GREEN ECONOMY TRANSITION AT THE EBRD

Stefania Racolta-CruceruEBRD Energy Efficiency and Climate ChangeFebruary 2016

WHAT IS THE EBRD?

2

• €30 billion capital base• €40 billion portfolio• €8.7 billion average annual

business volume in the last three years

• AAA rated

• Public financing institution established in 1991 to foster transition to market economies

• Owned by 65 countries and 2 intergovernmental organisations

• Operates in 35 countries in Central and Eastern Europe, Central Asia and the Southern and Eastern Mediterranean

THE CHALLENGE

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International context

• COP21 Paris : universal and ambitious agreement to limit the increase in global average temperatures to +2*C; also, “to pursue efforts” to limit to 1.5*C

• The Sustainable Development Goals, adopted in 2015, provided increased focus on environmental sustainability

• G7 Summit Leader’s Declaration in June 2015: MDBs need to maximise their balance sheets in delivering climate finance and helping countries transition to low carbon economies

• EBRD is at the forefront of efforts to channel resources from existing and emerging global climate finance funds to projects on the ground.

GREEN ECONOMY TRANSITION CONTEXT

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THE PATH

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AMBITIOUSLimit the increase in the average global temperature to 2 degrees C“Pursue efforts” to limit to 1.5 degrees C

UNIVERSALAgreement endorsed by 195 countries

GREEN ECONOMY TRANSITION CONTEXT

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EBRD context

• Special mandate to foster transition to market economies – this implies that resources are used efficiently

• EBRD focus is placed at the crossroad between sustainability, market development and private sector support.

• Legacy of big enterprises and utilities having developed not reflective of costs and environmental externalities

• Several EBRD economies display some of the highest energy and carbon emissions intensity levels in the world

• Imperative to increase energy security• Existing and forecasted water stress in Central Asia and SEMED countries

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ENERGY INTENSITY IN THE EBRD REGION

• The EBRD region has some of the most energy-intensive economies in the world, for instance Ukraine is the 10th energy intensive economy in the world, Russia the 11th, Kyrgyzstan the 13th and Moldova 18th.

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EBRD Countries of Operations United Kingdom China

CARBON INTENSITY OF EBRD REGION

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Alban

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Lithuan

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Hunga

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Slove

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Slova

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Roman

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Armen

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Monten

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Tajiki

stan

Azerba

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EBRD Co

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Macedo

nia (F

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Bulga

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Belar

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pt

Russi

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lia0.0

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3.0EBRD CoOsEU-28 averageUSA

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s of

CO2

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ns /

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GDP

2013 energy-use related CO2 emissions per unit of GDP (2005US$ at market exchange rates) from IEA

• 11 out of the 20 most carbon-intensive economies in the world are in the EBRD region due to the heavy reliance on fossil fuels in their energy mix. 9 out of those 11 are net-importers of fossil fuels.

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WATER STRESS IN THE EBRD REGION

Water risk indicator

Low to medium

Medium to high

High risk Extremely high risk

Low

1 2 3 40 5

GREEN ECONOMY AND GET APPROACH

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2006 2013 2015Sustainable Energy Initiative Sustainable Resources Initiative Green Economy Transition

• Energy efficiency• Renewable energy

• Water efficiency

• Material efficiency

• Adaptation to climate change

• Environmental protection• Technology transfer

A green economy is a market economy

• in which public and private investments are made with a specific concern to minimise the impact of economic activity on the environment; and

• where market failures are addressed through improved policy and legal frameworks aiming at accounting for the inherent value of limited natural resources, at managing related risks and at catalysing innovation.

• The new GET approach will mean even more projects in the Bank’s countries of operations will have a sustainable energy and resources element.

