Bretton Woods Committee | Sun, Oct 9, 2022
by Abdulhamid Alkhalifa
The 2022 Annual Meetings of the World Bank and the International Monetary Fund in Washington, DC will take place against perhaps the bleakest background in decades, from the aftermath of COVID-19 to the war in Ukraine, climate change and inflation pressures.
One of the key issues that needs to be addressed without delay is the climate challenge. As climate change knows no borders, climate action must be global too. A recent IMF research paper identifies financing needs between US$3 to $6 trillion per year until 2050 to reach the Paris goals. By contrast, global climate finance currently amounts to about US$630 billion annually – “and very little goes to developing countries”, as the IMF notes.
For the OPEC Fund addressing climate change and its consequences is development work. This is what we are about: Improving people’s lives and fostering sustainable development with targeted investments in crucial sectors such as agriculture, energy, finance, infrastructure, transport and water, and boosting human capacity with supporting education and healthcare.
Development is, as the name says, the business of the multilateral development banks (MDBs) to which the OPEC Fund belongs. Our group plays a crucial role also when it comes to financing climate action not only through loans, but also by offering, for example, blended finance, grants, and technical assistance.
We are also active in mobilizing the private sector, an indispensable player to narrow the financing gap: In 2020, according to a joint MDB report, their climate finance and co-financing totaled more than US$151 billion.
With its new Climate Action Plan the OPEC Fund will strengthen this effort in areas where we are best suited to be additional. Since inception in 1976, we have committed more than US$22 billion of our own resources for more than 4,000 projects in over 125 countries worldwide with a total project value of close to US$190 billion. Out strength is the ability to address both sudden emergencies and long-term development challenges.
Our Climate Action Plan maintains this tradition. And it sets ambitious targets: In addition to doubling our percentage of climate financing by 2030, starting in 2025, every project will be examined for its value in terms of climate adaption or climate mitigation. In other words, climate action will be mainstreamed in our operations, while we continue to strive for the right balance between energy poverty and climate.
In a world where 750 million people live without electricity, securing access to “affordable, reliable, sustainable and modern energy” remains a priority. Those goals laid out in United Nations Sustainable Development Goal (SDG) 7 demonstrate that energy is an indispensable driver of development in the low- and middle-income countries that the OPEC Fund is dedicated to support.
But – as SDG 7 says - this energy must be “sustainable and modern”. This means renewables as well as energy efficiency measures, the introduction of smart grids and meters, and investments in decentralized, tailor-made solutions. The needs are enormous, but so are the opportunities, especially in areas like clean cooking, an issue where the OPEC Fund, together with partners like Sustainable Energy for All, has taken the lead. In doing so, we have also attracted fellow MDBs and other financiers to support effective solutions.
Helping the 2.5 billion people in the world lacking access to clean cooking doesn’t just address a critical sustainable development goal, it also creates benefits for other issues, for instance improving personal health and curtailing deforestation. Providing women access to modern energy is also a critical but often overlooked means of empowering women at a household level and advancing gender equality.
Following the consultations in Washington, DC we will, only a few weeks later, participate in the COP27 climate conference in Egypt where we will showcase the strength of lean and agile MDBs like the OPEC Fund. Our goal is to leverage our efforts into even bigger outcomes. Together we are stronger.
The author is Director-General of the OPEC Fund for International Development
More information about Dr. Alkhalifa can be found here.