Mobilizing private resources and financing inclusive green g rowth in the Republic of Moldova

1. Mobilizing private resources and financing inclusive green growth in the Republic of Moldova Andrei ISAC, Independent Expert, former Head of Environmental Policy Department , Ministry of Environment, Republic of Moldova G20DWG Workshop on Inclusive Green Growth, 7 July 2013, Moscow

2. “Moldova 2020”: 7 solutions for economic growth and poverty reduction Population: 3.5 million (UN, 2011) Capital: Chisinau Area: 33,800 sq km (13,050 sq miles) Life expectancy: 66 years (men), 73 years (women) Main exports: Foodstuffs, animal and vegetable products, textiles GNI per capita: US $1,810 (World Bank, 2010) • National development strategy adopted in 2012 • Aims to accelerate economic growth and, implicitly, poverty reduction by: • Conducting structural changes of the national economy; • Promoting a dynamic growth model based on local and foreign investments and development of industries exporting goods and services. • Identifies seven priority areas: the “7 solutions for economic growth and poverty reduction” • States that the country will undertake all efforts to ensure the transition towards green economic development

3. development priorities • Aligning the education system to labor market needs in order to enhance labor productivity and increase employment in the economy. • Increasing public investment in the national and local road infrastructurein order to reduce transportation costs and increase the speed of access. • Reducing financing costs by increasing competition in the financial sectorand developing risk management tools. • Improving business climate by streamlining the regulatory framework and applying information technologies in public services for businesses and citizens. • Reducing energy consumption by increasing energy efficiency and using renewable energy sources. • Achieving financial sustainability of the pension system in order to ensure an appropriate rate of wage replacement. • Increasing the quality and efficiency of justice and fighting corruption in order to ensure equity for all citizens.

4. Energy efficiency objectives and targets

5. MoldovanSustainableEnergyFinancingFacility (MoSEFF) • Launched in September 2009 by the European Bank for Reconstruction and Development (EBRD) in order to support energy efficiency investments of Moldovan enterprises; • EBRD made a total of € 20 million available for on-lending through local partner banks; • MoSEFF includes a grant component for eligible projects, from 5% to 20% of the loan amount, depending on the energy savings and CO2 emission reductions achieved; • Offers a higher share of grant financing for projects employing Best Available Techniques (BAT). • http://www.moseff.org

6. MoSEFF: Typical Investments • Energy efficiency • Thermal insulation of walls, roofs and floors, installation of insulated windows, rolling doors or door lockers • Replacement and rehabilitation of boilers (enhanced control, economizers, etc.) • Refurbishment of efficient heat and power distribution systems • Switch from electric heating to fuel based heating • Renewableenergy • Biomass combustion in heat only and combined heat and power plants • Biogas generation for the use in heat only and combined heat and power plants • Solar thermal collectors for hot water or steam generation, Solar photovoltaic power plants • Small hydro power plants • Wind power plants

7. 80 projects: examples of results achieved by sectors/companies • Food sector:Telemar LTD: 55% energy savings, a 66% carbon emission reduction; • Agricultural sector: Agromaxer LTD: savings 91% ofenergyandreducingannual CO2 emissionby 1322 tons; • Industrial sector:Macon SA: achieved 43% energysavingsand a 40% carbonemissionreduction; • Building rehabilitation:Artima SA: achieved 83% energysavingsand CO2 emissionsreductionof 163 tonsperyear; • Small enterprises:Startcom LTD: reducethecompany’senergyconsumptionby 90% and CO2 emissionsby 31 tonsannually; • Energy projects:VilaVerdeHotel: the largest solar thermal system in Moldova with a surface of 200 m2 - reduceditsenergyconsumptionby 80% andits CO2 emissionsby 133 tonsperyear.

8. Use of remittances • Important role – some 30% of GDP • PARE “1+1” programme – replicates Mexican experience •  Aims to mobilize the human and financial resources of Moldovan migrants, in Moldova's sustainable economic development, by fostering the establishment and development of small and medium enterprises by migrant workers and recipients • Operates under the rule of "1+1", so every MDL invested from remittances will be complemented with a MDL in the form of grant • Grant financing can amount up to 50% of the investment, but not more than 200 thousand MDL • Not yet clear how could be used to finance “green” projects Source: http://www.worldbank.org/content/dam/Worldbank/document/eca/Moldova-Economic-Update.pdf

9. Complementary investment sources • Public funding • National Ecological Fund – 10 million Euro/year (revenue from environmental taxation) • National Regional Development Fund – 10 million Euro/year • National Energy Efficiency Fund – 6.3 million Euro/year • Donor funding • European Union Programs - 2011-13 National Indicative Programme (NIP) - €273.14 million financed under the European Neighbourhood and Partnership Instrument (ENPI) • US Millennium Challenge Account - 2010-2015 Compact $262 million grant • GIZ – German International Cooperation Agency: German support for Investments – 15 million Euro in 2013 (water supply and sanitation; Waste management; Energy efficiency.

10. Major challenges to private investment On the demand side: • Deficiencies in the framework policies and public administration practices • Need for regulatory reforms (e.g. improved regulations on energy audits, energy efficiency standards and labels, on associations of homeowners), investing in education, supporting R&D • Information dissemination – insufficient access to information and uncertainties regarding the performance of new technologies make firms risk averse with regard to long-term green investments • Subsidized and cross-subsidised prices and tariff structures not related to consumption (i.e. where actual consumption is not metered) impede green investments - pricing in Moldova gradually addressed • Insufficient capacity of borrowers to prepare viable projects On the supply side: • Lack of liquidity or access to adequate funding in the banking system • General creditworthiness requirements of lenders and credit constraints faced by enterprises and households (e.g. high interestrates, short maturities, focus on short-term returns) • Lack of capacity within local banks to identify and financegreeninvestments

11. Future objectives and role of international community • Continue to support the existence of a mix of financing instruments (private, public domestic, ODA, etc.) • Advise on the further development of financing instruments • Help understand the magnitude of investment flows • Help understand specific market and policy barriers that restrict green, low-carbon financing • EaP GREEN programme (EU, OECD, UNECE, UNEP, UNIDO) • Help foster public-private partnerships and advise on how to best match private and public financing • Facilitate the transfer and diffusion of environmentally sound technologies and corresponding know-how • Capacity development and pilot projects • Moldova Energy and Biomass Projects (EU and UNDP)

12. Thank you for your attention!