Investment Framework on Clean Energy & Development

1. Investment Framework on Clean Energy & Development CDM DNA Forum Addis Abeba; 4-6 October 2007 Dr. Yogesh Vyas Lead Environmentalist African Development Bank

2. AfDB Clean Energy For Development Investment Framework • Climate Change Impacts • G8 request to MDBs • MDB Clean Energy Investment Framework (CEIF) • Energy & Development nexus • AfDB Strategy on CEIF • AfDB CDM Facility

3. 1. Climate Change effects and impacts 1990 CO2 emissions from fossil fuel combustion and land-use change Africa is not a major contributor to GHG emissions. Largest share of Africa’s contribution is from land use change and not from energy consumption

4. 1. Climate Change effects and impacts

5. 1. Climate Change effects and impacts

6. 1. Climate Change effects and impacts • More severe droughts • Desertification • Changing eco systems • Reduced crop yields • Floodings and storms • Increased vector diseases • Rising sea level • Etc.

7. 2. G8 request to MDBs G8 Gleneagles Communiqué (July 2005) • 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

8. 2. G8 request to MDBs World Bank and RDBs requested to develop a clean energy investment framework to: • 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

9. 2. G8 request to MDBs Timeframe: • July 2005: request by G8 to MDBs • November 2005: meeting with finance ministers (London) • April 2006: World Bank to report at IMF Spring Meeting • 3rd / 4th quarter: RDBs to present IF strategies / action plans to their Boards • G8 summit 2007 (Germany): report progress • G8 summit 2008 (Japan): report outcomes

10. 3. AfDB Clean Energy For Development Investment Framework • 3 Pillars: • Increase Energy Access in Sub-Saharan Africa • Transition to Low Carbon Economy • Adaptation to Climate Change

11. Gas Flaring in Gulf of Guinea Energy in Africa

12. Energy in Africa • Africa has 13% of global population but consumes 5%of global energy and 3% of global electricity • Only 23% of population in SSA and 91% in North Africa has access to electricity yet world average is 73% • Lowest energy consumption per capita of 0.7 toe compared to world average of 1.6 toe • Traditional biomass (woodfuel and charcoal) contributes to over 82% of energy used in SSA-less South Africa • Between 2000 and 2050, absolute number of people depending on biomass expected to rise from 583 to 823 million

13. Energy in Africa • Abundant resources available (hydro, oil, natural gas, biomass) but not developed • Unevenly distributed resources yet poor interstate energy trade. (Oil and Natural gas are in North and West Africa and Coal in Southern Africa)

14. Energy and development nexus • Energy is central to all developmental interventions • Energy is a pre-requisite for poverty alleviation and attainment of the MDGs • The poor are forced to pay a higher price for their energy. The price is paid in form of: • Human time and labour • Economic cost • Health costs (mainly indoor air pollution), and • Social and gender impact of energy services.

15. 4. Clean Energy Investment Framework 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

16. 4. Clean Energy Investment Framework • Major energy challenges : • strengthening energy security for macroeconomic stability, • improving energy services for economic growth and better quality of life, and • reducing environmental and human health threats from energy production and use. • Low carbon drive must not have additional cost on the poor • “Shared but differentiated responsibilities”

17. 4. Clean Energy Investment Framework Strategies clean energy • Clean energy for economic growth and sustainable development • Low-cost and high-impact solutions • Project Development Fund to assist the development of clean energy projects • Changes in national energy fiscal and regulatory policies

18. 4. Clean Energy Investment Framework Adaptation challenges: • Human-induced change: combustion of fossil fuels & land management practices • Major challenges to Africa • The poor are most vulnerable, having the least means to adapt • Ensure long-term adaptation strategies compatible with short term impacts

19. 4. Clean Energy Investment Framework Adaptation strategies: • Integrating adaptation in PRSPs, Country Strategy Papers and project cycle • Disaster preparedness improvement through proactive actions – early warning systems • Development of tools and checklists • Research and Development

20. 4. Clean Energy Investment Framework Investment needs are huge • $ 300 billion per year to meet rising energy demands in developing countries • $ 60 billion / year additionally for a low-carbon option • $ 40 billion / year as cost of adaptation • Public and private resources need to be mobilised • New financial instruments needed

