Overview of financial sources and access modalities for mitigation actions, including supportfor CDM and NAMAs

Regional Workshop on CDM and NAMAs for Latin America and the Caribbean

31 August – 2 September, Bogota, Colombia

Mateo Salomon

Climate Change and Sustainability Division

Inter-American Development Bank

USD 359 BN

94% towards Mitigation

Financial Mechanism to Support CDM (some examples)

The NEFCO Norwegian Carbon Procurement Facility (NorCaP) (30 MtCO2e) UNFCCC Loan Scheme for CDM Joint Crediting Mechanism (Japan) Fiscal incentives (ej. Colombia, technology and equipment exempted of IVA) WB methane pay-for-performance auction facility (reversed auctions) Domestic Carbon Markets Voluntary Carbon Markets (76 MtCO2e in 2013)

Source: World Bank. 2014. State and Trends of Carbon Pricing 2014

POSSIBLE FINANCING STREAMS FOR NAMAS

Source: IISD, 2013Combination

Financing NAMAs: the instruments

A variety of NAMA financing instruments exist, such as: - Project financing, structures funds, promotional loans, development

loans, grants, equity instruments, guarantees etc.

Basic principles of NAMA financing instruments: - Adaptation to the specific circumstances of the host country to

overcome financial barriers is key - Instruments need to be sustainable that work beyond first steps of

project implementation- Affordability of financial instruments is crucial - Price signals are not enough…- Availability to potential investors and private sector investors - Managing risks and attracting private sector investments

riskriskriskriskriskriskriskriskriskriskriskriskriskriskriskriskriskriskrisk

DIFFERENT SOURCES OF FUNDING FOR EACH STEPS OF THE NAMA PROCESS

Grant / Technical Assistance

Grant / Technical Assistance Component of Loan

Concessional Loan / Private Sector Investment

Key phase to develop the appropriate mechanisms that will trigger private investments

Technical Assistance Programmes (Examples)

- UNDP Low Emission Capacity Building Programme

- World Bank Partnership for Market Readiness

- UNEP FIRM

- Mitigation and Implementation Network (MAIN) – WB, CCAP

- …

Bilateral Funds (Examples)

- NAMA Facility

- Austrian NAMA Initative (SIDS)

- French Development Agency

- …

Multilateral Funds (Examples)

- Climate Investment Funds

- Global Environment Facility

- Green Climate Fund

- EC Latin America Investment Facility

- …

www.climatefinanceoptions.org

Climate Investment Funds

GEF-6 (2014 July-2018 June) Climate Change Mitigation Focal Area Strategic Framework (USD 1,220 million) (DRAFT)

GREEN CLIMATE FUND (GCF)

The Fund will support [developing countries] in pursuing project-based and programmatic approaches in accordance with climate change strategies and plans, such as low-emission development strategies or plans, nationally appropriate mitigation actions (NAMAs), national adaptation plans of action (NAPAs), national adaptation plans (NAPs) and other related activities.-Mitigation and Adaptation windows (Same modality of Access)

- 50:50 balance between adaptation and mitigation during the initial phase of the Fund.

-Private Sector Facility (PSF) – direct and indirect finance to private sector-Readiness Support-National, Regional and International Implementing Entities (Direct and International Access)-Geographical balance-Grant & Concessional Lending

Financing NAMAs: Role of MDBs

Multilateral Development Banks- Trigger and facilitate first steps by providing loans and concessional

funding to prepare and develop NAMAs together with host country- Help eliminate barriers (technical, regulatory, financial) and risk-

return equation - Create implicit credit enhancement effect on account of participation

by banks (AAA credit rating) - Facilitate the access and implementation of climate funds- Catalyze private investments in NAMAs for long term sustainability

for NAMAs and transformational impact - Help build institutional capacities for enhanced NAMA coordination

by host countries and help develop national and sectorial plans - Provide valuable knowledge, regional experience and replicable

best practices

Financing NAMAs: Successful IDB Example: ColombiaPhase 1: Study and Disbursement

Supplier

Hotel/Hospital

Private Bank

National Development

Bank

Information for prior diagnostic

Technical and financial proposal

Credit application

Validator Verifier

Application for project evaluation

Validation of the project

Disbursement

Disbursement approval

Insurance company

Insurance Policy application

Grant policies

Credit application

form

Financing NAMAs: Successful IDB Example: ColombiaPhase 2: Project in Operation

Supplier

Hotel/Hospital

Private Bank

National Development

Bank

Payment of % retained in accordance with contract

M&V Report

Credit Payment

Validator Verifier

BID

Report on program impact

Insurance company

M&V report

YESNO

Application for M&V revision

Report review

Execution policy

IDB

Thank you for your attention!Gracias por su atención!

Mateo SalomonClimate Change and Sustainability Division

Inter-American Development Bank (IDB)jmsalomon@iadb.org

Financing NAMAs: 1: New Housing NAMA Mexico (Ecocasa)

International DonorNAMA Fund (IDB/KfW)

SHF Subsidized loansRevolving fund

Trust fund Trustee (TBD)

Grants

Primary lending institutions (PLI)

Loans

BanksPLI

Grants

SCVto be determined (RUV)

Qualification

Mexican Government CONAVI

Supervision

House ownersDevelopers

0,6% of building costs

Financial flow

Monitoring

Information flow

ECOCASA: Program Structure and Financing