subsidies, and; iii) the International Centre for Trade and Sustainable Development (ICTSD) on the run up to Copenhagen.

— Supporting developing country networks and capacity through ICTSDs global platform on trade and climate change.

— Influencing the developed and developing world at the political and business level through political engagement on trade and climate change in the run up to Copenhagen.

74. The UK has established a cross-government Trade Policy Unit to increase coherence in Trade and Development policies. The Trade Policy Unit's priorities for Trade and Climate Change include:

— Promoting concepts (eg Low Carbon Zones) that can complement the goals of Copenhagen;

— Reassuring business that tackling climate change can be compatible with competitiveness;

— Seeking to liberalise trade in low carbon goods through Doha and FTAs (or potential stand-alone/pluri-lateral agreements);

— Developing a better understanding of perceived/real barriers to technology transfer including IPR and working to reduce concerns;

— Promoting the benefits of harmonised standards that are mutually acceptable to developed/developing nations; and

— Using existing fora and mechanisms to promote trade measures that support our climate change objectives—this includes WTO, EU, FTAs, Multilateral Environmental Agreement, World and EU standard setting bodies, the World Intellectual Property Organisation etc.

How else is the UK helping to deliver low carbon development and growth?

75. The UK is working to better understand low carbon development, to help reduce the uncertainties developing countries face, and to help them begin to respond to the challenges. This work takes place at a number of levels—nationally, bilaterally and multilaterally—and with a range of different actors:

How we work in Whitehall

76. In Whitehall, DFID and OCC have been collaborating on understanding what low carbon growth is likely to mean in practice for different types of developing countries, including through a joint stocktake of studies into low carbon growth (most either directly or indirectly HMG-funded—see Box 7).

77. We work closely with the UK academic community and with NGOs, funding research and drawing on the research evidence base to inform policy.

How we work bilaterally

78. The UK is actively working on low carbon growth with rapidly industrialising countries (eg Brazil, China, India, Indonesia, South Africa). In these countries our priorities are to engage with the host government on issues such as low carbon growth, their participation in the Clean Technology Fund (see below) and preparation of their country investment plans, and incorporating low carbon development objectives into our bilateral programmes.

79. In low income countries where DFID has a presence, we are working to mainstream low carbon development thinking into our country programmes. In Malawi, for example, we have recently inputted to the energy chapter of the Country Economic Memorandum. Energy emerged as a major constraint to growth in Malawi, and we have worked with the Government of Malawi to explore a number of low or zero carbon options for expanding power provision in a way that is complementary to the country's broader objectives on power sector reform.

How we work multilaterally

80. The Clean Energy Investment Framework (CEIF), set up by Multilateral Development Banks, has as one of its goals to help accelerate public and private investments in clean energy. It has started to stimulate the increased finance needed to make sustainable energy investments more viable propositions. At the G8 this summer, Summit Heads welcomed the forward programmes of the MDBs, which are expected to result in at least $117 billion over the next three years in new global energy investments, including leveraged financed from private sector sources.

Since 2006, the UK committed $30 million to support the MDBs deliver their Clean Energy Investment Frameworks.

81. The UK has played a pivotal role in the design of the multi-donor, World Bank administered, Climate Investment Funds, or CIFs (see Box 8). The UK supported the World Bank and worked with other donors to design and establish the Funds to meet the objectives of providing co-ordinated short term finance to tackle the climate challenge and to pilot approaches for the longer term. The UK £800 million Environmental Transformation Fund—International Window (ETF-IW) will part capitalise these funds. The funds represent collaboration between Multilateral Development Banks (that will act as implementing agencies), donors and recipients to address the climate change learning and financing gap between now and 2012. They have been designed to complement and support other key initiatives including the Adaptation Fund (created under the UNFCCC), the Global Environment Facility and the UNFCCC, which will play an important role in the governance of the funds. The funds avoid climate based conditionality and include a sunset clause so that they do not pre-empt future financing arrangements.

BOX 8: THE CLIMATE INVESTMENT FUNDS (CIFS)

The CIFs are comprised of: the Strategic Climate Fund—with spending programmes on adaptation (the Pilot Programme for Climate Resilience (see section 4, Box 13); forestry and renewable energy; and the Clean Technology Fund, which will stimulate ambitious clean energy projects by topping up existing finance from public and private sources. The Strategic Climate Fund will provide a forum to receive lessons from the different programmes, to be discussed and disseminated to inform the development community and the climate change negotiations. The funds were approved by the World Bank board in July 2008, endorsed by the G8 at the Hokkaido Summit, and now have $6.1 billion in pledges from 10 donor countries. The funds' design includes an innovative governance structure: each fund has a Trust Fund Committee and each programme a Sub-Committee, all of which have equal representation from donor and recipient countries with decisions on the use of funds made by consensus. Activities carried out under the CIFs will be country-led and integrated in countries' development strategies.

82. The UK is working to encourage the MDBs to make the most of the CEIF and CTF to support the more ambitious goals of their client countries, shifting their business away from continued financing for run-of-the-mill high carbon emitting projects. MDB concessional finance is a form of public subsidy giving it a special place in energy policy. Increasingly we will be looking to the MDBs to set an example in the standards they apply.

83. In addition to new capital resources, we have engaged with the World Bank Group on the development of its Strategic Framework on Climate Change, which was agreed at the World Bank's Annual Meetings in October 2008. It includes new targets on increasing lending to cleaner energy projects. It provides a framework for the integration of climate actions into the World Bank's country, regional and sector strategies and operations. We will continue to push the World Bank and the other MDBs to go further. We are also providing targeted resources to support new climate change posts within the MDBs.

