Download Innovative financial mechanisms to mitigate climate change

Debt-for-environment swap
The Polish case
Stanislaw Sitnicki
Post-Kyoto climate regime, March 5, 2009
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The idea of converting debt into environmental
investments
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The EcoFund Foundation
- Governance and decision making
- Programming
- Environmental effects
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Potential to replicate
Arrangements
(the idea)
Stanislaw Sitnicki
Post-Kyoto climate regime, March 5, 2009
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Bad debts (not served or poorly served debt by
companies or governments)
Secondary market (debt papers available at a
discount price)
Swap (willingness to buy debt papers back in
local currency)
Benefit (difference between discount price and
buy back price of debt papers for charitable
purposes)
Arrangements
(the Polish case - circumstances)
Stanislaw Sitnicki
Post-Kyoto climate regime, March 5, 2009
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Context (reduction by the Paris Club creditor countries
of the Polish sovereign debt by 50%)
Request (allocation by individual creditor countries
another 10% of Poland’s debt for environmental
investments defined in bilateral agreements, to be spent
in a period of 1992-2009)
Condition (the outstanding debt to be fully served
including its part allocated to domestic environmental
financing, strong public support to improve
environmental protection in Poland)
Support (World Bank loan on improving environmental
policy, seminar in Norway under auspices of Ms Grø
Haarlem Brundland)
Arrangements
(contributors 1)
Stanislaw Sitnicki
Post-Kyoto climate regime, March 5, 2009
Country
Year
Percentage
of debt
USA
Switzerland
1991
1993
10
10
Amount
$ million
372.0
63.0
France
Sweden
Italy
1993
1997
1998
1
2
10
66.0
13.0
32.0
Norway
Total
2000
10
27.0
573.0
Arrangements
(contributors 2)
Stanislaw Sitnicki
Post-Kyoto climate regime, March 5, 2009
60
million USD
50
EcoFund's receipts from the debt-for-environm ent sw ap schem e in 1992 ÷ 2009
[m illion USD]
40
30
20
10
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Year
Arrangement
(the Polish case - decisions)
Stanislaw Sitnicki
Post-Kyoto climate regime, March 5, 2009
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Debt-for-environment swap funds for meeting
requirements of international agreements and
conventions
Financial support chiefly of investment projects
Project financing in a form of non-refundable grants
Aid is exempt from any taxes and charges of the host
country
Highly professional institution to administer aid under
supervision by creditor countries
The Foundation
(fields of investment)
Stanislaw Sitnicki
Post-Kyoto climate regime, March 5, 2009
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Air protection (reduction of transboundary transport of
sulfur dioxide and nitrogen oxides)
Water protection (reduction of pollutant inflow to
Baltic Sea)
Climate protection (reduction of emission of gases that
cause climate change)
Nature protection (biological diversity protection
through protection of endangered species and habitats)
Waste management (communal waste reduction,
selective collection and recycling, management of
hazardous waste including hospitals)
Governance and decision making
(the EcoFund Statutes)
Stanislaw Sitnicki
Post-Kyoto climate regime, March 5, 2009
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Established by the Ministry of Finance to administer debt swap
funds
EcoFund Council to decide on programs, projects and procedures by
2/3 majority of up to its 15 members
Members of the Council nominated by the Minister of Treasury,
including representatives of creditor countries
Chairman of the Council nominated by the Minister of Environment
Board of the EcoFund nominated by the Council
Staff selected, trained and supervised by the Board
Debt-swap funds transferred twice a year on EcoFund’s bank
account by the Minister of Finance
Programming
(expenditure program)
Stanislaw Sitnicki
Post-Kyoto climate regime, March 5, 2009
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Goals to be accomplished through use of debt
swap funds
Inventory of a prospective activities contributing
to a particular goal
Priority list of effective project proposals
Terms and conditions to announce call for
project proposals
Programming
(project selection and appraisal)
Stanislaw Sitnicki
Post-Kyoto climate regime, March 5, 2009
1.
Eligibility criteria (first stage application)
2.
Appraisal criteria (full application)
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Collecting and validating project data
Calculating criteria to be assessed in appraisal process
Technical, financial and environmental appraisal of a project
Point system to integrate different criteria
Benchmarks or limits of financial resources to select projects for
financing
Environmental effects
(climate protection projects)
Stanislaw Sitnicki
Post-Kyoto climate regime, March 5, 2009
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Mitigation of greenhouse gas emission
- focus on energy production and use, replacement of
fossil fuels, innovative technologies, nature protection
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Sequestration of greenhouse gases and adaptation to
climate change
- focus on wetlands and forestry
- focus on education, demonstration and adjustment of
ecosystems to changing climate conditions
Mitigation programs and
projects
Stanislaw Sitnicki
REC-climate workshop, March 5, 2009
Heat energy
conservation
Improvement of
energy efficiency
in heating systems
Electricity
conservation
Renewable
energy sources
Reduction of nonCO2 greenhouse
gas emissions
Modernisation of
energy sources
Biomass
Reduction of
methane emissions
from coal mines
Modernisation of
electric drives
Biogas
Use of CNG as fuel
in buses
Wind
Solar
Heat energy conservation
Improvement of energy efficiency in
heating systems
Stanislaw Sitnicki
Post-Kyoto climate regime, March 5, 2009
• Heat supplies in Poland
mostly base on district
heating systems.
• There is great energy
saving potential in the
municipal and housing
sector, which is responsible
for about 40% of national
final energy consumption.
Electricity conservation
Modernisation of electric drives
Stanislaw Sitnicki
Post-Kyoto climate regime, March 5, 2009
 Electric drives account for
50% of electricity
consumption by Poland’s
industry.
 Their modernisation offers
significant energy saving
opportunities for the industrial
sector.
Renewable energy sources
Solar energy
Stanislaw Sitnicki
Post-Kyoto climate regime, March 5, 2009
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On average, insolation
conditions in Poland allow to
gain about 2 GJ per year of heat
energy per m2 of solar panels,
offering a very cheap way to
heat water for domestic use.
Focus on big hot tap water
users.
Installation of a photovoltaic
system with total power output
of 70 kWp and a total area of
600 m2.
Non-CO2 greenhouse gases
Use of CNG as fuel for buses
Stanislaw Sitnicki
Post-Kyoto climate regime, March 5, 2009
• Traffic-related pollution is
becoming the main threat to
air quality in city centres.
• The co-funding of CNG fuelled engines which meet
the Euro4 standard allows to
improve the air quality in the
big cities centres.
Mitigation technical projects
- general results
Stanislaw Sitnicki
REC-climate workshop, March 5, 2009
Heat energy
conservation
Electricity
conservation
Renewable
energy sources
Reduction of
the emission of
non-CO2
greenhouse
gases
Annual reduction of CO2 emissions resulting from EcoFund’s projects
580 thous. Mg
2,4 million Mg
683 thous. Mg
TOTAL 3,93 million Mg
Total number of projects – 415
Total cost of projects – $1 billion
Total EcoFund’s grants - $200 million
261 thous. Mg
Potential to replicate
Stanislaw Sitnicki
Post-Kyoto climate regime, March 5, 2009
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Capacity of debtor country to serve debt after its
reorganization and reconstruction
Adoption of a good practice in programming and
implementing environmental protection activities
Good will of creditor countries to accept debt reduction
Direct engagement of creditor countries in supervision
and control
Technology transfer and benefit sharing
Thank you!
A.Wołkow