The World Bank Group’s Country Climate and Development Reports (CCDRs) cover nearly 50 low- and middleincome countries and serve to estimate the (additional) investment needed to shift toward more resilient and lower-emission pathways.
The reports take a hybrid approach to modeling, with technoeconomic sectoral models used to generate investment, cost, and benefit estimates for sector-level pathways, which are input into macroeconomic models to assess their feasibility. For low- and lower-middle income countries, development needs cannot be separated from climate-related needs and total investments are large, while in upper- and middleincome countries additional investments are calculated to be manageable.
- For upper- and middle-income countries, the additional investment needs are calculated as the difference between a resilient low-emission scenario and a business-as-usual (BAU) scenario, with results showing the additional investment needs are manageable; i.e., these would not substantially affect these countries’ financing challenges. The estimates include negative costs from, e.g., avoided investment in fossil fuel infrastructure, and account only for the incremental cost of resilient infrastructure rather than the total cost of the asset.
- A key challenge is singling out additional investment needs when studying low- and lower-middle income countries, as their development needs are not separable from their climate-related needs. Hence, total investment is reported in the CCDRs for these countries. The financing needs are substantial and may contribute to financial challenges if development is to be achieved sustainably.
- Resilient and low-carbon pathways call for high upfront investments, with offsetting benefits occurring at a later point. In principle, the private sector is essential in closing the financing gap; the potential for, and thus reliance on, this sector is also assessed in CCDRs and found to vary substantially across countries, however.
Ministries of Finance can replicate methods applied by the World Bank for CCDRs, and indeed, most leveraged models can be made available to MoFs. Questions that could be answered with the approach include how much investment is needed for a low-emission development path, and which development milestones and ambitions, and which sequencing of interventions across sectors, may be realistic, as well as what the best source of finance is and what its macroeconomic implications may be.
Keywords
combining approachesgreen growthinvestment needsmodelssector pathways