84. Finally, we are working to ensure that our annual contribution to the Energy Sector Management Assistance Programme (ESMAP), which is housed within the World Bank, is used to support the integration of low carbon development objectives into its research and analysis. ESMAP plays an important "think-tank" role within the World Bank Group and beyond, and will be key to mainstreaming low carbon developing thinking into MDB lending operations.

SECTION 4: ADAPTATION

85. Just as climate change threatens development, development is the most credible response to the impacts of climate change. Prosperity and economic progress are the best protection for vulnerable communities. Countries with well-educated people, good infrastructure and the wealth to cope with climatic shocks will fare best.

86.  But development in a changing climate needs to factor in climate risks, recognising that climate change will be felt through sectors that rely on natural resources, and which form the basis of people's livelihoods. Additional actions may be needed in certain sectors, and to assist particularly vulnerable people.

BOX 9: APPROACHES TO ADAPTATION

Adaptation means different things to different people. The Intergovernmental Panel on Climate Change (IPCC) describes climate change adaptation as "adjustments or changes|that might ultimately enhance resilience or reduce vulnerability to observed or expected climate change". DFID has evolved this definition and has identified three distinct strands to climate change adaptation; targeted adaptation, vulnerability and resilience. An effective approach to adaptation combines all three.

Targeted adaptation. Targeted adaptation involves implementing discrete and specific measures in anticipation of expected climate change impacts eg activities such as risk assessments on the impact of climate change on planned and existing infrastructure, and amending of building and planning regulations eg building on flood plains may need to be restricted.

Vulnerability. Vulnerability focuses on assisting particularly vulnerable people through additional actions such as:

—  Disaster Risk Reduction aims to make poor people less vulnerable to natural hazards and more resilient to all types of disaster.

—  Livelihood diversification is also an example of a response to vulnerability, as the poor often rely on a single source of income.

—  Social protection, including short term safety nets and longer term measures to combat poverty. Safety nets, such as cash transfers or food aid are important mechanisms to protect poor people from the impacts of floods or droughts, allowing households to take initiatives that incur some risks, but bring potentially higher returns.

Many of these approaches to vulnerability contribute both to longer term climate resilience and to supporting the most vulnerable.

Resilience. Resilience refers to a society's or ecosystem's ability to withstand environmental shocks. Effective and rapid development is the best adaptation—strong institutions, education, health, infrastructure and a diversified economy all strengthen resilience. But resilience also requires a recognition that climate change will be felt through sectors that rely on natural resources, and which form the basis of people's livelihoods. Examples of interventions include: improving national capacity around water resource management; effective fisheries policies; considering climate impacts in agricultural policy-making, including around livestock; and addressing the causes of deforestation and forest degradation.

87. Integration of climate resilience into development planning is the most effective way for countries to adapt. National governments in developing countries need to make adaptation an integral part of development planning—rather than treating it separately or as an "add on".

88. The range of adjustments countries are likely to have to make in response to climate risk is show in Box 9.

89. In order to achieve climate resilient development, developing country governments need the following:

— Information on what climate change impacts will look like for them, and what tools are available to respond with;

— Support for capacity and incentive building so that they can respond to the challenge of adaptation, and are given incentives to do so in a way that integrates adaptation into core development planning;

— Finance that helps meets additional costs of making development climate resilient in poorest countries from adequate and predictable sources, and allocates it according to need. There is currently too little finance available for adaptation to climate change.

— International institutions reform (such as the UN and multilateral development banks), where each institution plays to its comparative advantage.

90. The international community has a role to play in all four of these areas. In the short-term this will involve supporting developing countries within the international negotiations, and pressing for a deal at Copenhagen that meets the needs of the poorest and most vulnerable. In the longer-term, this means working on the ground to understand more about how adaptation works best in practice, and supporting the implementation of the global deal.

The UK is increasing access of developing countries to climate information and tools

91. We support the provision of better climate information. For instance, we have provided consultancy and advice to help develop the Climate for Development in Africa (ClimDev) Programme, to improve information on the impacts of climate change across Africa. This would help countries identify actions they need to take to build resilience and adapt. The programme would be implemented by the African Union Commission (AUC), United Nations Economic Commission for Africa (UNECA) and the Africa Development Bank, and we anticipate it would start in early to mid 2009.

92. Another example is UK support for the South Asia Water Initiative (SAWI) which brings together seven countries that share rivers that drain from the Himalaya (Afghanistan, Bangladesh, Bhutan, China, India, Nepal and Pakistan). The initiative aims to improve cooperation over water sharing through building knowledge, relationships and institutions. We are supporting improved access to climate change knowledge and approaches in individual countries too, including Nepal, Bangladesh and Pakistan.

93. We support a range of regional and sectoral research initiatives, such as £130 million of core support to the 15 international research centres of the Consultative Group on International Agricultural Research (CGIAR). This will support a range of programmes addressing adaptation to climate change, like breeding drought-resistance maize in twenty countries with potential direct benefits to over 320 million people. We are also supporting a research and capacity development programme in Africa—see case study 1 (Box 10) below.

  94.  The true costs of adaptation are poorly understood, so the UK (DFID) is jointly funding work with the World Bank, the Netherlands and Switzerland on the Economics of Adaptation. This study is looking at Bangladesh, Vietnam, Ethiopia, Mozambique, Ghana and Bolivia. Results are due in the second half of 2009, and will be used to help inform the UNFCCC negotiations in Copenhagen next December. We are also supporting initiatives at country and regional level, such as an economic and social analysis of the costs of climate change to Afghanistan, South-East Asia, the Caribbean, Brazil, Central America, South America and East Africa.