21. Pillar 1:Energy Access - AfDB Priorities • Enabling environment for maximising private participation • Mobilisation of financing and private participation • Electricity for the MDGs • Energy access for rural development • Energy for urban development • Renewable energy and energy efficiency • Transportation sector fuel efficiency and emissions; and • Facilitating countries’ access to CDM

22. Pillar 2: Clean Energy and RE/EE, AfDB Priorities • >50MW: Hydropower, Geothermal power, Co-generation, Windpower; Biofuel production. • <50MW: Promote renewables aimed at income generating activities in the agro/forest industrial sector such as co-generation and small hydro. • <5MW: Solar water heaters, windpumps and solar PVs use in remote rural dispensaries, schools, commercial wildlife and coastal tourism-linked enterprises. • < 1kW (household level):Improved biofuel cookstoves in countries where charcoal is a major fuel and indoor air pollution benefits.  

23. The Private Sector Department of the AfDB focuses mainly to develop (a) the wind energy area (b) the small size hydropower (c) bio-fuel, (d) Geothermal, and (e) Co-generation 30 MW hydropower - Tunisia The Middelgrund wind farm – Copenhagen - Denmark

24. The Current ADB Interventions in promoting the use ofRenewable Energy • Morocco: Solar/Gas Thermal Power Station (250 MW, 30 MW Solar) (EUR 200 Mio) • Egypt: Solar/Gas Thermal Power Station (120 to 150 MW)

25. The Current ADB Investments in of Renewable Energy • Madagascar: Small Hydro 15 MW – Euro14 M • Uganda: Bujagali Hydro 250 MW – Euro120 M

26. Cogeneration and Small-hydro Projects in the Sugar and Tea Industry in East and Southern Africa

27. Small Hydro for Tea Industry in East Africa • UNEP/GEF/AFDB small hydropower initiative for the tea industry in Eastern and Southern Africa countries (Kenya, Uganda, Tanzania, Rwanda, Burundi, Malawi, Mozambique and Zambia). East African Tea Trade Association (EATTA) is the executing agency. • Key objectives: - Reduce energy cost in the tea industry - Increase reliability of power supply - Increase power supply for rural electrification - Encourage development of self sustaining small hydro industry in the region - Reduce greenhouse gas emission by replacing use of diesel run backup generators in the tea factories • Project expected to install 10 MW of small hydropower within 4 years and leverage over 82 MW in the long-term • For more information, visit - http://greeningtea.unep.org

28. Small Hydro in Tea Industry project - Planned installations 82+ MW additional small hydro capacity capacity 10 MW additional installed capacity of small hydro promotion projects Beyond 4 years 4 year project period

29. Cogen for Africa Project • Project funded by GEF, UNEP and AfDB are co-implementing agencies, AFREPREN/FWD is executing agency. • Covers 7 countries: Kenya, Uganda, Tanzania, Ethiopia, Malawi, Swaziland and Sudan. • Modeled on success of Mauritius cogen program which now accounts for close to 40% of national power supply. Objectives • Promote increased investment in efficient cogeneration systems in eastern and southern Africa. • For more information, visit - http://cogen.unep.org

30. Cogen for Africa project - Planned installations 200+ MW additional cogeneration capacity 40 MW additional installed capacity of cogeneration promotion projects 20 MW pipeline projects Beyond 6 years 6 year project period

31. COFAMOSA Ethanol Project • Under the proposed COFAMOSA Irrigation Project, the Government of Mozambique intends to develop an area of 29,000 ha for irrigated land under sugar cane for sugar and ethanol production. • The goal of the project is to reduce poverty levels through increased exports of sugar and ethanol from Mozambique to the region and beyond. • Based on the preliminary studies, the project aims to: • develop 29,000 ha of irrigated land in possibly 3 phases, over a period of ten years (first and second phase 10,000 ha each and the third phase of 9,000 ha) • re-settle over 500 farmers in the project area • make use of already existing investment in Corumana Dam and available  good irrigation soils; • create 18,000 jobs (70%) of economically active people in the area); and • make permanent impact in districts of Moamba and Magude and the overall Mozambican national economy.   • Currently the Bank is funding, through the African Water Facility a consultancy srevice to undertake an integrated feasibility study for the envisaged project.  The Study will commence early next year