• Financing offered on market terms:• Debt• Equity• Guarantees

BUSINESS MODEL

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• Targeted technical assistanceEnables transfer of skills, builds up the capacity of clients to develop their businesses, assists in introducing new policies or products, etc

• Concessional or grant financingHelps overcome barriers : affordability constraints, transaction costs associated with setting up new business lines, penetration of advanced technologies onto the market

Financing on

commercial terms

Additional instruments to overcome

barriers

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Activities to address resource efficiency gaps

• Energy and resource audits to identify sustainable resource investments

• Integrated technical, financial and marketing consultancy teams to support banks in developing sustainable energy as a core business

• Risk assessments related to climate vulnerabilities

• Transition gaps and market scoping studies

POLICY DIALOGUE

PROJECTS & INVESTMENTS

TECHNICAL ASSISTANCE

Tailored financing instruments• Direct financing• Indirect-financing via local banks

(SEFFs)• Technology Transfer investment

grant support• Blended concessional finance so as to

overcome affordability and risk perceptions

Working with governments• To strengthen the institutional

and regulatory framework

BUSINESS MODEL

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DELIVERY MECHANISMS

Direct financing of large borrowers

Local Partner Banks

Reaching out to SMEs and residential borrowers

via local banks

Energy Efficiency

teamExternally

hired consultancy

team

EBRD

THE EBRD TRACK RECORD:OPERATIONAL RESULTS

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10 years after launch of SEI in 2006, results as at end 2015:

• 1,080 projects

• €19.3 billion cumulative EBRD SEI/SRI financing

• €106.9 billion cumulative total project value

• 64% in private sector

• 30% of the Bank’s overall ABI in 2015

1.5

3.2

3.2

3.2

3.4

1.1

2.9Central Asia

Central Europe & Baltics

Eastern Europe & Caucasus

Russian Fed.

South-Eastern Europe

SEMED

Turkey

Cross-regional

8.2

3.4

3.2

4.5

SEI/SRI ABI by banking group and

by region (€ billion)

Energy

Financial Institutions

ICA

Infrastructure

THE EBRD TRACK RECORD: ENVIRONMENTAL IMPACT

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REDUCED

77 million tonnes of CO2/year

In 2006–2015

More than the annual energy use related CO2 emissions of Romania or twice those of Sweden

SAVED

33 million m3 of water /year

In 2013–2015 from 70 water efficiency projects

Equivalent to a third of the annual water consumption of the population of Prague

REDUCED

1 million tonnes of waste /year

In 2013–2015 from 40 waste efficiency projects

Various streams of waste: metals, minerals, agricultural waste

GET OBJECTIVES AND DRIVERS

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GET objectives:

• further scale-up Bank operational and policy activity to accelerate COO transition to low carbon economy and climate resilience

• broaden green investment activity through environmental dimension

• develop innovative technical and financing products supporting private sector climate action complemented by public sector channels when needed

• in quant terms, increase EBRD environmental climate financing to 40% of total ABI by 2020.

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015 ...

2020

0

1,000

2,000

3,000

4,000

15%

19%

29% 28%

34%

30%

0.4

GET ABI target

Resource ef -ficiency in municipal in-frastructure

Renewable energy direct financing

Energy effi-ciency in the power and resources sectors

Sustainable energy financ-ing facilities via banks

Share in total Bank invest-ments€

mill

ion

GETTING THERE!

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40%2020 target for the share

of GET business in EBRD ABI

€4 billionTarget annual EBRD green

business by 2020

€18 billion

Target cumulative EBRD green business 2016-2020

GET: SCALING-UP

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GET approach builds on range of activities and expertise developed under SEI and SRI. Activities expected to drive GET scaling-up include:

• Direct private sector resource efficiency financing in industrial, agribusiness, commercial and infrastructure sectors including circular economy projects.

• SEFF expansion through development of network of participating banks and countries covered by facilities, and of product range.

• Renewable energy financing.• Develop FINTECC activity supporting climate technology transfer to countries with low

technology penetration. • Improvements in power network infrastructure and efficiency in conventional generation

and natural resources value chain.• Expansion of municipal infrastructure energy efficiency activity including street lighting

projects and low carbon transport modes.• Pursue development of gas flaring reduction projects.