BOX 10: CLIMATE CHANGE ADAPTATION IN AFRICA (CCAA)—RESEARCH AND CAPACITY DEVELOPMENT PROGRAMME

This five year programme is helping African researchers and policy makers to identify practical ways that rural and urban people can adapt to climate change. For example, this includes looking at how to cope with more extreme weather in agriculture and shifting patterns of disease such as malaria. DFID is contributing £24 million to the programme. Examples of its work are:

—  How small scale farmers in Ethiopia, Kenya, Sudan and Tanzania can modify working practices to cope with increased drought.

—  How farmers in Zambia could adopt new agricultural practices, such as using different crop varieties and improved technologies to deal with a more variable climate.

—  Malaria epidemic prediction in Kenya and Tanzania in response to changes in climate so that health officials can intervene more effectively.

95. The UK is also currently working with international partners to enable delivery of a set of research and tailored advisory services on climate change and development. The aim is to enable developing countries to access and use high quality, timely, and relevant research and information on climate change, to build the capacity of developing countries in climate research, and to provide the basis for transformational policy-making on adaptation and low carbon development.

96. We will ensure that our approach is flexible enough to adapt to and support any global framework emerging as a result of the Copenhagen negotiations, and will be subject to regular review.

Capacity-building and incentives

97. Developing country governments need the capacity to do the following if they are to respond effectively to the challenge of adaptation:

— assess risks and vulnerabilities, develop adaptation options, prioritise the most cost effective ones, and integrate them into core policies, in consultation with key stakeholders; and

— ensure that eventually all parts of government are considering climate risks alongside other risks and opportunities when they do their planning, and incorporate risk mitigation actions into all climate sensitive activities.

98. The UK is supporting capacity-building in developing countries on all these fronts through multilateral and bilateral channels. At the multilateral level, we are the second largest donor to both the Least Developed Countries Fund (LDCF) (£10 million over 2008-09) and the Special Climate Change Fund (SCCF) (£10 million over 2005-07). These are international funds held under the financial mechanism of the UNFCCC (the Global Environment Facility, or GEF). The LDCF is helping the poorest developing countries develop National Adaptation Programmes of Action (NAPAs), and the SCCF supports adaptation activities in developing country Parties to the Convention. We are also giving £140 million over 2006-10 to the GEF Trust Fund, which focuses on global goods.

99. As a board member, and through start-up funding, we are also supporting the design and implementation of the Adaptation Fund. This is a new instrument under the UNFCCC which will use money from international carbon trading (a 2% levy on the Clean Development Mechanism) to provide additional finance for countries' adaptation priorities. We are working hard to get the Fund up and running and to move it from project support to a more programmatic approach.

100. The UK works bilaterally to promote an integrated approach to adaptation and development planning. In some countries we are working bilaterally to help countries go beyond vulnerability assessment and a list of urgent adaptation priorities, to a more comprehensive adaptation strategy and putting in place institutions to oversee this. For example:

— In Malawi, DFID is working with UNDP and Norway to support the government in developing its Strategic Framework on Climate Change. This will build on the government's NAPA and co-ordinate and drive existing and new government and donor action on climate change. We will support the government to get better information about climate risks, gather practical experience of adaptation and low carbon development and use then use this information to facilitate dialogue with a range of stakeholders in developing the Strategic Framework.

— In Ghana, DFID is working with the World Bank, Netherlands, France and the EC to support the Ghanaian Government to plan programmes in forestry, environmental protection and minerals. This includes developing a national strategy to cope with impacts of climate change, eg on cocoa production and coastal infrastructure.

— In Tanzania, DFID is helping build government capacity in climate change and environment as part of a UN-led joint donor programme.

— In Bangladesh, DFID supported the Government to develop a climate change strategy and action plan that explicitly sets out the need to integrate this work into mainstream development planning. The strategy will be supported by donors through a multi-donor trust fund and by the multilaterals with IDA. These funds will be overseen by a high level steering committee, which will seek to coordinate climate change projects supported by different forms of funding. It is expected that eventually this will lead to complete integration of climate change in development planning. See case study 3 for more information.

— In Nepal, we are funding the government to develop its NAPA with UNDP and Danida. We are encouraging them to learn from the experience of other countries' NAPA processes, and to produce a high level strategic framework for action, as well as immediate priorities in a NAPA. It is expected that government, civil society and donors will then be able to harmonise their support behind the framework.

101. The UK believes that the global deal should include support for capacity building on adaptation, and that the way finance is provided should allow countries to move from a project approach to adaptation (as illustrated by NAPAs), to a more strategic, national plan (as Bangladesh has recently done), and eventually to full integration of adaptation into national planning and budgeting. This experience will inform long-term adaptation practice in country, not least through lessons that will inform the global deal in Copenhagen next year. The global deal should build on the lessons learned from aid effectiveness, enabling country-led planning, and supporting the integration of adaptation responses into national development planning and budgets. The UK is testing this transformational approach to adaptation practice through the Pilot Programme on Climate Resilience (PPCR—see below and Box 13 for more detail).

Adaptation Finance

102. The UK currently provides finance for adaptation through multilateral and bilateral channels. At the multilateral level, we fund the UN through the GEF, LDCF and SCCF and (through our start-up funding) the Adaptation Fund.

103.  We also contribute funding through our IDA contributions to the World Bank (International Development Association lending, which focuses on the poorest countries). Our IDA contribution was significantly scaled up last year (£2.134 billion, against a contribution of £1.430 billion in the previous replenishment round), partly in recognition of the need to respond to climate change impacts through development aid.

