Climate finance van de ven (ebrd)scaling up cf ccxg gf march2014


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EBRD sustainable energy initiative experiences inputs for the CCXG Global Forum discussion on scaling-up and replication

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Climate finance van de ven (ebrd)scaling up cf ccxg gf march2014

  2. 2. THE QUESTIONS 2 1. How has EBRD worked with actors at international, national and local levels to identify and tackle barriers to replication and scaling-up? 2. How can useful lessons and information on barriers be shared and used for scaling up and replicating climate finance interventions?
  3. 3. SCOPE 1. Introduction to the European Bank and Reconstruction and Development, and the Sustainable Energy Initiative 2. Scaling-up and replication, an embedded consideration in the Bank’s operations (transition impact, SEI): • Ingredients to success • Systematic development approach • Market demand driven 3. Robust MRV, enabling demonstration effects and sharing of information. 3
  4. 4. The EBRD 4 • International financial institution established in 1991 to promote transition to market economies in 34 countries from Central Europe to Central Asia • Owned by 63 countries and two inter-governmental institutions (EU and EIB). Sound Banking Principles Transition Impact Environmental Sustainability • AAA rated. Capital base of €30 billion • 2013: €8.5 billion finance committed THE EBRD
  5. 5. EBRD REGION – CHARACTERISTICS AND BARRIERS EBRD Region characteristics: • High share of heavy industry • Ageing infrastructure • High energy and carbon intensity • Substantial potential for renewable energy resources • Energy efficiency potential externalities and market failures: • Difficult access to finance (particularly for SME) • Lack of information and (management) skills • Regulatory constraints, incl. a lack of market-based pricing energy (subsidized) and no/low carbon prices. 5
  6. 6. BARRIERS TO SEI (FURTHER) Credit-related risks • high perceived credit risks • long pay-back period for investments in energy supply and utilities • commercial loans not readily available Behavioural and technology-related • information barriers: consumers have a high discount rate for decisions on EE investments (based on first costs rather than lifecycle savings) • limited market availability of energy efficient technologies Pricing and policy • limited policy support, capacity and expertise • energy tariffs not reflective of the costs of generation externalities • low collection rates (ETCs) • reforms to support renewable developers inadequate in some CoOs • unclear carbon pricing signals • inadequate pace of industrial restructuring 6© EBRD 2014, all rights reserved
  7. 7. THE SUSTAINABLE ENERGY INITIATIVE • The EBRD has been engaged in sustainable energy finance since its establishment. • In 2006, the EBRD launched the Sustainable Energy Initiative to deal with energy efficiency and climate change (responding to G8 call). • The EBRD was the first MDB with a dedicated pool of technical experts in- house. • In 2013, the EBRD launched Sustainable Resource Initiative which includes SEI, materials efficiency and water efficiency. 7© EBRD 2014, all rights reserved
  8. 8. SEI FINANCE BY BUSINESS AREAS • From 2006 to 2013, SEI finance amounts to €13.4 billion. • SEI business volume has shown an increasing trend since 2006, with a peak in 2011 (€2.6 billion). • Cleaner energy production and corporate EE account for the bulk of SEI investments since 2006. • Since 2006, the share of SEFFs and renewable energy projects has increased significantly. 0 500 1000 1500 2000 2500 3000 2006 2007 2008 2009 2010 2011 2012 2013 SEIfinancevolume(€inmln) Municipal Infrastructure EE Renewable Energy Cleaner Energy production SEFFs Corporate EE SEI business volume split by business areas 8© EBRD 2014, all rights reserved
  9. 9. SEI INGREDIENTS TO SUCCESS POLICY DIALOGUE PROJECTS AND INVESTMENTS TECHNICAL ASSISTANCE / INCENTIVES Mainstreaming: SEI Projects across Bank’s Investment Portfolio (set investment targets) Enabling Regulations: Working with governments to support development of a strong institutional and regulatory framework that incentivises sustainable energy (carbon pricing, energy efficiency regulations, feed-in tariffs) Technical Assistance: to overcome barriers: market analysis, LEME development, energy audits, training and awareness raising Incentives: (grant co- financing) to reward performance, attract early adopters / demonstration projects and address affordability constraints 9© EBRD 2014, all rights reserved