GET: INNOVATION

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Main GET innovation areas include:• broadening the environmental dimension• sector innovation• flexible instruments

Examples of GET innovation activities include:• Green logistics projects• Development of adaptation project financing across sectors• SEFF for small and medium sized climate adaptation projects, and to support local

environmental technology development• Public buildings energy efficiency projects• Support to accelerated implementation of environmental standards (through ESAPs and

SEFFs) and environmental remediation in industry, natural resources and transport• Pollution reduction including local air quality improvement• Demand side management through utilities and smart grid development• Development of biofuel/bioenergy sources, and waste to energy for district heating• Water efficiency projects• Supply chain financing to reduce environmental footprint• Flexible approach to allow targeted use of public channels of transition impact relevant for

public building energy efficiency and climate resilience.

GET: POLICY WORK

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Building on capacity and tested practice, pursue technical assistance, policy advice and advocacy work to strengthen GET policy framework.

Intended Nationally Determined Contributions (INDCs) developed in context of COP21 by all EBRD COOs (except Kosovo and Uzbekistan) provide a frame to develop policy agenda and investment priorities to be reflected in country strategies.

At regional level, policy work could include support to national adaptation strategies in key vulnerable countries including Kazakhstan, SEMED and Turkey, or INDC preparation in major countries.

At specific country level, policy work could include energy efficiency labelling, renewable energy TC on implementation, policies for buildings energy efficiency and support to green cities policy and planning.

2006 2007 2008 2009 2010 2011 2012 2013* 2014 20150

50

100

150

200€203 million

Grants

Concessional co-finance

TC

€ m

illion

GET DONOR FUNDING AND RESOURCES

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• Strong donor support to date with €389 million committed in TC (2006-14) and €270 million non-TC funding (2013-15)

• Shareholder support with approval of incremental budget for GET implementation.

* Full SRI concessional co-finance and grant data available from 2013 onward

GET ACTION: ON THE MOVE ACROSS REGIONS AND SECTORS!

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CONTINUING TO SCALE-UP

INNOVATION BROADENING THE ENVIRONMENTAL

DIMENSION

• SEFFs• Renewable energy

• Flexible financing channels• Technology transfer• Sector innovation

• Financing environmental improvements

Materials efficiency in Turkey manufacturing

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CLIENTThe second largest PVC profile manufacturer in Turkey.

PROJECT Supporting the company in constructing a new state-of-the-art plant and in enhancing its plastic waste recycling capabilities, both of internally produced waste streams as well as from external collection.

INVESTMENT PLANEBRD loan € 25 million of which green finance represents € 7 millionConcessional parallel loan from the Clean Technology Fund € 1 million

RESOURCE AUDITAudit funded by the Government of Spain recommended innovative measures: tri-generation, solar PV, improved automation and controls, high efficiency motors and drives and wastewater treatment. Most measures have payback times between 3-5 years.

IMPACT OF PROJECT• The company will increase plastic waste

recycling rates from below 10% currently to over 15%

• Estimated plastic recycled of 800 tonnes per year

• Estimated emission reductions of 22,000 tCO2/year

GET ACTION SCALING UP

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RENEWABLE ENERGY SUSTAINABLE ENERGY FINANCING FACILITIES

• Continued support for wind and biomass-based generation• Growth in solar energy

particularly in SEMED• Focus on hydro in Central Asia

and Caucasus

• Launching SEFFs in new countries• Rolling out SEFF activities in new

sectors in countries already covered by facilities

Biomass CHP in Latvia and Estonia

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CLIENT

Producer of wood pellets based in Estonia with operations in the Estonia and Latvia. It has a business in electricity and heat generation through its biomass fuelled combined-heat-and-power (CHP) plants.

PROJECTS

In 2011, 2013 and 2015 the EBRD supported the financing of three pairs of new biomass CHPs in Estonia and Latvia. These produce both electricity to sell to the grid and heat to support the company’s pellet business.