BOX 12: SUPPORT BANGLADESH'S 10 YEAR CLIMATE CHANGE STRATEGY

—  The UK helped Bangladesh develop a 10-year Climate Change Strategy and Action Plan (CCSAP) building on the National Adaptation Programme of Action (NAPA). CCSAP was launched at the Climate Change Conference co-hosted by UK (DFID) on 10 September 2008.

—  UK support through UNDP provides technical assistance to the GoB Climate Change Cell, which facilitates capacity building across Government and civil society, and action research on climate change.

—  By lifting 60,000 island homesteads onto raised earth platforms over the past two and a half years, around 300,000 people and their possessions have been protected from severe monsoon floods. These raised homesteads are the first line of defence against severe floods that will occur more frequently due to climate change.

—  Through its community based interventions, the Comprehensive Disaster Management Programme helped some 500,000 vulnerable people by raising cluster villages above high flood levels, building flood and cyclone shelters, building embankments, and providing training on climate resilient livelihoods.

—  DFID Bangladesh is one of the first country offices to pioneer a screening study to identify climate vulnerability of its existing portfolio. Some of the recommendations of this study are already being implemented (eg, plinth raising in the chars).

—  DFID Bangladesh in collaboration with FCO, DECC and DFID's Policy and Research Division, has developed an HMG Climate Change Strategy for Bangladesh.

BOX 13: PILOTING TRANSFORMATIVE APPROACHES—THE PILOT PROGRAMME FOR CLIMATE RESILIENCE (PPCR)

The UK is providing multi-donor support for lesson-learning on adaptation through the PPCR. Approximately one third of the UK's £800 million Environmental Transformation Fund (ETF) will be allocated to the PPCR, and supplemented by funds from other donors. It will:

—  deliver country-led programmatic funding at scale in five to ten highly vulnerable countries to enable them to go to the most advanced level—integrating resilience into core development planning and budgeting;

—  provide crucial lessons on how to invest in climate resilience through national development planning, to inform the evolving operation of the Adaptation Fund;

—  demonstrate that a scaled up, country-led, mainstreamed approach is possible and effective, influencing how a post-2012 deal will support developing countries to adapt to climate change.

104. Our bilateral development assistance, particularly on natural resource management and disaster risk reduction, also helps to build resilience amongst poor communities to the impacts of climate change. We are also working with the private sector to help raise awareness about why it is critical for businesses to increase private investment in adaptation in developing countries (eg from ensuring that businesses and the jobs they support are resilient, to the provision of insurance). We emphasise how the actions of the private sector can be designed in collaboration with local communities and stakeholders to improve their adaptive capacity.

105. In terms of the global deal, we want to see a financial package agreed that adheres to the principles of effective, efficient, equitable financing, with a diverse range of sources to ensure adequate, predictable, sustainable financial flows to the developing world. We also want to see measures in place help leverage the role and effort of the private sector and overcome barriers to this.

Reforming Institutions

106. At the institutional level, the UK is supporting the multilateral development banks (MDBs) and the UN to ensure that they are able to provide the right kind of support to developing countries in adapting to climate change. For instance, we are supporting mainstreaming of adaptation within UNDP and the Asian Development Bank. We are calling for the international institutions such as the UN to take a hard look at what their agencies' strengths are, and to avoid duplication of roles. We are also looking at the future institutional architectural needs of the post-2012 regime, and using our influence to encourage both the World Bank and UN system to continue their reform efforts so that they are effective, trusted institutions that developing countries will be able to work with to face the challenges ahead.

107. We are pressing for the Copenhagen deal to clearly set out who should do what, and strongly support the catalytic role of the UNFCCC.

108. In Mozambique DFID is working with Save the Children to help communities in the Zambezi flood plain improve resilience to flooding that will be made worse by climate change. The programme will develop alternative sources of income to traditional farming and fishing, such as processing agricultural products. This will help communities cope with increasing shocks and adapt to change.

109. DFID is helping fund insurance for Malawi to purchase and distribute international grain in the event of significant drought. A payout is triggered based on severity of the drought when future maize production is predicted to fall below certain levels. Similar insurance schemes have been used in advanced agricultural markets but not in poor countries.

SECTION 5: SUSTAINABLE DEVELOPMENT IN A CHANGING CLIMATE: SECTORAL IMPLICATIONS

110. Improving management at the sector level is key to sustainable development. Three out of four people surviving on less than a dollar a day live in rural areas, where their livelihoods depend on the natural environment. This section sets out examples of how the UK is working on different sectors and demonstrates how our understanding of climate change, as articulated in the previous three sections, informs our work at the sectoral level.

Agriculture and food

111. Climate change will have far-reaching consequences for agriculture that will disproportionately affect the poor. Greater risks of crop failures and livestock deaths are already imposing economic losses and undermining food security and they are likely to get more severe. According to the IPCC, by 2080, an extra 600 million people worldwide could be affected by malnutrition because of climate change.

112. The recent food crisis has made it clear that the international community has paid too little attention to productive agriculture and its links to the natural environment. We need to invest more in agriculture and the UK is committed to global efforts to double the agriculture production in Africa, double agriculture growth rates in Asia and increase investment in international agricultural research. Since April the UK Government has made a number of commitments to address both long and short term problems and to improve the security of the most vulnerable, and tackle high food prices. UK commitments to date total £868 million. The UK will spend £400 million on agricultural research over five years and a significant proportion of this will be directly related to climate change. For example, the UK supports the Consultative Group for International Agricultural Research (CGIAR) which is developing a major new programme devoted to climate change and agriculture (see Box 13b).