34. Types of Carbon Project Eligible for CDM • Hydroelectric power offsetting the need for coal- or gas-fired generation • Extending grid to reach customers currently using diesel or kerosene • Reducing CO2 and possibly methane by generating energy and bio-fuels from sugar industry by-products -- bagasse and molasses • Replacing firewood/kerosene/cowdung with biogas from livestockand human wastes • Extracting methane from landfills or avoiding its generationtroughcomposting organic waste inurban dumpsites • Extracting methane from disposal of sewage sludge • Capturing No2, a powerful greenhouse gas, from fertilizer production • Sequestering CO2 by tree planting, small plantations, landrestoration(limited capacity to buy though)

35. ADB CDM Facility (1) ADB intends to establish a CDM facility Objectives: Integrate climate change in Bank operations Help remove reg. bottlenecks to clean energy and scale up investment in modern technologies: Suppressed grid energy demand and Off-grid energy access Modern waste management Afforestation and reforestation projects Build carbon capacities in public and private sectors Pioneer innovative approaches that combine multiple stream of revenues from carbon offsets, micro credit, weather insurance, etc

36. ADB CDM Activities • technical assistance for identification and design of CDM-eligible projects, • preparation of PDD; • development of new methodologies for programmatic or bundling of CDM opportunities for small-scale regional projects; • technical studies to identify interested countries’ range of prospective projects and programs eligible

37. ADB CDM Activities (cont) • policy assistance to address regulatory barriers to the development and execution of CDM projects; • capacity-building and awareness raising by organising training programs and information dissemination; and • strengthening national designated authorities (DNA). • AfDB Carbon facility would be announced formally at the 13th UNFCCC CC in Bali, Dec 2007

38. Pillar 3: Adaptation: AfDB Priorities • Promote development and use of climate risk assessment and management methods to minimize climate change and variability risks • Application of climate risk screening tools to development programs and investment projects • Support mainstreaming of climate issues into key regional, national, local and sectoral planning, policies and decision making processes,(e.g PRSPs, etc) • Plan to introduce AfDB Policy on Climate Risk Management & Adaptation

39. Climate Information for Development in Africa • Objective: Improve the availability and use of climate information and services in support of sustainable development and achievement of the MDGs. • Raising Policy awareness of politicians, planners and the public for broad ownership, support and commitment to adaptation to climate variability and change. • Climate Risk Management for strategic MDGs development planning, sectoral management, livelihood strategies and disaster risk reduction. • Climate Services for the use of MDGs decision-makers in government, the private sector and civil society. • Observations, data management and infrastructure upgrading to provide essential data for climate services, risk management and policy development. • The results are to be achieved in part by drawing on, and strengthening the capacity of existing climate institutions in Africa.

40. Examples of climate risk management operations (3) African Development Bank: Malawi, agriculture Climate Adaptation for Rural Livelihoods and Agriculture(CARLA) US$ 3.3 million added to US$ 24 million baseline

41. CARLA: Managing climate risk to sectoral investments in Malawi • ADBSmallholder Crop Production and Marketing Project(SCPMP) • Irrigation development • Farmer support programme Recurrent floods and droughts are affecting investments, and reducing development outcomes.

42. CARLA objectives • strengthen the climate resilience of baseline investments and their outcomes • while at the same time enhancing broader climate risk management in relation to agriculture and food security in Malawi, including integration in strategic and operational planning in the agriculture sector.

43. CARLA components • COMPONENT 1 – INVESTMENTS, e.g.: • Crop diversification, • Adjusting timing of farm operations • Changes in tillage practices • Food reserves and storage • Irrigation and efficient water use • COMPONENT 2 – EARLY WARNING SYSTEMS • COMPONENT 3 – ENABLING ENVIRONMENT • Policy, legislative, and institutional frameworks • Capacity building of key institutions • Targeted knowledge and monitoring systems • Multi-stakeholder dialogues

44. Thank you for your attentionYogesh VyasAfrican Development BankY.Vyas@afdb.org(216) 71 10 21 78