INVESTMENT PLAN

2011 EBRD loan € 34 million2013 EBRD loan € 30 million2015 EBRD loan € 42 millionParallel commercial banks lending€146 million

IMPACT OF PROJECTSNew biomass-based generation capacity: 41 MW New biomass-based heat capacity: 109 MWGreen electricity generation: 300 MWh/yearEstimated emission reductions: 189,000 tonnes of CO2/year

Sustainable Energy Financing Facilities

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• Through Sustainable Energy Financing Facilities (SEFFs), the EBRD extends credit lines to local financial institutions.

• Local financial institutions on-lend funds to small and medium-sized businesses, corporate and residential borrowers.

• Finance is provided for energy efficiency, small-scale renewable energy and water efficiency projects.

• SEFFs establish project implementation teams who support local financial institutions and their clients.

• SEFFs may often include partial grant financing of sub-loans as incentives, or concessional elements to support partner banks in developing the corporate structures necessary to

  EBRD  

Donor funding

• EE corporate strategy

• Marketing support

• Training /appraisal support

Credit lines

Technical assistance team

Partner financial

institutions

• Energy Audits• Eligibility check

  Commercial loans

Local borrowers

SEFFs are an integrated model to support banks develop sustainable energy as a durable, core business area

Results of the SEFF programmes

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• Developed integrated SEFF programmes in 22 countries

• 100 Partner Financial Institutions received technical assistance and credit lines

• 95,000 investments implemented

• Worth over €3 billion• Saving over 14 million MWh

equivalent each year• Avoiding over 5 million

tonnes of annual CO2 emissions

GET ACTION POWER SECTOR RESILIENCE AND EFFICIENCY

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POWER SECTOR WATER EFFICIENCY IN WATER-STRESSED COUNTRIES• The reliability and efficiency of thermal power generation is already being

affected by rising temperatures and increasing water scarcity, particularly in more water scarce countries

• A first investment in dry cooling technology decreased the reliance on water for Damanhour CCGT in Egypt (US$62 million of adaptation finance out of EBRD financing of US$200 million)

• Country study for Turkey currently underway; examines the vulnerability of the power sector to climatic impacts and identifies potential investments

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Example of climate resilience project in Tajik hydropower

CLIENTState Unitary Enterprise KMK

PROJECTFinancing for rehabilitation of two units at the Qairokkum hydro power plant. This will increase capacity of the plant from 126MW to 142MW, increase the safety level and strengthen the plant’s resilience against the projected impacts of climate change.

ADAPTATION COMPONENT • Rehabilitation of hydro power plant to make its

operation more climate-resilient• Climate resilience built into the design of the upgrade

by modelling future hydrology outcomes under a range of climate change scenarios

• Turbine upgrade and spillway capacities adjusted to optimise power generation and safety across the range of projected hydrological conditions

TECHNICAL ASSISTANCEUS$4.7 million provided by the EBRD’s Special Shareholder Fund, the government of Austria and the UK. This amount was mainly used for climate resilience skills transfer to the client.

FINANCIAL STRUCTUREThe EBRD’s credit line US$50 millionThe CIF PPCR* funds US$21 million

- Loan US$10 million - Grant US$11 million

Technical Cooperation grants US$4.7 millionTotal project value US$75.7 million* The Climate Investment Funds (CIF) Pilot Programme for Climate Resilience (PPCR)

GET ACTIONPUBLIC BUILDINGS REHABILITATION

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LARGE POTENTIAL ACROSS ALL COOs• Buildings sector responsible for approximately a third of the final energy

consumption in EBRD COOs, and for approximately the same share of total greenhouse gas emissions.

• Buildings in the public sector in most EBRD COOs lag behind in terms of adopting efficient buildings and buildings management measures and technologies.

• This considerable gap in terms of inefficient energy and water use and low penetration rates of advanced technologies is most effectively addressed via focused sovereign and sub-sovereign approaches.

GET ACTIONGREEN CITY INTEGRATED APPROACH

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TBILISI “GREEN CITY”• Integrated approach and projects based on

Green City Action Plan, including bus systems upgrades, waste logistics and public buildings rehabilitation.