113. The UK's approach to agriculture policy aims to address many of the constraints to farmers' development and to support the intensification of agriculture in the context of a changing climate. This includes:

— Increasing access to fertile land, fertiliser, and seeds;

— Developing and disseminating appropriate technologies;

— Supporting markets and trade;

— Supporting national policies and strategies that focus on rural and agricultural growth;

— Securing an international system which works more effectively.

BOX 13B: CONSULTATIVE GROUP FOR INTERNATIONAL AGRICULTURAL RESEARCH (CGIAR)

CGIAR is a partnership of national governments and international organisations supporting 15 international research centres with a mission "to achieve sustainable food security and reduce poverty in developing countries through research and related activities in agriculture, forestry, fisheries, and the environment". It is estimated that without the CGIAR, world food production would have been 4-5% lower, developing countries would have produced 7-8% less, world food and grain price would have been 18% to 21% higher; and, 15 million more children would have been malnourished[9].

The UK has been working with its partners to reform the CGIAR so that it can deliver more research and respond to today's challenges including climate change. This includes setting up a $1 billion p/a fund, which will be used to support research such as:

— Breeding drought-resistance maize in 20 countries

— Scaling up bio-fortification of staple crops

— Increasing yields in the context of climate change

— Ensuring women's full participation in agricultural innovation

114. The UK funds agriculture and rural livelihoods programmes in more than 20 countries and many of these programmes involve some element of "adaptation" to climate change. Examples of support include:

— Support to the Malawi Governments fertiliser and seed subsidy programme. This contributed to a harvest surplus of one million tonnes in 2007.

— Support to the Government of Rwanda to develop their national strategy for agricultural transformation, making more effective use of the limited agricultural land.

— Support to a climate change programme in Bangladesh (see Box 12), which will enable the most vulnerable communities to improve their agricultural practices so that they are better able to cope with the impacts of climate extremes.

— Programmes on improved access to information (eg: CLIMDEV), aimed at improving access to climate information so that farmers can adjust their planting dates and crop choices to changing climate conditions.

115. Internationally, the UK works with the UN High Level Task Force on Food and Agriculture, which addresses humanitarian needs, short term social protection and longer term strengthening of support to sustain able agriculture and rural development. The UK has provided leadership in establishing the Global Partnership for Agriculture and Food (GPAF) needed to take this agenda forward.

116. DFID plans to review its Agricultural policy and produce a new strategy in 2009.

BOX 14: FOOD MILES AND BIOFUELS: CAN DEVELOPED COUNTRIES' MITIGATION EFFORTS HAVE ADVERSE IMPACTS ON DEVELOPING COUNTRIES?

It has been suggested that we need to reduce "food miles" as the distance food has travelled is a measure of whether the food we eat is sustainable. This suggestion harms sales of food from developing countries. Almost a million African farmers and their families rely on the fruit and vegetable trade with the UK, and depend on their earnings to get their children through school and to care for them when they are sick. Research has shown that "food miles" are an incomplete way of judging whether the food we eat is sustainable and not a reliable indicator of the environmental impact of food transport. The Government is working towards a global system for pricing carbon that will eventually ensure the price of food and other products fully reflect their impact on the environment. DFID and DEFRA work closely on the issue of food miles.

There has been concerns about the impacts of biofuels on food prices—which will affect especially the poor who already spend a large proportion of their income on food. Biofuel production has had some impact on the prices of some food commodities, particularly products such as oil seeds. But biofuel production by no means explains all the price movement we have seen in the last year.

As the independent Gallagher Review into the indirect effects of biofuels made clear in the summer, biofuels can and should have a role to play in any international low carbon energy response. But they provide no silver bullet, and caution should be applied in their uptake until we have a clearer understanding of their impact on carbon emissions and food prices.

As part of its effort to address global food insecurity, the UK is encouraging industry to move rapidly to the commercial development of new technologies which would allow the production of biofuels from non-food sources—so-called Second Generation Biofuels.

Water Resources Management

117. The Stern Report and the 4th Assessment Report of the IPCC state that the impacts of climate change will be felt mainly through water—with more frequent, and more intense, floods and droughts. It is the poor who overwhelmingly suffer from this: they are most at risk from flooding and drought and typically suffer from limited access to water for agriculture and other productive uses.

118. The cost implications of poor management of water is huge: in 2007 flooding in Bihar and Bangladesh affected 70 million people, caused 4,500 deaths and resulted in the loss of 7.5 million hectares of productive cropland. The floods in Kenya of 1997-98 led to a drop of 11% of GDP and the drought of 1998-2000 resulted in a drop of 16% in GDP.

  119.  In recognition of this, the UK has significantly increased its focus on the water sector. DFID's new water and sanitation policy[10] (see Box 14b) emphasises the centrality of improved water resources management to adapt to climate change, boost economic growth and improve security. In the policy, DFID commits to providing £1 billion over the next five years for the sector in Africa and to spend an additional £30 million on improving water resources management in Asia and Africa in light of climate change.

BOX 14B: UPDATED DFID POLICY "WATER: AN INCREASINGLY PRECIOUS RESOURCE; SANITATION: A MATTER OF DIGNITY"

DFID launched an updated policy of water and sanitation "Water: an increasingly precious resource; Sanitation: a matter of dignity" in October 2008. The updated policy identifies three key priorities for DFID:

—  A stronger focus on sanitation;

—  Improving water resources management to boost economic growth, cope with climate change and improve security; and

—  Advancing sector governance.

These priorities reflect that sanitation is marginalised, as noted by the IDC in their enquiry into sanitation and water in 20061. DFID is committed to ensuring adequate investment to get the world back on-track to meet the target.

