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German development bank KfW on its contribution to climate protection

KfW sign (source: KfW-Bildarchiv / Thorsten Futh)
Alexander Richter 3 Nov 2017

German development KfW, a big supporter of geothermal development through its funds in East Africa (GRMF) and Latin America (GDF), is seeing an urgency in fast-tracking the Paris climate agreement and the energy transition towards renewable energy.

On November 6, 2017, Cop23, the international climate conference will begin in Bonn, Germany. The main focus of the two-week conference — the largest in Germany to date — will be on implementing the decisions made in Paris back in 2015.

In this interview published by German development bank KfW, Member of the KfW Executive Board Joachim Nagel explains why it is so urgent that the process gain momentum now and what KfW can contribute.

Not all people or governments believe that climate change exists. What is KfW’s stand on this?

As we see it, there is no doubt about it. I think discussions like that are absurd anyway. Anyone who is not completely blind to the facts has noticed now, at the latest, that global warming is a reality. 2017 gave us a clear sense of the effects that climate change can have. Whether hurricane Harvey or Irma, we are witnessing many natural events that demonstrate the kinds of immense damage that climate change can cause.

What does this mean for the international community?

It means that we have to fast-track the Paris process. Instead of continuing to entangle ourselves in discussions of “if”, we now have to work under intense pressure to think about the “how”: how can we quickly implement the decisions made in Paris to swiftly reinforce climate protection and measures for adaptation? These are the critical questions. Everything else is a waste of time. Time that we do not have. If we want to achieve the two-degree target, we now have to act effectively.

Does this also apply to Germany and KfW?

Yes, absolutely. As KfW, we will maintain the extensive commitment we have shown in the last years and can expand it even more. In our opinion, the issue of climate protection and Germany’s contribution to it should also play an important role in the upcoming coalition negotiations. We, as KfW, have very closely assisted and supported the German Federal Government in the past. The cooperation was always good. We hope this will be the same with the next Federal Government and assume that the issue of climate will be tackled at least as intensively, if not more intensively, than before.

What did KfW’s previous commitment look like?

KfW is one of the largest financiers of climate protection measures in the world. And that even applies when compared to large multilateral institutions like the World Bank. Within the last ten years, we have spent EUR 250 billion on climate protection and adaptation measures. We fund 80 % of German climate financing. In Germany itself, we radically advanced the expansion of renewable energies and energy efficiency. KfW is a key player when it comes to the energy transition in this country. But we have also supported a broad spectrum of projects and programmes abroad and committed around EUR 7.6 billion for such measures in 2016 alone.

You want to take faster action. But hasn’t even KfW supported the coal industry, an energy source that is not exactly climate-friendly, for a long time?

In this case we were probably a product of our times. Coal used to be considered a safe and good energy source, and, in many developing countries, there were no alternatives available. This is different nowadays. In 2012 we stopped, in accordance with the definition from the Federal Government´s goal guidelines, providing new financing for the coal industry.

What exactly do your projects abroad look like?

Of course, we also promote the area of renewable energies abroad as well. Whether geothermal energy in Kenya or one of the largest solar parks in Morocco, whether hydropower in Uganda, solar home systems in Bangladesh, wind power in Egypt or new grids in India — we are active all over the world to spur on the global energy transition we need for the two-degree target. But this is by no means everything: for example, our portfolio contains projects for protecting forests, coasts and oceans because they are also important in this context.

Can poorer countries also contribute to climate protection? Or does this only apply to more prosperous nations?

The Paris Agreement — and this is actually the notable thing about it — no longer just applies to industrialised nations like the precursor, the Kyoto Protocol. All countries, even the poorest, have set national targets, so-called National Determined Contributions or NDCs. The advantage is that each country can now act at its own speed. As KfW, we support our partner countries as they implement and achieve these targets. Nevertheless, it still remains true that the principal generators of climate change, the industrialised countries, have to do most of the work.

Some say that climate protection is a luxury item and not suitable for poorer countries.

I wouldn’t describe climate protection and adaptation as a luxury item because poorer countries in particular will disproportionately suffer from the effects of global warming. But it is also clear: we need holistic concepts here. Without local social and economic benefits, climate protection does not make sense for the poorest countries. For example, if people shouldn’t clear forests anymore, they will need another source of income. They don’t willingly and happily destroy the forest. They do it because there’s nothing else they can do and otherwise they don’t have anything to live from.

Could you give an example of that?

I was able to see for myself how it can be done and how it works in the Brazilian rainforest. In the early morning, around six o’clock, I sat in front of a hut and saw how children from somewhere in the Amazon were brought to school. They wore school uniforms and beamed with joy as they tramped by. The school was new and part of a larger change process which included growing cassava instead of cutting precious woods. This is the type of holistic approach we support because a one-sided focus on climate projects does not work in developing countries.

Beside that, where and how could KfW put things on the fast track?

We still have the capacity to increase our promotional business volume. And we can develop new financing instruments for green financing. I think that is extremely important. In its 70 years of history, KfW has frequently demonstrated that it is innovative. Whether in microfinance, climate protection insurance or blending, which means combining funds from various financing sources – KfW has proved time and again that it is full of ideas. And we will continue to be in future. A great deal of climate protection must also take place via capital markets.

Is KfW already doing enough for climate change adaptation?

No. In comparison to climate change, adaptation is often neglected because it is not as tangible as car exhaust pipes or industrial smokestacks that emit exhaust. We already finance projects, for example, in the areas of agriculture and water, flood protection or construction of cyclone shelters. But overall, we still have to do much more here. It is very difficult to calculate the needs and these issues are probably even more important for developing countries than climate change mitigation itself.

What are your hopes for Bonn?

A strong signal that we will resolutely continue the path we began in Paris and not be dissuaded from it.

Source: KfW