Download IDB`s Sustainable Energy and Climate Change Initiative

The Inter-American Development
Bank
PSLO Meeting
October 15, 2008
IDB’s commitment to green energy
Gregor Meerganz von Medeazza
Sylvia Larrea
Carla Tully
Presentation Outline
» IDB’s Sustainable Energy and Climate Change Initiative
» Biofuels Case Study: Itumbiara, Ituiutaba, Campina Verde
» IDB Biofuels Sustainability Scorecard
PSLO Meeting
October 15, 2008
Presentation Outline
» IDB’s Sustainable Energy and Climate Change Initiative
PSLO Meeting
October 15, 2008
Energy & Climate Change: Challenges for the LAC Region
» LAC countries confront a twin dilemma:
-
They must boost their energy consumption to fuel economic and social
development.
Energy use has been largely responsible for an increase in greenhouse gases
emissions
» Approx. 10% of total population (50 million people) does not have
electricity.
» Energy demand in LAC will increase 75% by 2030.
-
Required investments to satisfy such demand will be around US$ 1,600 billion.
» Achieve sustainability of energy supply and rational use of energy resources
-
Regulatory and institutional frameworks
Pre-investment funding for project preparation
PSLO Meeting
October 15, 2008
Expected Impacts of Climate Change in LAC
» Andean inter-tropical glaciers likely to disappear over the next decades
» Changes in precipitation trends
» Continuous decline in natural land cover at very high rates
» Risk of significant species extinctions in many areas of tropical Latin
America
» 50% of agricultural lands likely to be subjected to desertification and
salinisation in some areas, by the 2050s
» Increase in the number of people experiencing water stress likely to be
between 7 and 77 million by the 2020s
» The expected increases in sea-level rise (SLR), weather and climatic
variability and extremes are very likely to affect coastal areas
PSLO Meeting
October 15, 2008
IDB’s response: SECCI
» Approved by the IDB Board in March 2007
» A response to LAC’s request for an
expanded role in sustainable energy and
climate change in LAC
» IDB contribution to the new international
clean energy investment framework
» Bank wide-initiative complementing the
Bank’s existing efforts in energy
» Technical Cooperation, programmatic PBL
and Investment Grant: support for IDB
project lending and policy lending
PSLO Meeting
October 15, 2008
IDB Sustainable Energy and Climate Change Initiative
2008 Activity
1. RENEWABLE ENERGY AND EFFICIENCY
2. SUSTAINABLE BIOENERGY
15 TCs (US$8.5m) / 5 Loans (US$300m)
9 TCs (US$4.2m) / 4 Loans (US$310m)
3.
4.
CARBON FINANCING
CLIMATE CHANGE ADAPTATION
3 TCs (US$2.6m)
5 TCs (US$2.8m)
5. MULTI-PILLAR
10 TCs (US$6.3m) / 3 PBL Loans (US$825m)
PSLO Meeting
October 15, 2008
Climate Investment Funds:
IDB’s leadership on Climate Change in LAC
» New funds for promoting low carbon and climate resilient growth
and development
» CIF - Two Funds: Clean Technology (CTF) and Strategic Climate
Fund (SCF)
» Purpose: to scale-up investments moving from project to
programs
» Fill immediate financial gap for urgent actions until the post-2012
regime financial architecture is effective
» Accelerate public and private investments
» Amount: US$ 6.1 Billion
» Timeframe: now and for next 5 years
PSLO Meeting
October 15, 2008
SECCI Policy-based programs: Mexico and Colombia
» Country-specific Stern Report
» Strengthening Environmental Ministries responsible for CC
policies
» Mainstreaming CC in priority sectors
» Development of CC plans for 15 states (Mexico)
PSLO Meeting
October 15, 2008
SECCI’s Operational Structure
Infrastructure and Environment Sector
Energy
Water and Sanitation
SECCI
Transportation
Rural Dev & Natural Disasters
PSLO Meeting
October 15, 2008
SECCI’s Biofuel objectives
» Assess the economic viability of biofuels and bioenergy
development.
