Investment Framework on Clean Energy & Development Wim Jonker Klunne Alois Mhlanga

Slide 2 Outline 1. Background/context of Investment Framework G8 Gleneagles Communiqué Time frame 2. The MDBs and the Investment Framework The MDBs response to G8 3. The ADB and the Investment Framework The role of the ADB Conclusion and way forward

Background/context of Investment Framework

Slide 4 G8 Gleneagles Communiqué (July 05) Objectives of the Framework: increase the volume of investments on renewable energy and energy efficiency assist regional member countries to identify less greenhouse gas intensive growth options support private sector to develop and finance cost-effective projects on energy efficiency and low-carbon energy sources Request to World Bank and RDBs to develop a clean energy investment framework Background of Investment Framework

Slide 5 G8 Gleneagles Communiqué (July 05) Focus on Africa and on Climate Change Secure, reliable and affordable energy sources are fundamental to economic stability and development Action has to be taken now to slow, stop and reverse greenhouse gas emissions  promote energy efficiency  conservation of energy  improvement of policy-, regulatory- and financing- frameworks  accelerated deployment of cleaner technologies Background of Investment Framework

Slide 6 G8 time frame July 2005: request by G8 to MDBs November 2005: meeting with finance ministers (London) April 2006: World Bank reported at IMF Spring Meeting 3 rd / 4 th quarter: MDBs expected to present IF strategies / action plans to their Boards G8 summit 2007 (Germany): report progress G8 summit 2008 (Japan): report outcomes Background of Investment Framework

The MDBs and the Investment Framework

Slide 8 MDBs response to G8 Clean energy and low-carbon economy  Focus on cleaner utilisation of fossil fuels  Increased used of renewables  Attention to increasing access to energy Adaptation to climate change  Climate proofing of investments  Integration of adaptation into project cycle MDBs agreed to take a two pronged approach to Climate Change: The ADB and the Investment Framework

Slide 9 Outline Clean Energy and Low-carbon Economy. Adaptation to climate change.

Slide 10 A - Clean Energy and Low-carbon Economy Outline 1. The Challenge. 2. Strategies for Clean Energy Future 3. Investment Needs and Sources

Slide 11 1.The Challenge Double dividend in development. Major energy challenges :  improving energy services for economic growth and better quality of life;  reducing environmental and human health threats from energy production and use; and  strengthening energy security for macroeconomic stability. Up to 2050, primary energy demand will increase, so will GHGs since coal, oil and gas will be main sources for energy. CC major additional challenge to the poor. Low carbon drive must not have additional cost on the poor. A- Clean Energy and Low Carbon Economy

Slide Strategies for Clean Energy Future Focus on clean energy for economic growth and sustainable development. Criteria that focuses on low-cost and high-impact solutions. changes in national energy fiscal and regulatory policies.  Non-regrets Investments: applying exiting technologies and approaches that are viable financially and yield ancillary benefits.  New Technologies : Focus on technologies that are economically viable but not yet financially viable.  Research and Development :  Additional measures to reduce GHGs and Low carbon economy : aggressive program on efficiency, renewables and fuel switching & adoption of policy targets A- Clean Energy and Low Carbon Economy

Slide Investment Needs and Sources Financing needs are enormous :  300 billion US$/year for Clean Energy for Development.  60 billion US$/year for GHG reduction and Low-carbon economy. Internal Cash generation, Private financing, Public funding: national investment climate – policies, tariffs, subsidies etc. IFIs – finance, policy and technical advice. IFIs – need to expand existing risk management products, mainstreaming carbon finance, accessing sufficient grants, enhance country dialogue etc A- Clean Energy and Low Carbon Economy

Slide Proposed New Financial Instruments Focus: 1- buy down cost of investment. 2-mitigate technology risks. 3-fund efficiency improvement of existing assets. 4- strategic research financing. Clean Energy Finance Vehicle (CEFV) : blend grants, carbon finance and collateralize clean energy technologies Power rehabilitation financing facility. Project Development Fund. Development of Bankable projects. Venture capital funds for technology adoption : use dedicated venture capital to promote the adoption and penetration in the marketplace of new technologies. A- Clean Energy and Low Carbon Economy

Slide 15 B -Adaptation to Climate Change Outline 1. The Challenge. 2. Strategies to Adapt to Climate Change. 3. Investment Needs and Sources

Slide The Challenge 1 of 2 Human-induced change: combustion of fossil fuels & land management practices. All countries vulnerable : the poor are most vulnerable, having the least means to adapt. Long-term adaptation strategies compatible with reduction of vulnerabilities to immediate climates. Mitigation and adaptation major challenges to Africa. B -Adaptation to Climate Change

Slide The Challenge Some Projected Impacts in Africa Decrease in water availability & quality. Risks of droughts and floods. Human health: Increased vector and water-borne diseases. Food security : reduced agricultural productivity Infrastructure : economic and social infrastructure B -Adaptation to Climate Change

Slide Strategies for adaptation Development of Information & tools : reduce uncertainties of threat and impacts; planning risk insurance and disaster management. Disaster Preparedness : improve preparedness through proactive actions. Implementation of existing cost-effective technologies and infrastructure. Research and Development. B -Adaptation to Climate Change

Slide Investment Needs and Sources billion US$ per year required: all developing countries need finance and technical assistance. Public finance to be main driver : need to climate proof development programs. Private finance threatened : improve private sector capacity to deal with climate variability. Innovation : collaboration between private re-insurance industry and IFIs in reducing risk to infrastructure investments and agriculture. Instruments similar to the clean energy financing B -Adaptation to Climate Change

The ADB and the Investment Framework

Slide 21 ADB strategy on IF Proposed action plan - Clean energy Increasing access to energy (both rural and urban) Emphasis on hydropower, biomass, solar energy Integrate cleaner energy / renewable energy in Bank’s projects Energy policy / RE&EE strategy  Analyse role of energy in Bank’s operation  Stakeholder consultations The ADB and the Investment Framework

Slide 22 ADB strategy on IF Proposed action plan - adaptation Mainstreaming in all ADB operations  Country programming  Integrate in Bank project cycle  Update procedures / guidelines Training & capacity building (RMCs & ADB) TA to countries on climate proofing Research and Development The ADB and the Investment Framework

Slide 23 Conclusion and way forward ADB to work in close collaboration with other MDBs in developing the Investment Framework Framework endorsed by Development Committee ADB to develop its own Action Plan with specific issues related to our core mandate and African needs Present clean energy and adaptation action plan to the Board by 4 th quarter 2006 The ADB and the Investment Framework