Global Environment Facility (Prepared in September, 2011) GEF Investment in Climate Change Mitigation and Sound Chemicals Management Dr. Ming Yang Sr. Environment Economist / Climate Change Specialist myang@theGEF.org Global Environment Facility October 5, 2011 Trinidad (Prepared in September, 2011)

Outline The GEF GEF’s 20 Years’ Investment in Climate Change Mitigation and Sound Chemicals Management GEF 5 Resources and Strategy in Climate Change Mitigation and Chemicals Investment Case Studies on GEF Investments Key Points in GEF5 Project Development

The GEF

The GEF Secretariat GEF’s Operation: Based in Washington, D.C, the GEF Secretariat reports directly to the GEF Council and Assembly, ensuring that their decisions are translated into effective actions. GEF’s Mission: A mechanism for international cooperation for the purpose of providing new, and additional, grant and concessional funding to meet the agreed incremental costs of measures to achieve agreed global environmental benefits The GEF is the Financial Mechanism of the UNFCCC, CBD, Stockholm Convention, UNCCD and the Nagoya Protocol. The GEF also provides assistance to International Waters and the Montreal Protocol. The GEF provides Secretariat Services to the Adaptation Fund Board.

The GEF 1991-2011 10 Agencies Under the Ongoing Reforms of the GEF, additional agencies, including qualified National Entities will be added to the GEF Agencies. Over 2,700 projects 182 participating countries, private sector, and civil society US$ 16.13 billion as of June 2010 US$ 16.22 billion as of June 2011

GEF 20 Years’ Investment in Climate Change Mitigation and Chemicals

20 Years – Financing for Climate Change Mitigation GEF Trust Fund invested about US$3 billion in over 150 countries Mitigation Adaption Technology Needs Assessments National Communications to the UNFCCC

20 Years – Financing for ODS and POPs GEF Trust Fund invested about US$613 million including $ 187 million in ODS 26 ODS projects 19 individual countries and 6 regional projects $ 426 million in POPs 219 POPs projects Over 154 countries

20 Years – Catalyzing investment Catalytic Leveraged more than US$18 billion in co-financing on its US$3 billion of investments in CC Leveraged more than US$875 million in co-financing on its US$ 613 million of investments in ODS/POPs US$ 179 in ODS US$ 696 in POPs Cost-effective Over 2.5 billion tonnes of CO2 avoided The ODS portfolio of the GEF additionally eliminated 1.155 GT of CO2 Equivalent. About US$ 1.2 per ton CO2 You may need to revise the cost effectiveness figure with the value of reduction from the ODS Portfolio.

Distribution of GEF Approved 851 CC Projects in Regions

Distribution of GEF US$ 179 million in 25 ODS Projects

Distribution of GEF US$ 696 POPs Projects

Continued Financing Climate Change Mitigation: Strategic Objectives for GEF-5 (2010-2014) Demonstration, deployment, and transfer of innovative low-carbon technologies Market transformation for energy efficiency in industry and the building sector Investment in renewable energy technologies Energy efficient, low-carbon transport and urban systems Conservation and enhancement of carbon stocks through sustainable management of land use and forestry (LULUCF) Enabling activities and capacity building

Continued Financing ODS and POPs: Strategic Objectives for GEF-5 (2010-2014) Phase out POPs and reduce POPs releases; Phase out ODS and reduce ODS releases; and Pilot sound chemicals management and mercury reduction.

GEF 5 Resources and Strategy in Climate Change and Chemicals Investment

Increased Resources in Climate Change (US$ million)

Utilization of the GEF funds in POPs 1991-2010

Climate Change Allocation in GEF 5 STAR $ million

GEF 5 Set-aside Funds for Climate Change and Chemicals Climate Change Total: US$272 million (US$1360 million X 20%) National Communications and Technology Needs Assessments (US$80m) Global and regional technology centers and network (US$42m) Incentives for countries to participate (with STAR) in global and regional projects (US$20m) Global and regional projects (targeted research, etc.) (US$10m) Support for carbon finance (US$20m) Sustainable Forest Management/REDD + incentives (US$100m) ODS and POPs Total: US$35 million for national communications

Key Points in GEF’s Project Development

Full-sized projects (> $1 Million) Council approval of Work Program* CEO endorsement of project GEF Agency approval of project** GEF Agency completion of project & implementation start*** It will be useful when presenting this slide to discuss what a PIF is and the 18 month project cycle. * Work Program consists of PIFs cleared by the CEO ** GEF Agency approval of project signifies start of project implementation *** Project completion follows terminal evaluation and financial closure

Medium-sized projects (< = $1 Million) Single –step Approval Agency submits final MSP project document for CEO approval* GEF Agency completes implementation followed by evaluation and financial closure Two-step Approval (if PPG is needed) Agency submits PIF/PPG for CEO approval Agency submits final MSP project document for CEO approval* GEF Agency completes implementation followed by terminal evaluation and financial closure * Agency approves MSP after CEO approval of the project and starts implementation.