» Provide sustainability assessment to mitigate potential adverse
social and environmental impacts.
» Assist Latin America and the Caribbean in becoming a leader in
“climate friendly” biofuels production by increasing research and
expertise in second generation biofuels.
» Provide country-level policy assistance in support of biofuel
development.
» Finance sustainable biofuel and bioenergy programs, including
feedstock development, production facilities, and related
infrastructure.
PSLO Meeting
October 15, 2008
Promoting Sustainable Biofuels
“The lesson learned is that we have to distinguish between
the various biofuel options, looking very carefully at the
different feedstocks, agricultural practices and production
processes to ensure that only the most sustainable biofuels
are promoted: the ones that offer climate benefits while
protecting biodiversity and food security”
PSLO Meeting
October 15, 2008
Key Trends in Biofuels
» Increasing demand given high price of oil and climate change
awareness
» Moving target – scientific opinion continues to evolve
» Highly complex issue with a series of trade-offs
» Focus on sustainability standards, but no available tools for
assessment so far
PSLO Meeting
October 15, 2008
IDB Supporting Investment in Sustainable Biofuels
» Biofuels action plans and technical cooperation
» Partnership with the Roundtable on Sustainable Biofuels
» Biofuels Sustainability Scorecard for assessing biofuels
projects
PSLO Meeting
October 15, 2008
IDB’s role in knowledge sharing and regional cooperation
» Brazil-US MoU: IDB partnership to elaborate Biofuel Blueprints
in Central America and the Caribbean
» Meso-American Biofuels working group
- Sharing best practices and technology transfer
- Action plans for regional initiatives for ethanol and
biodiesel
» Upcoming regional stakeholder meetings with the RSB focusing
on sustainability
PSLO Meeting
October 15, 2008
IDB Support
» “Blueprints” and Action
Plans for Biofuels
– suitability for
production
– mapping of areas for
feedstock
development and
production facilities
– Regulatory and legal
issues
» Technical cooperation
– sustainability
standards,
– Clean Development
Mechanism credits;
– new technology
utilization
PSLO Meeting
October 15, 2008
IDB Private Sector
Projects
Ethanol feedstocks:
- Grain sorghum
- Municipal waste
- Pineapple waste
- Sugar beet
- Sugarcane
- Sweet sorghum
Biodiesel feedstocks:
- Castor bean oil
- Jatropha
- Palm oil
- Recycled kitchen oil
- Soy
- Sunflower oil
Presentation Outline
» IDB’s Sustainable Energy and Climate Change Initiative
» Biofuels Case Study: Itumbiara, Ituiutaba, Campina Verde
PSLO Meeting
October 15, 2008
Bioenergy Projects: Background
» Demand for sugar and ethanol, expected for the domestic
and export market to grow at an annual average rate of 4%
and 14%, respectively, until 2020.
» Brazil will have to undertake substantial capital investments
to increase its sugarcane, sugar and ethanol production
estimated at US$70 billion.
» This Projects will provide part of such investment in the
sector.
Bioenergy Projects: Project Location
Goiás
Minas
Gerais
Itumbiara
Ituitaba
Campina Verde
Bioenergy Projects: Description and Structure
» Construction, operation and management of: (i) 3 greenfields
sugar and ethanol mills located in the States of Goiás and
Minas Gerais with a total cane crushing capacity of 8.1 million
tons per year; (ii) a 168 MW biomass-based co-generation
plant; and (iii) the development of sugarcane plantations.
» Full commercial and legal due diligence, hiring consultants for:
Local and international legal review
Technical/engineering review
Agricultural review
Insurance review
Market review
Financial and economic review
Environment review
Bioenergy Projects: Description and Structure
» Project challenges. Risk identification and proposed
mitigants.
» Environmental considerations.
» Financing structure:
Total Project costs US$1 billion.