  10. 10. STRUCTURED APPROACH TO SEI PROJECT DEVELOPMENT 10 The EBRD’s Sustainable energy Initiative (SEI) Country Strategies Sustainable Energy Action Plans (SEAP) Market Studies Demand for finance by project sponsors Definition of Financing Programmes (examples): Sustainable Energy Financing Facilities (SEFFs) Finance and Technology Transfer Centre for Climate Change (FINTECC) Resource Efficiency Transformation Programme (RESET) Instruments and tools (mitigation and adaptation): Leveraging private sector intermediaries (banks, ESCOs) Policy dialogue and Technical Assistance Energy / resource efficiency audits Incentive grants and training (energy/carbon management) List of Eligible Measures and Equipment (LEME) Monitoring, Reporting and Verification (MRV) Assessment of Market Demand, Barriers and Delivery Potential (incl. co-finance) © EBRD 2014, all rights reserved
  11. 11. SEFF - A SUCCESSFUL MODEL 11 Slovak Republic Slovak Republic Turkey Turkey Ukraine Western Balkans Moldova Poland Romania Romania Russia Russia Armenia Bulgaria Bulgaria Bulgaria Bulgaria Belarus Georgia Hungary Kazakhstan Kosovo Kyrgyzstan Moldova
  12. 12. SUSTAINABLE ENERGY FINANCING FACILITIES CATALYSING AND RESPONDING TO DEMAND • Local financial institutions on-lend funds to small and medium-sized businesses, corporate and residential borrowers. • The potential demand is demonstrated with a market study and origination of a project pipeline. • Finance is provided for energy efficiency and small-scale renewable energy projects. • SEFFs establish project implementation teams who support (and train) local financial institutions and their clients. • SEFFs have a robust MRV regime, whereby incentives are typically paid upon verified project completion. SEFFs are effective in reaching a wide range of small and medium-sized business and residential clients 12© EBRD 2014, all rights reserved
  13. 13. • Climate finance reaching a bigger market of small and medium sized transactions, and herein involving and leveraging private finance sector. • Bring together the critical technical and financial components required to facilitate and to add value to sustainable energy investment opportunities. • Increase awareness of the benefits of sustainable energy investments and promotes ‘best practice’ technical solutions, builds skills. For climate finance to become a viable banking product, the EBRD SEFF model uses a “Pilot > Prove > Propagate” approach to kick- start and scale-up, in parallel with related “Policy” approaches SEFFS AND SCALING UP CLIMATE FINANCE © EBRD 2014, all rights reserved 13
  14. 14. FACILITY Turkish Sustainable Energy Financing Facility (TurSEFF) provides local banks with credit lines for sustainable energy investments in the residential, industrial and commercial sectors (sub-loans of up to €5 million). TECHNICAL ASSISTANCE • €2.4 million provided by the Climate Investment Funds and €7.5 million from the EU were used for project implementation support. • This included supporting partner banks with pipeline development, loan appraisals, energy audits, promoting the facility and training. INNOVATIVE FINANCIAL MIX EBRD loans $222 million of which SEI $222 million CTF concessional loan $47 million JBIC loans $ 20 million Total facility value $ 289 million 5 PARTICIPATING BANKS ESTIMATED IMPACT Over 370 sub-projects financed through five partner banks by the end of 2012 are estimated to result in: • Energy savings: 3,300 GWh/year • Emission reductions: 645,210 tCO2/year SEFF EXAMPLE TURKEY
  15. 15. SHARING • Keep the eye on delivery; focus on “what works, when it starts working”. • Demonstration projects are key in support of the bigger picture policy dialogue, and resulting regulatory reform to an enabling environment. • Most SEI programmes have dedicated websites in local and English languages. • Standardise where possible, e.g. the EBRD is carrying out a number of standardised carbon emission factor studies and publishes these. • Climate Finance MRV essential to learn and share results (e.g. J-MDB Report). • Co-ordination between stakeholders, e.g. recent donor co-ordination meeting on the Kazakh emissions trading scheme in Astana. 15
  16. 16. Thank you Jan-Willem van de Ven Senior Carbon Manager, Energy Efficiency and Climate Change, EBRD 16© EBRD 2014, all rights reserved