Stern and the IPCC both note that much of the impact of climate change will be felt through water. The inability of poor countries to store water has a massive impact on overall growth and they suffer huge economic losses from drought and floods. Increasing water stress will increase the risk of conflict over water. DFID is committed to improving management of water within countries and on shared waters.

The countries furthest behind on the MDG targets for water and sanitation are those where governance is poor. Political will and policy frameworks are weak and there is little or no accountability and transparency. DFID will ensure improved sector governance is an objective of all its support in the sector.

120. About 30% of DFID spending on water and sanitation goes on water resources. Our objectives are to improve water resources management at country and regional levels and to ensure that the international architecture and support for water resources management is made more effective. We are focusing on ensuring that water management for key water uses such as food and energy supports economic growth and secures livelihoods for the poor in face of a changing climate.

121. We have made a commitment to integrate our work on water resources and climate change. This will mean that water resources projects address climate change and that adaptation programmes we support include water as a critical sector. For example, integrated water resources management will be a component in the recently announced climate change adaptation programme in Bangladesh.

122. There is an increasing focus for DFID on supporting regional or transboundary water management initiatives with the recognition that climate change creates greater risks of conflict over shared waters. Current examples include funding for the South Asia Water Initiative (SAWI) involving seven countries in Asia that share waters draining from the Himalaya (see Box 15). DFID also provides funding for the Southern Africa Transboundary Water Programme through a delegated cooperation arrangement with Germany. These new programmes build on our experience with the Nile Basin Initiative, which itself is increasingly targeting building resilience and adaptation to climate change. We are also looking into the development of further regional water management work in Africa.

123. A lot of the UK's support to water resources management is channelled through multi-lateral agencies, which provide much of the finance for water resources. We are developing new relationships with the World Bank through the Water Partnership Program that will allow us to improve the quality of their lending and to mainstream climate change within future water resources investments. This will include addressing the development of hydropower as a lower-carbon form of energy, within the context of developing multi-use water storage that is resilient to climate change and supports long-term economic growth. We are also providing support to the Africa Water Facility in the African Development Bank and will use this as a mechanism to ensure greater focus on improving water management in light of climate change.

124. Improving the international architecture and support is critical to delivery of improved water management. There is no multi-lateral lead on water resources and there is poor coordination among donors and partner countries. In recognition of the urgency to improve this in light of climate change, we are currently working with WWF-UK to review the international architecture to identify how this can be improved. This will lead to a wider reform process involving the World Bank, UN-Water, Global Water Partnership (GWP) and other bilateral donors.

125. The role of water management in supporting climate change adaptation is central in a number of research programmes, such as the Ecosystem Services for Poverty Alleviation programme. We will also support smaller, targeted pieces of research, to improve our understanding of the impacts of and options for water management in light of climate change.

BOX 15 : SOUTH ASIA WATER INITIATIVE

About 1.5 billion rely on the rivers that drain from the Himalaya-Hindu Kush into South, East and South-East Asia. These rivers drive economic growth, support food security and, through hydropower development, they are the most obvious form of lower-carbon energy in a region in dire need of power.

Projections by the IPCC show that glacier recession in the Himalaya and the Tibet plateau will initially cause increased flooding and in the long term will reduce the amount of water available for almost two billion people.

The trans-boundary nature of rivers makes managing water more complicated as decisions require agreement between neighbouring states. The UK supports the South Asia Water Initiative (SAWI) facilitated by the World Bank, which was set up to address the need to improve cooperation over shared waters in the region. SAWI looks to improve the sharing of meteorological and hydrological information between countries and to create the space for a dialogue among representatives from Afghanistan, Bangladesh, Bhutan, China, India and Nepal. The dialogue process is showing results. Participants have articulated a 10-year "consensus vision" to achieve a more equitable distribution of water resources. A research and knowledge sharing programme has also been developed and will support multi-country projects.

Forest Management

126. Forests and their biodiversity provide critical elements of the livelihoods of 90% of the 1.4 billion people living in extreme poverty. They deliver a range of services that are important for human wellbeing, including the supply of food, medicines and fibre, plus soil regulation and air purification. The global overexploitation of forest ecosystems is leading to significant habitat fragmentation and loss of livelihood. Burning and soil exposure associated with deforestation and forest degradation is also a major source of GHG emissions especially in many developing countries, accounting for about 18% of global emissions[11]. Activities such as afforestation (planting to increase forest area) and reforestation (replanting of areas that were once forest) can help to remove carbon from the atmosphere through sequestration and storage of carbon in vegetation and soil. The Eliasch Review into the financing of forests[12] concludes that, at this rate of deforestation and tree planting, it will be impossible to keep carbon dioxide concentrations below dangerous levels. The Review estimates that the global cost of climate change caused by deforestation could reach $1 trillion a year by 2100 and that it would cost from $17-33 billion a year to halve emissions from the forest sector by 2030.

127. The UK's effort on international forestry is designed to deliver a number of strategic objectives in the areas of climate change, the natural environment, sustainable development and poverty reduction. Achieving these objectives requires us to address the market failures and poor governance which drive deforestation and undermine public goods and local livelihoods. Our approach can be summarised according to four broad areas:

Improving governance:

Knowledge and capacity development:

— Generate, share and promote better access to knowledge on key aspects of forestry, land use and climate change;

— Develop the institutional capacity of developing countries to: implement policy, market and governance reforms, to promote more sustainable production and consumption of commodities (eg timber, biofuels and palm oil), and to participate in reducing emissions from deforestation and degradation (REDD).

