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Steve Gorman Program Manager Global Environment Program Environment Department The World Bank Group WORLD BANK’S LENDING PROGRAM World Bank provided $46.9 billion for 303 projects in developing countries worldwide in 2008; WORLD BANK GROUP RENEWABLE ENERGY & ENERGY EFFICIENCY FINANCING FY2004-09 WORLD BANK GROUP LOW-CARBON ENERGY COMMITMENT IN FY09 Available Resources for Climate Change Mitigation (Total Needs est. $170bn+ / year) FCPF $0.2 b REDD Carbon Market: CDM&JI ~ $ 8 billion for FY09 GEF $ 0.25 blln for FY09 $3.4 billion for FY09 $ 0.25 b Adaptation funding Resources to address Climate Change Adaptation Fund $ 0.3-0.5 blln UNDP $ 0.09- 0.12 blln for adaptation EU (Total Needs est. $28-67bn / year) Both M&A IFC/MIGA) GEF Adaptation WBG RE & EE Progam (IBRD/IDA/ Global Climate Change Alliance € 0. 3 blln GFDRR $ 0.07 blln Bilateral Donors $? FY09 estimates are projections Private Donors $? ? Climate Investment Funds (MDBs) $6.1 billion Other MDBs $3 billion for FY09 ? MLF $2b since inception AVAILABLE SOURCES OF PROJECT-LEVEL MITIGATION FINANCE GEF: Global Environment Facility CIF: New funds, esp. Clean Technology Fund (CTF) Pledges of $6.1b across all components of CIF Pledges of $5.2 b especially for CTF CF: Newly established Carbon Partnership Facility (CPF) Allocated $2.4b to CC mitigation from 1991-2008 Current GEF-4 Replenishment $1b for CC, $250m per year GEF-5 Replenishment beyond 2010 Existing funds of $2b for period up to 2012 largely committed CPF pledges of $200m will open first tranche for operation World Bank Group’s own resources FY08 Approvals of $2.7b for renewables and energy efficiency, including GEF, IFC, MIGA, IBRD, and IDA Target of $3.3 billion for FY’09 to EE and RE How to utilize the above for HCFC phase-out and maximize the impact of the limited resources available? CAN THE FOUR SOURCES BE COMBINED IN THE SAME PROJECT? (+) C a s h F l o w Year Baseline development project—BAU—no GHG mitigation (-) MITIGATION PROJECT: GHG EMISSION REDUCTION (+) C a s h F l o w Year Redesigned project—higher costs & benefits (-) GEF/MLF: REMOVE BARRIERS, INNOVATE AND CONDITION MARKETS (+) GEF/MLF C a s h F l o w Year (-) ADD CTF: TRANSFORM MARKETS (+) C a s h F l o w Year CTF (-) ADD CF: ENHANCE REVENUES (+) CF C a s h F l o w (-) Year CONDITION MARKETS, TRANSFORM MARKETS, ENHANCE REVENUES (+) CF C a s h F l o w GEF/MLF Year CTF (-) HOW TO WEAVE TOGETHER THE FOUR SOURCES OF MITIGATION FUNDING? Each must be used in a manner consistent with its objectives and approaches GEF: Focus on barrier removal—source of grant funding to establish conditions for market sustainability CTF: Focus on investment support—providing investment support in form of loans, grants or guarantees CPF: Performance reward to provide extra revenue to scale-up carbon-reducing investments MLF: Identify applications of strategic importance to phase-out and find intersection with above May be linked simultaneously in same project structure or sequentially through a consistent programmatic approach INDIA CHILLERS: HOW TO PHASE-OUT 1200 CHILLERS WITH $1M? MLF provided $1m grant—30 chillers Total market has 189 ODP t Given GWP, equals 378,000 t CO2 eq GEF provided $6m—185 chillers Interested in energy savings, 4.8 TWh over 20 years Equal to 3.9 m tonnes CO2 eq plus replication CDM-Spanish carbon fund Purchase CERs from project—revenues to revolving fund Flows of CER’s, 982,000 CER’s valued at $12m Private investors---$80m to make investment complete SYNERGIES CAN LEAD TO GREATER IMPACT: INDIA CHILLERS Private Sector $80 million CDM $12 million GEF $6 million MLF $1 million Leveraging enables MLF Funds to achieve greater impact and investment GEFindirect 8 m tCO2e GEF-direct 4.6 m tCO2e CDM 982,000 tCO2e MLF 95,000 tCO2e SYNERGIES MAKE IT POSSIBLE TO DESIGN PROJECTS TO UTILIZE CTF, CPF, GEF & MLF Objectives are not identical, but overlap can be found Instruments are compatible with each other—can be used sequentially or simultaneously Requires foresight, strategic thinking Building upon HCFC phaseout for greater EE & GHG reductions Some complexities do exist To reduce growth in GHG emissions linked to HCFCs Condition markets; scale-up markets; enhance revenues Issues of eligibility Focus on larger countries Changing strategy and focus Sunset clause Although programmatic approaches can be tailored to all four instruments, need to focus on problem at hand INNOVATIVE FINANCIAL ENGINEERING – INTERNATIONAL FINANCE FACILITY FOR IMMUNISATION (IFFIM) IFFIm was launched in 2006 thanks to the initiative of the United Kingdom Government. IFFIm is also supported by France, Italy, Spain, Sweden, Norway and South Africa who have together pledged to contribute US$ 5.3 billion to IFFIm over 20 years. This strong financial base enables IFFIm to have a triple-A rating from the three major rating agencies. IFFIm raises finance by issuing bonds in the capital markets and so converts the long-term government pledges into immediately available cash resources. The long-term government pledges will be used to repay the IFFIm bonds. The World Bank acts as financial adviser and treasury manager to IFFIm. POTENTIAL REPLICATION TO SUPPORT NATURAL REFRIGERANT & EE PROJECTS Donors Up to 20-year Grants Investors Capital Market Funding International Facility for Ozone/Climate (IFFOC) Financial Management Carbon Revenues from Compliance and Voluntary Markets Country Driven ODS and Climate Protection Programs TOWARD GREATER COOPERATION AND SYNERGY IN CLIMATE-RELATED FUNDING Opportunities do exist to utilize multiple sources of funding in projects that will replace HCFC with the most optimum ozone and climate friendly technologies Innovative financial engineering model to monetize future commitments to support up-front investment exists and could be applied to future commitments (MLF contributions) and future revenues (CERs) Strategic thinking is necessary to piece together puzzle and maximize global benefits As much as strategy, patience may be even more necessary Cooperation and synergies are necessary to leverage large impacts and benefits