Investment Framework on Clean Energy & Development

1. Investment Framework on Clean Energy & Development Wim Jonker Klunne Alois Mhlanga

2. Outline • Background/context of Investment Framework • G8 Gleneagles Communiqué • Time frame • The MDBs and the Investment Framework • The MDBs response to G8 • The ADB and the Investment Framework • The role of the ADB • Conclusion and way forward

3. Background/context of Investment Framework

4. Background of Investment Framework G8 Gleneagles Communiqué (July 05) Objectives of the Framework: • increase the volume of investments on renewable energy and energy efficiency • assist regional member countries to identify less greenhouse gas intensive growth options • support private sector to develop and finance cost-effective projects on energy efficiency and low-carbon energy sources Request to World Bank and RDBs to develop a clean energy investment framework

5. Background of Investment Framework G8 Gleneagles Communiqué (July 05) • Focus on Africa and on Climate Change • Secure, reliable and affordable energy sources are fundamental to economic stability and development • Action has to be taken now to slow, stop and reverse greenhouse gas emissions • promote energy efficiency • conservation of energy • improvement of policy-, regulatory- and financing-frameworks • accelerated deployment of cleaner technologies

6. Background of Investment Framework G8 time frame • July 2005: request by G8 to MDBs • November 2005: meeting with finance ministers (London) • April 2006: World Bank reported at IMF Spring Meeting • 3rd / 4th quarter: MDBs expected to present IF strategies / action plans to their Boards • G8 summit 2007 (Germany): report progress • G8 summit 2008 (Japan): report outcomes

7. The MDBs and the Investment Framework

8. The ADB and the Investment Framework MDBs response to G8 MDBs agreed to take a two pronged approach to Climate Change: • Clean energy and low-carbon economy • Focus on cleaner utilisation of fossil fuels • Increased used of renewables • Attention to increasing access to energy • Adaptation to climate change • Climate proofing of investments • Integration of adaptation into project cycle

9. Outline • Clean Energy and Low-carbon Economy. • Adaptation to climate change.

10. A - Clean Energy and Low-carbon Economy Outline • The Challenge. • Strategies for Clean Energy Future • Investment Needs and Sources

11. A- Clean Energy and Low Carbon Economy 1.The Challenge • Double dividend in development. • Major energy challenges : • improving energy services for economic growth and better quality of life; • reducing environmental and human health threats from energy production and use; and • strengthening energy security for macroeconomic stability. • Up to 2050, primary energy demand will increase, so will GHGs since coal, oil and gas will be main sources for energy. • CC major additional challenge to the poor. • Low carbon drive must not have additional cost on the poor.

12. A- Clean Energy and Low Carbon Economy 2. Strategies for Clean Energy Future • Focus on clean energy for economic growth and sustainable development. • Criteria that focuses on low-cost and high-impact solutions. • changes in national energy fiscal and regulatory policies. • Non-regrets Investments: applying exiting technologies and approaches that are viable financially and yield ancillary benefits. • New Technologies : Focus on technologies that are economically viable but not yet financially viable. • Research and Development : • Additional measures to reduce GHGs and Low carbon economy : aggressive program on efficiency, renewables and fuel switching & adoption of policy targets

13. A- Clean Energy and Low Carbon Economy 3. Investment Needs and Sources • Financing needs are enormous : • 300 billion US$/year for Clean Energy for Development. • 60 billion US$/year for GHG reduction and Low-carbon economy. • Internal Cash generation, Private financing, Public funding: national investment climate – policies, tariffs, subsidies etc. • IFIs– finance, policy and technical advice. • IFIs– need to expand existing risk management products, mainstreaming carbon finance, accessing sufficient grants, enhance country dialogue etc

14. A- Clean Energy and Low Carbon Economy 3. Proposed New Financial Instruments Focus:1- buy down cost of investment. 2-mitigate technology risks. 3-fund efficiency improvement of existing assets. 4- strategic research financing. • Clean Energy Finance Vehicle (CEFV) : blend grants, carbon finance and collateralize clean energy technologies • Power rehabilitation financing facility. • Project Development Fund. Development of Bankable projects. • Venture capital funds for technology adoption : use dedicated venture capital to promote the adoption and penetration in the marketplace of new technologies.

15. B -Adaptation to Climate Change Outline • The Challenge. • Strategies to Adapt to Climate Change. • Investment Needs and Sources

16. B -Adaptation to Climate Change 1. The Challenge 1 of 2 • Human-induced change: combustion of fossil fuels & land management practices. • All countries vulnerable :the poor are most vulnerable, having the least means to adapt. • Long-term adaptation strategies compatible with reduction of vulnerabilities to immediate climates. • Mitigation and adaptation major challenges to Africa.

17. B -Adaptation to Climate Change 1. The Challenge Some Projected Impacts in Africa • Decrease in water availability & quality. • Risks of droughts and floods. • Human health: Increased vector and water-borne diseases. • Food security : reduced agricultural productivity • Infrastructure :economic and social infrastructure

18. B -Adaptation to Climate Change 2. Strategies for adaptation • Development of Information & tools :reduce uncertainties of threat and impacts; planning risk insurance and disaster management. • Disaster Preparedness : improve preparedness through proactive actions. • Implementation of existing cost-effective technologies and infrastructure. • Research and Development.

19. B -Adaptation to Climate Change 3. Investment Needs and Sources • 10- 40 billion US$ per year required: all developing countries need finance and technical assistance. • Public finance to be main driver :need to climate proof development programs. • Private finance threatened : improve private sector capacity to deal with climate variability. • Innovation : collaboration between private re-insurance industry and IFIs in reducing risk to infrastructure investments and agriculture. • Instruments similar to the clean energy financing

20. The ADB and the Investment Framework

21. The ADB and the Investment Framework ADB strategy on IF Proposed action plan - Clean energy • Increasing access to energy(both rural and urban) • Emphasis on hydropower, biomass, solar energy • Integrate cleaner energy / renewable energy in Bank’s projects • Energy policy / RE&EE strategy • Analyse role of energy in Bank’s operation • Stakeholder consultations

22. The ADB and the Investment Framework ADB strategy on IF Proposed action plan - adaptation • Mainstreaming in all ADB operations • Country programming • Integrate in Bank project cycle • Update procedures / guidelines • Training & capacity building (RMCs & ADB) • TA to countries on climate proofing • Research and Development

23. The ADB and the Investment Framework Conclusion and way forward • ADB to work in close collaboration with other MDBs in developing the Investment Framework • Framework endorsed by Development Committee • ADB to develop its own Action Plan with specific issues related to our core mandate and African needs • Present clean energy and adaptation action plan to the Board by 4th quarter 2006