Page 1 The Costs of Going Green and the Role of Financing MSMEs Dr. Wolfram Hiemann GREEN FINANCING FORUM TAGBILARAN, BOHOL 29 APRIL 2013

Page 2 GREEN FINANCING FORUM - TAGBILARAN 29 APRIL 2013 Problem Climate change, in particular global warming, provoked by human activities

Page 3 GREEN FINANCING FORUM - TAGBILARAN 29 APRIL 2013 Global warming Temperatures of pavements without trees and sunshine protected

Page 4 GREEN FINANCING FORUM - TAGBILARAN 29 APRIL 2013 Going Green A common definition for green financing has still to be developed. For example: Green finance relates to financing activities and investments that reduce man-made effects on climate change  growing green house gas emissions and CO 2 level  measures: EE, RE, (re-) forestation environment deterioration  e.g. pollution and degradation of air, water and soil  measures: cleaning effluents, flaring methane gas, terracing, mulching, organic farming, etc.

Page 5 GREEN FINANCING FORUM - TAGBILARAN 29 APRIL 2013 Reward For investor Subsidy, tax exemptions Preferential loans: lower interest rate, longer gestation period, reduced collateral requirement Technical assistance (TA) For banks and other financial institutions Image gain as an environment-conscious institution Attracting new medium- to long-term oriented customers (lower risk of revoking the business permit or conflicts with the neighboring community) Access to long term funds Access to consultancy and training

Page 6 GREEN FINANCING FORUM - TAGBILARAN 29 APRIL 2013 Consciousness and individual responsibility towards our joint environment Knowledge about feasible options (research, information, consultancy) Knowledge management (applying knowledge, investment not required: switching off the electricity consumer the engine, selecting paint,) Availability or accessibility of equipment, after sales service Finance Inputs required to go green

Page 7 Consciousness

Page 8 GREEN FINANCING FORUM - TAGBILARAN 29 APRIL 2013 Examples for green measures for MSMEs Non assets related Consultancy (walkthrough) Training Smart electricity management Waste reduction and segregation

Page 9 GREEN FINANCING FORUM - TAGBILARAN 29 APRIL 2013 Examples for EE equipment for MSMEs Major fields of investment in EE Lighting: outphasing of incandescent light bulb, fluorescence light, and compact fluorescence light (CFL) for LEDs Refrigerating and air conditioning: Inverter technology, heat absorbers for heating water (simultaneously: replacement of ozone depleting substances) Heating (using process heat) Green transport: reduced fuel consumption and lower CO 2 emission, use of LPG, LNG Green building architecture and environment

Page 10 GREEN FINANCING FORUM - TAGBILARAN 29 APRIL 2013 Equipment: Selecting the right color: transport

Page 11 GREEN FINANCING FORUM - TAGBILARAN 29 APRIL 2013 Building design and material

Page 12 GREEN FINANCING FORUM - TAGBILARAN 29 APRIL 2013 Building design and material

Page 13 GREEN FINANCING FORUM - TAGBILARAN 29 APRIL 2013 Examples for RE equipment for MSMEs Warm/hot water generation: Solar heat collectors 150 l = about 30,000 to 60,000 without/with electric heater serves two to three hotel rooms Savings: about 3 kWh/day x 11 or about 10,000 per year (Smaller and larger capacities available) In Bohol only available at Citi Hardware, Tagbilaran City

Page 14 GREEN FINANCING FORUM - TAGBILARAN 29 APRIL 2013 Examples for RE equipment for MSMEs and cooperatives Agricultural waste converting to electricity (rice husks, melasse, etc.) Biodigester Micro-hydropower: 100 kW, investment 10,000,000 and more depending on civil construction (dam) and distribution grid, serves more than 100 rural households Photovoltaic electricity generation: 100 kWp, investment 10,000,000 to 20,000,000 or more depending on battery capacity + 1,000 m 2 land Annual income: 1.2 kWh/Wp x 100,000 Wp x 7/kWh = 840,000 (Income is higher when based on feed-in tariffs)

Page 15 GREEN FINANCING FORUM - TAGBILARAN 29 APRIL 2013 LED lamp, rechargeable battery, solar panel : 8,000 (Edward Marcs, Cebu)

Page 16 GREEN FINANCING FORUM - TAGBILARAN 29 APRIL 2013 Promoting energy efficient LED lamps

Page 17 GREEN FINANCING FORUM - TAGBILARAN 29 APRIL 2013 Replacement lighting Calculation model Replacing 100 tube type lamps in shop and in office Old: Tube type 8, 36 W, magnetic ballast Replacement: 2 LED 7 W, bulb Investment/tube: 1, ,000 for new fittings, total 2,200 Investment: 220,000 to replace 100 tubes

Page 18 GREEN FINANCING FORUM - TAGBILARAN 29 APRIL 2013 Replacement lighting Calculation model Savings 36 W – 2 x 7 W = 22 W x 12 hours/day x 11 / kWh = 2.9/day per tube Total savings/year: 2.9 x 360 days x 100 tubes = 104,400/year Payback period: 2.1 years Further savings: Less electricity consumption for AC: LEDs emit less heat Replacement period for bulbs about 5 times longer

Page 19 GREEN FINANCING FORUM - TAGBILARAN 29 APRIL 2013 Efficiency of air conditioners (AC)

Page 20 GREEN FINANCING FORUM - TAGBILARAN 29 APRIL for inverter / 9.2 = 1.48 = 48% higher EER

Page 21 GREEN FINANCING FORUM - TAGBILARAN 29 APRIL 2013 Modelconventionalinverter ConsumptionW/h Savings of inverterW/h200 Running timeh/day8 Savings per day/yearkWh1.6 / 584 Electricity tariffⱣ/kWh11.0 SavingsⱣ/year6,424 Price of new ACⱣ16,00025,000 Payback period of difference (Ᵽ9,000)Less than 1.5 year Replacement of air conditioner for office/home

Page 22 GREEN FINANCING FORUM - TAGBILARAN 29 APRIL 2013 Biogas from piggeries Biogas/methane capture and electricity production facility Investment cost: about 7 million for 1,000 sow level farm Savings replacement of electricity from grid: 80% or 0.5 million (7.1%) Carbon credits 1,000 sow level = 10,000 heads = 18,000 t CO 2 equivalent/year 18,000 t x EUR 0.5 – 5.0 / t CO 2 = EUR 9,000 – 90,000 or 0.45 – 4.5 million per year This income has to be shared with the carbon credit arranger, e.g. bank.

Page 23 GREEN FINANCING FORUM - TAGBILARAN 29 APRIL 2013 Access to financing institutions is easy, but access to green finance?

Page 24 GREEN FINANCING FORUM - TAGBILARAN 29 APRIL 2013 Suggestion Act environmentally consciously Support environment friendly activities We have only this planet, the next one is too far away Thank you!