Addressing market failures:

Achieving coherence and scale:

BOX 16: COMMUNITY FORESTRY IN NEPAL

A transformation has taken place in the hills of Nepal within a generation. Forests previously owned by the government are now under the control of local communities. A DFID-funded initiative called the Livelihoods & Forestry Programme[13] is working with half a million households (11% of the population) to help them get the most out of their forests. That means more reliable access to the products they need for their daily lives and more opportunity to make money to pay for essentials. Women and other disadvantaged groups are now actively involved in the decision making that was previously controlled by a narrow elite.

BOX 17: ILLEGAL LOGGING AND FLEGT

Illegal logging is having a devastating impact on some of the world's most valuable remaining forests. Governments of some of the poorest countries in the world lose over £10 billion per year. The UK supports the Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan, which brings the development assistance of the EC and the influence of the single market to bear on this problem. Within the framework of bilateral agreements (Voluntary Partnership Agreement—VPA), the EU helps timber-producing countries to reform and enforce laws, promote greater transparency of information and build systems to verify that timber has been legally harvested. The EU has passed legislation to prohibit entry of products from partner countries that are not licensed as legal. Evidence of progress is being seen in terms of reduced levels of illegal logging, greater revenue collection and a major shift in the purchasing practices of European companies.

128. Sustainable and predictable resources are required at scale to provide positive incentives that replace the income forgone by individuals not deforesting, or for the utility services provided by sustainably managing them. The forest products industry accounts for about 10 million formal jobs and many times that figure in the informal sector. International trade in forest products is about US$ 270 billion p.a. of which developing countries account for about 20%.

129. While climate change presents a renewed premium on the conservation of forests, it is also a significant threat to the very large numbers of poor people who depend on forests for their livelihoods. Forestry institutions in many developing countries are ill-equipped to cope with projected inflows of capital. They lack the governance structures that are needed to regulate and distribute this money fairly. We need to strengthen forest tenure and use rights to protect the interests of the forest-dependent poor. Significant progress has been made on this front in the last 15 years, to the point where 27% of the world's forests are now owned or controlled by local communities and indigenous people. That process now has to be accelerated rapidly.

130. Changing the policies, the investments and the subsidies which often drive people to cut down forests is part of the story. Getting financial incentives to the people who matter on the ground is also important. We know how to make payments to remote farmers to give them an incentive to conserve their forests. The UK is now working to do this on the scale and in the timeframe that climate change science suggests are necessary.

Mineral Extraction

131. Mineral extraction can be an effective driver of growth, poverty reduction and sustainable development through the process of converting finite natural resources into more sustainable opportunities. However, mineral exploitation has also often been associated with conflict, corruption, social dysfunction and environmental degradation.

132. The focus of the UK's work on mining policy is to achieve the former and avoid the latter. This is progressed by encouraging the development of systems that ensure good governance, effective environmental and social management, the protection of rights and the equitable sharing of benefits throughout the life cycle of the mining process.

133. We do this multi-laterally, through mechanisms such as the Extractive Industries Transparency Initiative (see Box 1 section 1) or the Inter Governmental Forum for Mining, Minerals, Metals and Sustainable Development (see Box 18 below). We also work at the bilateral level with several countries. For example, DFID works to support the institutional and policy reform process of the mining sector in Sierra Leone, to develop the capacity to better manage the approaches of multinationals in exploiting uranium deposits in Malawi and to address private sector responsibility in the DRC's mining areas.

The UK supports the IGF, which was set up at the WSSD (2002). Through this Forum, 50 member (primarily developing) countries are sharing progress on improving the management of mineral wealth for their citizens' benefit. The Forum coordinates the national reporting of progress on improving the contribution of this sector to sustainable development. The 2010-11 session of the United Nations Commission on Sustainable Development (UNCSD) will scrutinise this progress and make recommendations for any future actions.

The Forum develops good practice in the improved governance of mineral resources. Of late this has included increased discussion of the role of developing countries (notably China and India) mining sectors in fossil fuel production—where the release of methane is estimated to be a greenhouse gas 23% more potent than carbon.

134. Through its contribution to the development of tools, such as the OECD DAC's Strategic Environmental Assessment, the UK has encouraged developing country partners to assess the implications of further fossil fuel development compared to other energy choices.

135. The majority of mining activity in many resource rich developing countries is not carried out by multinationals but by artisanal and small scale mining activities (ASM). The cumulative impacts of this scale of operation can compare with large scale operations and there is often conflict between the two. The artisanal dimension of the mining sector is often characterised by poverty, vulnerability, exploitation and poor environmental, health and safety practices. ASM is a growing phenomenon. The cause of this growth can be attributed to higher commodity prices but, anecdotally, it has also been attributed to land use changes possibly resulting from climate change impacts.

BOX 19: KIMBERLEY PROCESS CERTIFICATION SCHEME (KPCS)

The FCO and DFID, through EU representation, also support the work of the Kimberley Process Certification Scheme (KPCS) aimed at removing illicit diamonds from legitimate diamond trade. For the success of the KPCS to be durable, however, there is a need to complement the policing of the diamond trade with concerted action to address the root causes of the problem of "conflict" or" blood" diamonds—namely the development needs of artisanal miners and diggers and their communities. DFID has supported a KPCS Working Group on this issue. In addition DFID supports the work of the recently launched, multi stakeholder Diamond Development Initiative working at country level on the needs of impoverished and vulnerable miners and their communities.

Energy

136. Access to basic energy services, such as lighting and cooking, remains a significant development challenge, especially in rural areas of developing countries. A quarter of the world's population, about 1.6 billion people, have no electricity at home and some 2.4 billion rely on traditional biomass fuels for cooking and heating. They are deprived of a host of modern service made possible by electricity and are exposed to the significant health hazards of indoor smoke from low quality fuels.

