Green financing at international level.

Abstract

1) Green financing at international level 2) CDM, ODA and EU ETS compared 3) Public and private investments for environmental protection: The case of livestock The global-level powerful threats to world nature caused by climate change make that environmental protection -in turn- can be maximized only if global-level policies are applied within the International Community. The financing of “green” projects aimed at reducing the environmental impacts of climate change and fostering emission reduction is an essential part of those global-level policies. However, very few data and rigorous analysis exist concerning the actual amount of financing flows for environmental projects across the world and across the years and their breakdown in terms of financing typologies and sectors. As a matter of fact, especially before “Kyoto’s System”, Scholars did not approach this issue correctly, generally “making generalizations based on only a few cases” (Hicks, Parks, Roberts and Tierney, 2008). Accordingly, this research aims to investigate the actual amount and the characteristics of green financing flows destined to environmental protection in the last decades and to split the financing according to the different typologies. A quantitative comparison among the different institutional systems underlying green financing is also provided, together with significant examples for two very important green sectors (i.e. the renewable energy sector and the livestock sector). The research is composed of three essays: 1) The first essay addresses the issue of quantifying the Aid Flows (Official Development Assistance framework, ODA) destined for developing and poor countries for the period 1980-2010. The focus of the essay is set on the estimation of actual Aid Flows financed for environmental protection, the definition of their historical trends and volatile fluctuations and the identification of the main actors in terms of Aid Donors and Aid Recipients. The quantitative analyses undertaken in the essay permit to better define the perimeter of Green Aid, its main international actors in absolute and normalized terms (both for Donors and for Recipients) and to define interesting “development paths” with respect to Agricultural Aid, Energy Aid and Fuel production. 2) The second essay approaches the interaction between ODA, CDM and EU ETS institutional frameworks both qualitatively and quantitatively. It provides an extensive outline of the existing Literature, that scarcely addresses the interaction between these institutional frameworks with holistic perspectives, and describes the innovative Research Design applied. An econometric regression is performed in order to assess if the introduction of CDM projects brought positive effects in the field of renewable projects for the period 2005- 2012 in terms of energy efficiency (dependent variable), with specific focus on renewable energy projects. Yet, a Difference in Differences analysis (DD) is presented in order to estimate the impact of the introduction of the second Phase of the EU ETS System (treatment), on CDM renewable projects (treated group) with respect to ODA renewable projects (control group). 3) The third essay provides a significant example of green financing applied to the livestock sector. The essay has the target of mapping the livestock investments and development strategies of the last decade and connecting them to sustainable outcomes. This target derives from the need to have a clear vision of the current status-quo of the livestock sector by means of assessing the main public and private players operating in it, the most important market trends, the geographical localization of investments and the financial flows connected. For all the three essays, specific policy recommendations have been defined, taking advantage of the analysis of the main findings and commenting similar recommendations provided by the Literature. GENERAL CONCLUSION TO THE THREE ESSAYS Interesting results emerge from the exercise of quantifying and determining the actual amount of financing flows for environmental projects across the world and across the years. With regard to the first essay, the review of Literature retrieved shows that previous Scholars systematically failed in correctly estimating the actual amount of green financing, mainly due to the use of incomplete/partial data, and that a general lack of quantitative indicators exists. Similarly, the Literature concerning ODA Flows does not deal with green sectors alone, but it generally considers all sectors as a whole, defining no causal relations specifically using green Aid as dependent (or independent) variable. Regarding renewable energy projects (essay 2), the findings retrieved permit to assess that the introduction of CDM projects (and Kyoto’s Protocol) brought positive effects in the field of renewable projects for the period 2005-2012. Indeed, CDM projects were much less volatile, had much lower average cost ratio and definitely appeared more energy efficient with respect to similar ODA projects. From an econometric perspective, the regression results confirm the fact that the introduction of the Kyoto protocol has a very positive impact on the energy efficiency of renewable energy projects. Indeed, the dummy for CDM projects (𝛽3) shows a negative and statistically significant coefficient, contributing in reducing the dependent energy cost ratio (𝑟𝑖). The results of the DD Model applied show that the impact of Phase II is positive in terms of cost ratio reduction, but the DD coefficient is not statistically significant, implying that additional research is needed in this field. Concerning the green financing for the livestock sector (essay 3), the main quantitative findings of the essay reveal that the overall trade for meat and products of animal origin recorded significant growth rates during the period considered (2001 – 2010) and that meat trend seems to be totally aligned with general world trade. Yet, new players (with new strategies) are emerging for each livestock sub-sectors (such as China, Asia without India & China) while others are leaving world market shares. Regarding private investments, China is simultaneously the country hosting the bigger number of corporations and recording the higher overall livestock-product sales for 2013. The analysis of other investments shows that Livestock financing trend by multilateral Donors has not been constant during the period 2001-2011, while CDM livestock projects are mainly hosted by Brazil, China and Mexico. The specific policy recommendations deriving from a global interpretation of the three essays permit to conclude that:  In the global context of financing environmental protection, Kyoto system has an important role to play, especially for the future generations and “Ecological debt” shall find a place within future world negotiations on climate change and debt relief. More important, these two paramount themes shall be treated simultaneously by the International Community in order to put on the same balance past, current and future credits and liabilities own both by developing countries and by developed ones.  The reform of International Institutions towards a greater importance given to the protection of the environment (the so-called “Greening of Institutions”) is another very important theme for any future policy structure aimed at increasing environmental protection worldwide.  The interaction between ODA, CDM and EU ETS systems is very complex and the need to increase the Literature on this regard definitely arise.  It is evident that EU ETS is going much faster in terms of market attitude than other similar Carbon markets and maybe even faster than Kyoto Protocol itself. Accordingly, a better coordination shall be enhanced between ODA, CDM and EU ETS systems, in order to avoid misalignment in terms of market attitude.  Furthermore, the importance of no-market Carbon Funds for poor countries is vital for both ODA and Kyoto institutional systems and there is an urgent need to find consensus on the International Community with respect to the market orientation of post-Kyoto carbon markets and their accessibility for Developing and Poor countries.