GET ACTIONCLIMATE TECHNOLOGY TRANSFER

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FINTECC IN UKRAINE AND KAZAKHSTAN

• FINTECC (Finance and Technology Transfer Centre for Climate Change) enables the uptake of high efficiency technologies in countries with underdeveloped supply chains and low market penetration rates. • Combines targeted TC and policy dialogue activities with support for

climate investments via partial capital grants for eligible technical measures, made available by the Global Environment Facility.• After successful rollout in ETC countries and SEMED the programme

has been recently extended to Ukraine and Kazakhstan.

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Supporting technology transfer

FINTECC PROGRAMME• FinTECC (Finance and Technology

Transfer Centre for Climate Change) aims to enable the uptake of high efficiency technologies in countries with underdeveloped supply chains and low market penetration rates of such technologies.

• The programme offers up to 25% grant cover out of the cost of eligible climate technologies with low market penetration rates but high replication potential.

• Targets early market development and affordability and “first-mover” barriers.

• The programme is supported by the Global Environment Facility.

PROJECT EXAMPLE: POULTRY FARMING IN JORDAN • Leading integrated poultry

producer in Jordan received EBRD financing of US$ 21 million

• Approximately US$ 1 million to support investment in heat exchange technologies, earmarked as SRI finance.

• 18% of the SRI capital investment supported via a FINTECC grant.

GET ACTIONCLIMATE RESILIENCE IN PORTS

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CLIMATE RESILIENCE IN MOROCCO’S PORT INFRASTRUCTURE• Targeted investment in priority port infrastructure upgrades (e.g.

breakwaters) that build resilience to sea level rise and extreme storm events.• Technical assistance to introduce best international practices in port

sector resilience to extreme weather events and climate change• Planned investment of US$40 million supported by GEF grant co-financing

of US$6 million.

GET ACTIONCLIMATE RESILIENCE FINANCING FACILITY

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TAJIKISTAN CLIMADAPT FRAMEWORK• Building on the SEFF approach, the facility encourages the uptake of measures and

technologies which boost climate resilience, via on-lending by local partner banks.• Climadapt brings together EBRD pilot credit facilities of up to US$ 5 million, up to

US$5 million of concessional loans from the Climate Investment Funds and TC resources of €2.3 million made available by the EBRD SSF and the UK DFID for extensive sub-project preparation.

• The innovative approach makes investments in water and energy efficiency, and sustainable land management accessible for Tajik businesses, farms and households.

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EBRD climate adaptation activities

• Many of the EBRD’s countries of operation are vulnerable to climate risks such as water scarcity, altered hydrology and flooding.

• Climate vulnerability is worsened by poor infrastructure, suboptimal technologies, poor policy context and lack of data, and limited access to appropriate finance.

• The EBRD helps clients undertake actions to adapt to climate change and make them resilient by identifying potential climate risks and providing both technical and financial support.

• EBRD adaptation business tools include: • Feasibility study methodology for climate-resilient water supplies• Guidance on making ports and coastal infrastructure climate

resilient• Analytical tools for managing climate change risks to hydropower• Industrial water efficiency audits

• Since launching activities specifically dedicated to climate change adaptation in 2011, the EBRD financed 107 projects with climate resilience components totaling €640 million.

GET ACTIONENVIRONMENTAL DIMENSION

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BROADENING THE ENVIRONMENTAL DIMENSION• Investigating potential for financing capital investments arising from

Environmental and Social Action Plans, for M&S projects in EU Member States and Serbia.• Could be extended to other sectors and countries• Purpose is to improve broader (beyond climate) environmental standards

and impacts.

GET THE DIFFERENCE

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We are the first generation to feel the sting of climate change, and we are the last generation that can do something about it.

Governor Jay InsleeState of Washington

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For more information:

http://www.ebrd.com/work-with-us/project-finance.html

http://www.ebrd.com/work-with-us/trade-facilitation-programme.html

http://www.ebrd.com/work-with-us/procurement/consultancy-services.html

http://www.ebrd.com/work-with-us/procurement/project-procurement.html

Contact:

EBRD Energy Efficiency and Climate ChangeStefania Racolta-Cruceru

RacoltaS@ebrd.com