137. The 2002 WSSD recognised that improved access to energy is essential to the achievement of the Millennium Development Goals (MDGs). The UK is responding by:

— Co-funding (£0.95 million) the Policy Dialogue Facility of the EU Energy Initiative to help countries design energy access strategies;

— Providing core funding (£0.5 million in 2007) for the World Bank's Energy Sector Management Assistance Programme (ESMAP). This works with developing countries on policies to secure sustainable energy services to support growth and reduce poverty.

— Providing £2.8 million to enable ESMAP to work in about 12 countries to promote the development of small and medium enterprises in energy services.

— Supporting the Global Village Energy Partnership (GVEP), a UK-based NGO working to develop small private enterprises in energy services, especially in Africa and South Asia. The UK started commenced its four-year, £4 million support programme in 2007 and this has now attracted commitments of about £25 million from other donors.

138. Economic growth in many developing countries, especially in Africa, is constrained by unreliable and inadequate electricity supplies. This damages productive capacity and discourages investment, with businesses forced to use expensive emergency generators. All developing countries are striving to increase their investments in energy infrastructure in order to meet rising demand, which is forecast to increase by 45% between 2006 and 2030. About 90% of this increase will come from developing countries, and under a business-as-usual scenario, fossil fuels, such as coal, oil and gas, would be the primary sources. The potential consequences for climate change are a cause of great concern. As discussed in section 3, there is an urgent need to find ways of meeting the increasing demand for energy services while radically reducing global energy related CO2 emissions. We need to help developing countries move onto low carbon development pathways that maximise the opportunities, while minimising the risks, associated with the transition to a low carbon energy supplies and services.

139. The UK is working to mobilise new and existing finance to help support this transition—in particular through the Climate Investment Funds (see Box 8 section 3)—and we are steadily integrating low carbon development thinking into our multilateral and bilateral programmes. For example, we are engaging with the MDBs to ensure they adopt more challenging targets on clean energy, and we are working through a number of our country offices to support low carbon growth—including China, India, Indonesia, Malawi, and Tanzania.

Transport

140. The transport sector is estimated to contribute about 14% of global emissions. Three quarters of these emissions are from road transport, while aviation accounts for around one eighth (or 1.6% of global emissions) and rail and shipping make up the remainder. Total emissions from transport are expected to more than double in the period to 2050, making it the second-fastest growing sector after power[14].

141. Road transport is the dominant transport mode for both people and goods in most countries. 34% of the rural population in sub-Saharan Africa has access to transport systems; in South Asia 57% have access.[15] Nearly two-thirds of African markets are effectively isolated from national and world markets because of poor market access. In contrast, substantial investments in Indonesian roads over the last 30 years have allowed poor households to successfully enter the market economy[16]. Ensuring that poor people have access, through transport systems, to markets and social services such as clinics and schools, is an important part of the international development agenda.

142. As part of the Clean Energy Investment Frameworks, which the UK is supporting, the multilateral development banks are actively working to address the contribution of transport in developing countries to climate change. Efforts include the Sustainable Transport Initiative of the Asian Development Bank; the World Bank's new Transport Business Strategy 2008-12 which will seek to address the transport sector's role in both mitigation and adaptation; and EBRD investments in sustainable urban transport which almost doubled in 2007 from the previous year.

143. It is likely that there will be increasing pressure to limit or reduce emissions from international aviation and shipping and developing countries may be particularly affected by this. The UK is working to ensure that the potential impact of such restrictions is fully understood. and integrated into our country programmes.

Tourism

144. Tourism can play a significant role in economic growth[17]—but it also contributes to between 5 and 14% of total global GHG emissions[18] and can have a detrimental impact on the environment and culture of host communities. To reduce the negative impact of tourism on the environment and local communities, the UK is committed to sustainable tourism both at home and abroad and it is working to determine what sustainable tourism can mean in practice:

— Tourism is also one of seven task forces established under the WSSD's French-led "Marrakech Process", which focuses on sustainable consumption and production. The UK inputs into this group through DEFRA.

— The UK is member of a range of international and regional fora, including the European Travel Commission (ETC), the World Travel and Tourism Council (WTTC), the Pacific Asia Travel Association (PATA), and the EU and OECD Tourism Committees.

145. The UK is also working bilaterally to promote sustainable tourism in developing countries. Examples include:

— DFID has worked directly with the Government of South Africa to promote the concept and principles of fair trade in tourism, so that communities and workers benefit and the industry is more sustainable.

— The FCO is supporting the establishment and piloting of a Green Rating system for the hospitality industry in South Africa (with an initial focus on the Western Cape) which aims to be operational for the 2010 World Cup.

— The DEFRA-led Sustainable Development Dialogues are supporting a programme in Mexico to help communities benefit from the economic opportunities of tourism and to minimise the negative impacts on the local and indigenous cultures, biodiversity and the environment. The programme also aims to develop a sustainable tourism model that can be recreated in other regions.

CONCLUSION

146. Climate change is a development reality: its impacts on sustainable development are already being felt across the world. Addressing this is a momentous challenge—and the UK has expanded considerable efforts and resources in developing tools and programmes to meet it.

147. To make a difference, the UK has to focus and key areas where it has a comparative advantage. This is what we have sought to do—focusing on the global deal, low carbon growth and adaptation—and adding impetus to our sustainable development work across sectors and countries.

148. Climate change is an unfolding issue, where policies, institutions and paradigms are rapidly evolving, including in the context of international negotiations. We know that for decades to come, we will need to refine our policies and strategies and develop mechanisms and tools to enable us to implement effective solutions in support of sustainable development in a changing climate. Our current approach should not be viewed as static, but rather as an evolving platform that we are developing with our international partners.

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