Long-term debt: IDB A-Loan for US$260M and B-Loan for US$350M
Tenor: 13 and 15 years
Bioenergy Projects: Benefits
» Improve the competitiveness of the sugar and ethanol industry in
Brazil by having a low-cost vertically-integrated facility as well as
satisfying part of the growing domestic and international demand
for ethanol;
» Create significant impact on the regional economy, by contributing
to the creation of business and technological clustering.
» Generate direct and indirect jobs (during construction and
operation) while increasing the qualifications and level of training
of the employees hired in the plants.
» Increase the contribution of bioenergy in the national energy
matrix (i.e., with 56 MW of biomass renewable energy).
Bioenergy Projects: Monitoring
Monitoring during the life of the transaction with annual or
semiannual reports:
» Technical review
» Agricultural review
» Environmental and Social review
» Insurance review
Presentation Outline
» IDB’s Sustainable Energy and Climate Change Initiative
» Biofuels Case Study: Itumbiara, Ituiutaba, Campina Verde
» IDB Biofuels Sustainability Scorecard
PSLO Meeting
October 15, 2008
SECCI/SCF Scorecard Process
» High demand in biofuels
» Needed a way to screen for the “best” projects
» Sought internal and external feedback from academics,
environmental NGOs, financial institutions, investors, and
biofuels project developers in the US, EU, and in LAC
» Launched the Scorecard on 9th of September at 4th Annual
Western Hemisphere Energy Security and Cooperation
Forum, hosted at IDB.
» A 6-month broad public consultation period has begun with
the posting of the Scorecard on the website
PSLO Meeting
October 15, 2008
Scorecard Scope
» IDB knowledge product developed for use by financial institutions,
investors/developers, and IDB at all stages of project lifecycle
– Government entities, NGOs, and other members of biofuels community
also expected to benefit from Scorecard
» Thinking tool for how to address environmental and social
sustainability issues
– Does not provide a single score
– Fosters communication with clients about specific sustainability issues
related to biofuels
– Not a replacement for environmental and social due diligence
» Addresses complex issues in an organized and visual way
– Color map allows user to assess sustainability of project, including key
trade-offs
PSLO Meeting
October 15, 2008
Scorecard Use
» Colors used to designate rating from excellent to unsatisfactory
» If red (unsatisfactory), project should not be pursued
» Promote discussions about sustainability issues at an early stage
» Framework for providing clients with guidance on sustainability throughout
project lifecycle
» Already used to improve the sustainability of various biofuel projects
» Anticipate potential obstacles (future regulations, import restrictions,
community response, etc.)
» Complimentary to environmental and social due diligence process
PSLO Meeting
October 15, 2008
Biofuels Sustainability Scorecard
www.iadb.org/scorecard/
contacts:
[email protected]
[email protected]
[email protected]
PSLO Meeting
October 15, 2008
Examples of Use
» A biofuels project in Uruguay already benefited from the Scorecard:
the IDB team raised concerns to the client about a potential ‘food
vs fuel’ issue. IDB and the client are working together to identify
methodologies for evaluating the issue and ensuring the
sustainability of the project
» Another project in Costa Rica also used the Scorecard guidelines:
the client was counseled to cultivate grain sorghum in rotation
with rice on fallow land where rice is currently cultivated only 6
months per year, instead of displacing year-round production of
rice on irrigated productive land
» Another example of use is with a Fund client that will provide loans
to biofuels producers in LAC: they will use the Scorecard in
assessing projects for their own sub-lending
PSLO Meeting
October 15, 2008
Next steps
» Regional stakeholder meetings with Roundtable on Sustainable
Biofuels
» Presentation to World Bank and MDB working group on biofuels
» Working with EXR on presentation of Scorecard in other venues
» Revise Scorecard based on results of broader public consultation,
IDB experience with Scorecard, and continued evolution of
scientific information and perspectives
PSLO Meeting
October 15, 2008