Country endorsement (by Country National Operational Focal Point) All Project Identification Forms should have endorsement of Operational Focal Point when submitted to GEF for clearance (in case of full-sized projects) or approval (in case of medium-sized projects requesting project preparation grants)

Review criteria for FSP/MSP Country eligibility and ownership; Agency’s Comparative advantage; Resource availability; Project consistency; Project design; Baseline of the project; Incremental costs of the project; Project co-financing; Monitoring and evaluation; and Agency’s responses to comments and reviews. For combining GEF and MLF funding for HPMPs the MLF funded portion can count as part of the baseline project

Project baseline Project Baseline: Activities that would happen without GEF’s investment The costs of the baseline activities: to be covered by normal development expenditures such as government budgets, bilateral aid, the private sector, NGO resources, and loans from international financial institutions, including IDA and the Multilateral Fund. The impacts of the baseline activities (GHG emissions and global environmental benefits): to be estimated through historical projects and/or trend analyses

Alternative project and incremental costs Alternative Project: Activities that would happen with GEF’s investment Incremental costs of the alternative project may include technology licensing; procurement of equipment and engineering services; acquisition of additional natural resources, such as land for wind farm development; training for professionals to manage new technologies, etc. Net incremental costs can be negative Unit Cost Long run average cost – HCFC chillers Net incremental cost Net incremental cost Long run average cost – NON-HCFC chillers Operation years Year 1 Year 2

Example of baseline and GEF investment scenarios

Case Studies on GEF Investments in EE and ODS

Case study 1: Commercialization of CFC-Free Refrigerators in China GEF Financing 9.86 ($mn) Co-financing Total Government Private Other 32.29 ($mn) 1.38 29.72 .20 Ratio of co-financing 1: 3.3 GHG Emission Mitigation 42 (million tCO2e) Cost of carbon reduction US$1/tCO2e) Increased Efficiency of Household Refrigerators 29% (weighted average) Institutional Framework and Governance Impacts Transformed the refrigerator market by promoting energy efficient models Reduced GHG and CFC emissions via CFC-free appliances 1998-2006

Case study 2: Financing Energy Efficient Building Chillers in Thailand 1998-2005 GEF Financing 2.50 ($mn) Co-financing Total Government Other 2.73 ($mn) 0.26 2.47 Ratio of Co-financing 1: 1.1 GHG Emission Mitigation 1.224 (million tCO2e) Technology Transfer 17 CFC-based chillers replaced New Chiller Installations Per Year 25% in 2005; by 2010 two-thirds of remaining inefficient chillers were replaced Institutional Framework and Governance Impacts Achieved target energy savings and ozone depleting substances reduction Demonstrated successful replacement of CFC chillers with non-CFC chillers for further replication

Case study 3: Promotion of HCFC-free Energy Efficient Refrigeration and Air-Conditioning Systems in the Russian Federation CEO Endorsed 2010 GEF Financing 18.2 ($mn) Co-financing Total 40.0 ($mn) Ratio of Co-financing 1: 2.2 Expected GHG Emission Mitigation 15.6 (million tCO2e) Expected Institutional Framework and Governance Impacts Introduce more energy efficient designs through technology transfer in the refrigerator and air conditioning manufacturing sectors Building capacity for greater market share of energy efficient technology through greater consumer awareness and demand Meet 2015 Montreal Protocol target by reducing electricity consumption and GHG emissions from the commercial and industrial sectors

GEF Co-financing Total of cash and in-kind resources committed by: governments, other multilateral or bilateral sources, private sector, NGOs, project beneficiaries, and concerned GEF agencies. Essential for meeting the GEF project objectives It would be useful to include here the concept of the baseline project and baseline financing which is essentially the co-financing.

Historical GEF Co-financing (US$ million) Ratio in climate change mitigation 3:18 In GEF 5, the expectation is that the co-financing (baseline financning) be at least 1:4. For LDCS and SIDS this requirement will be applied on a case by case basis.

Key for HCFC/EE project development Policy and regulation of the government; Involvement of multilateral and local commercial banks; Development of energy service companies (ESOCs); Incentives to technology users; Capacity building and development for technology users and commercial bank professionals; Removing other barriers; and Working together.

Conclusions (1) GEF’s achievements in climate change Financial mechanism for the UNFCCC US$3 billion, over 850 projects, 150 countries Leveraged US$18 billion co-financing in climate change projects Mitigated about 2.5 billion tons of CO2 GEF’s achievements in ODS and POPs Invested US$ 613 million Leveraged US$ 875 co-financing Mitigated 1.155 GT of CO2 Equivalent

Conclusions (2) Looking forward Climate Change GEF5 (2010-2014) US$1.36 billion in climate change Six strategic objectives Greater positive impacts on global environment benefits Baseline and co-financing are important in project development Looking forward ODS and POPs GEF5 (2010-2014) Three strategic objectives More funds available Developing projects that meet strategic objectives of CC, ODS, and POPs has high priority in the GEF. Linkages can be made with ODS and Hazardous Waste Management and ODS and Energy Efficiency.

Thank you for your attention!