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SPEECH/07/821
Stavros Dimas
Member of the European Commission, responsible for environment
GEEREF – Innovative Financing for
Clean Energy
UN Climate Change Conference, Bali: Side-event on Global
Energy Efficiency and Renewable Energy Fund (GEEREF)
Thursday 13 December 2007
Ladies and gentlemen,
Welcome to this side event and thank you for coming.
I would like also to thank our speakers for being with us this afternoon:
- Mr. Urban Rid, Director-General for Climate Protection, Environment and Energy,
Renewable Energies, International Cooperation in the German Federal Environment
Ministry
- Ms. Gry Larsen, Political Adviser to the Norwegian Minister of Foreign Affairs.
- Mr. Simon Brooks, Vice-President of the European Investment Bank
- Mr. Anders Wijkman, who as you may know is one of the most active and
dedicated members of the European Parliament when it comes to climate change
and sustainable energy issues.
Ladies and gentlemen,
Today some 1.6 billion people in the poorer countries of the world still have no
regular access to reliable energy services. Even if energy is not directly addressed
in the Millennium Development Goals, it is clear that providing access to affordable
energy is a prerequisite for reducing global poverty.
A huge amount of new electricity generation capacity must be built in the next 20
years as part of this effort. But if this electricity is not to add considerably to global
greenhouse gas emissions and further exacerbate climate change, we need to
ensure it is produced from low- or zero-carbon sources. This will have an extra cost
that the World Bank estimates at €25 billion annually - about a quarter of global
annual development aid – between now and 2030.
The European Commission has therefore been looking at ways to mobilise some of
the additional public funding and private capital necessary. In this context I am very
pleased to be able to present to you today a major pilot initiative that the
Commission has set up: the Global Energy Efficiency and Renewable Energy Fund,
or GEEREF.
GEEREF is an innovative global risk capital fund that will use limited public money
to mobilise private investment in small-scale energy efficiency and renewable
energy projects in developing countries and economies in transition. It is both a
development tool and a contribution to global efforts to fight climate change. It is
concrete proof of Europe’s commitment to transfer clean technologies to developing
countries.
Many of you may already have heard about GEEREF since it has been under
discussion for quite a while. I am glad to be able to say that GEEREF is now in the
final stage of being established and will be operational from the start of 2008.
I will briefly explain why the Commission came up with the idea of engaging public
money in a global risk capital fund. I will then give the floor to our German and
Norwegian colleagues who have been working with us to take this initiative forward.
Vice President Brooks of the European Investment Bank will then update us on how
and where GEEREF will work. Finally, Mr. Wijkman will share with us his views on
this new type of instrument.
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At the World Summit on Sustainable Development in 2002, world leaders agreed
that it was urgent – I quote – “to substantially increase the global share of
renewable energy sources with the objective of increasing its contribution to total
energy supply."
The European Union and other like-minded countries launched the Johannesburg
Renewable Energy Coalition, the JREC, during the summit to help achieve this
objective.
The fact is that, despite some progress in deploying renewable energy, its share in
the global energy mix has hardly increased.
We know that improving energy efficiency can be far more profitable than building
new energy supply infrastructure. However, investment in energy efficiency around
the world is not taking advantage of the full potential for improvement that is
available.
One major problem is that projects on energy efficiency and renewable energy face
significant difficulties in raising commercial funding. The reasons for this are
complex. They relate mainly to a lack of risk capital. The need for risk capital in
developing countries and transition economies is estimated at over 9 billion euros a
year, which is far above current levels.
While public grants have increased in recent years, the overall amount available is
clearly insufficient to mobilise the additional funding needed in the energy sector up
to 2030.
Leveraging private sector finance is therefore essential. But the long pay-back
periods on clean technology are an obstacle to investors. This is even more the
case in regions that are considered to be high-risk. Private investment flows to SubSaharan Africa, for instance, are very modest.
A second issue is the scale of the projects. Small projects in distant countries can
have higher administrative and transaction costs. Consequently international
financial institutions tend not to provide equity finance for projects below 10 million
euros.
GEEREF is aimed at overcoming these investment barriers.
The Fund will attract private investors by using public money to protect them against
the risks I have mentioned. It is an innovative public-private partnership that will
neither lend nor grant funds, but will invest them with the aim of making sustainable
profits for its investors.
By offering an attractive investment opportunity for the private sector, we aim to be
able to mobilise capital on a much larger scale.
GEEREF will invest through regional sub-funds specialising in energy efficiency and
renewable energy projects. It will give priority to meeting the needs of the
developing countries in sub-Saharan Africa, the Caribbean and the Pacific.
We know that small and medium-sized enterprises and project developers in these
parts of the world experience particular difficulties in raising the necessary risk
capital. But it will also invest in the countries of the European Neighbourhood,
including North Africa and eastern European states that are not members of the
European Union, as well as in Latin America and here in Asia.
The European Commission has kick-started GEEREF by committing to inject about
80 million euros between this year and 2010. With additional pledges from the
German and Norwegian governments, we are already well above 100 million euros.
We expect this to mobilise additional risk capital from the private sector of at least
300 million euros, and possibly up to 1 billion in the longer term.
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Ladies and gentlemen,
Meeting the challenges of climate change and of protection the world's environment
for future generations requires innovative financing solutions. GEEREF is one of
these.
By establishing this fund, the Commission and other public investors are underlining
our shared commitment to accelerate the transfer, development and deployment of
environmentally sound technologies. By doing so we will help to bring clean and
secure energy supplies to people in poorer regions of the world.
I hope that many more investors will join us. GEEREF is a global fund, and it is
open to investors from anywhere.
I would like to take this opportunity to thank the German and Norwegian
governments, the European Investment Bank and the European Investment Fund
for helping GEEREF get off the ground, and the European Parliament for its strong
support.
I will now give the floor to Mr Rid.
Thank you.
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