1. Can Financial Innovation Promote Energy Efficiency? An Impact Analysis for China November 13, 2009 Hiroyuki Hatashima Independent Evaluation Group-IFC Evaluation 2009 The Annual Conference of the American Evaluation Association

2. 2 Dilemma of energy efficiency finance IFC’s program in China and its results Impact Evaluation methodology used Findings from impact evaluation Outline

3. Constraints to energy efficiency investments Profitable projects not realized because: –Lack of knowledge about benefits; –Lack of design capabilities to prepare energy saving projects; –Lack of financing Lenders’ perception (high risk) and skills (credit appraisal)

4. IFC Energy Efficiency Finance Program in China Output Develop, implement, finance Energy Efficiency projects with end users Develop capacities of EE market partners Disseminate knowledge Outcome Develop market for Energy Efficiency projects Improve access to financing for Energy Efficiency projects Demand for Energy Efficiency Finance Ultimate Goal Reduce GHG emissions by Energy Efficiency projects (directly and indirectly) Input: loan loss guarantees and technical assistance

5. Energy efficiency loans for energy saving investments

6. Program met some targets Cumulative investments from guarantees

7. Impact Evaluation Defined as: systematic comparison of project’s impact in contrast to the “without project” scenario. More systematic assessment of non- treatment group

8. Surveys are conducted for both treatment and control groups Banks Treatment group: 2 Banks Comparison group: Similar banks (8) End Users (Cement) Treatment group Companies received loans from partner banks (16) Comparison group 40 Random sampled similar companies

9. IFC program – small but catching up Bank loans to Energy Efficiency projects

10. Many investments took place without help Comparison group: High awareness on EE benefits, technical knowledge Government policy to promote EE High implementation of project with its own resources/bank financing

11. Many investments took place without help Treatment group “If you have not received a loan supported by the program, would you still undertake the project?” Only about 10% said it would not implement if not supported by the program

12. IE identified key differences made by the program Key differences are among small companies –Large companies – have finance access, technical knowledge, capacity; –Small companies –limited access to financing, less projects undertaken

13. Summary Financial innovation and energy efficiency –Importance of access to financing for small companies; –Government policy as important driver; Impact Evaluation –Effective in identifying intervention’s additional contributions –Show the areas of unique contributions for future focus