Tracking climate finance flows in South Africa ... · Leading infrastructure development Tracking...
Transcript of Tracking climate finance flows in South Africa ... · Leading infrastructure development Tracking...
Leading infrastructure development
Tracking climate finance
flows in South Africa:
reflections & challenges
Contribution to the OECD/IEA
Climate Change Expert Group Global Forum
19-20th March 2012, Paris
Climate finance is very complicated on the ground …..
• Donor commitments since 2003 > $2.5bn to South Africa
• Fragmented and unrealized potential to reach scale /replicate
• Poor alignment with national development priorities
• Low impact and high transaction costs
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National Government
(National Treasury)
Private Banks
Development Banks
World Bank
GEF, adapta-tion fund,
others mechanism
Provinces Individual governments
Private Banks
Private Inves-
tors
Munici-palities
Devel-opment
corpora-tions
NATIONAL SOURCES INTERNATIONAL SOURCES
National Government
(Departments)
Provinces Municipalities Development Banks
Development Corporations
Individuals projects
NGO’s
Private Inves-
tors
Donors
Carbon
markets
Public
finances
Adapt
Fund SCCF LDCF
CIFs
SCF CTF
Carbon
Funds
MDG
UN-
REDD
SCAF
REEEP UN-
REED
Financial
institutions
(Public /
Private)
Mitigation /
Adaptation
interventions
Public sector
UNFCCC GEF
Institutio-
nal FDI
Venture
capital
Philan-
thropy
World Bank /
IMF
RDBs / BFIs
UN (and
agencies)
Capital
markets
Financial
resources
GEF TF
Source, Adapted from DNA Economics, 2011
Green Climate
Fund
Bilateral and multilateral support to South Africa
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BILATERAL Committed: $525m – $1.5bn
(2007-2014)
MULTILATERAL Committed: $500m - $1.5bn
(including co-financings) (2010-2014)
Source of funding Financing instruments Intervention area
Loans, 88%
Grants, 7%
Tech Coop 5%
Renewable Energy
CDM market
Other green
technology
Climate policy
Energy Efficiency
Loans, 90%
Grants, 10%
Energy Efficiency
(SWH)
Natural Resource
Mgt
Technical capacity building
Other green tech
Renewable Energy
Private sources of funding in Renewable Energy sector
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COMMERCIAL BANKS (1) $4.12bn
(1743MW RE)
NATIONAL DFIS (1) $2.54bn
(1743MW RE)
Source of funding Financing instruments Intervention area
Renewable Energy
(1) Financial close anticipated by July 2012. Potential double
counting of “resources” as part of domestic funding is supported
by bilateral specialist credit lines.
Private equity and exchange traded funds
$312.5bn
Renewable Energy
Energy Efficiency
Trading on green
business
Debt, 70%
Equity, 30%
Equity, 100%
National budgets: Environmental expenditure allocations (2012/13-2014/5 in ZAR’m) (Total $2.25bn)
0 1000 2000 3000 4000 5000 6000 7000 8000 9000
2012/13
2013/14
2014/15
Energy Environment
National Green Fund Environmental Protection
Agriculture & Forestries & Fisheries
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Unpacking the Dept of Environmental Affairs’ budget (in ZAR’m)
• Programmes and projects relate to the “Working for’s” relating to wetlands, water, waste, rivers, fire through delivery of service while creating employment
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0
500
1000
1500
2000
2500
3000
3500
Environmental Quality and Protection
Oceans and Coasts Climate Change Biodiversity and Conservation
Environmental Sector programmes
& projects
Green Fund
2012/13 2013/14 2014/15
Policy and regulation
Sustainable development investments
Strategies contained in departmental budgets
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T rade & Industry
Respond and adapt to the impact of climate change by improving the monitoring of
water resources by refurbishing existing river flow gauging stations and constructing
4 new stations by 2013/14
Water
Energy Facilitate the implementation and adoption of new and renewable energy
technologies by supporting renewable energy projects, the demand side management
programme and the solar water gey ser programme.
Other governm ent initiatives
Industrial development- respond to the growing imperatives of climate change and
environmental concerns and opportunities through the promotion of green
industries and resource efficiency in the economy
T ransport emphasis will be placed on promoting job creation within the transport industry and
reducing its impact on the environment and climate change by promoting energy
efficient solutions and the use of cleaner fuels
Environmental policy alignmentPublic Enterprises
Agriculture Forestry and
Fisheries
NRM facilitates the development of insfrastructure and the sustainable use of natural
resources by providing an enabling framework for facilitating climate change
mitigation and adaptation
Econom ic Developm ent a) New Growth Path: Green Economy Accord. Reports on the implementation of the
green economy strategy over the MTEF period b) Subprogramme: Green Economy
identifies, develops and supports projects, incentives and other measures and
engages with government and non-governmental stakeholders to maximise the job
creation potential of green economic activ ities
Environmental management programme ensures that climate change strategies are
integrated into municipal planning processes by facilitating municipal development
management strategies that are responsive to climate change.
Will begin to implement its green buildings framework and step up efforts to green
state buildings as part of South Africa's strategies for mitigating the effects of global
warming
Public Works
COGT A: SALGA
Investment in green infrastructure and the retrofitting of infrastructure to be more
energy efficient is beign recognised as a government priority and is a focus area with
which the CIDB is aligned.
CIDB
JOBS FUND – R9bn (Green jobs programme?)
Domestic developments: Growing family of national green/climate funds
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SUSTAINABLE SETTLEMENTS FACILITY – Under development
NATIONAL GREEN FUND – R800M (include multi-donor facility?)($100m)
DRYLANDS FUND – R6.5M
Government , donors &
development institutions Banks Equity investors
Bankable and
sustainable
Enabling
environment
Pre-
feasibility
Studies
Feasibility
Studies
Detailed
business plan
Investment
proposition Capital
raising
Civil society interventions
Project
inception
ACID MINE DRAINAGE – R208M
SWH REBATE R4.1BN
“SUSTAINABLE ENERGY INVESTMENT PARTNERS” FUND – Under development
IDC GREEN ENERGY
EFFICIENCY FUND – R500M
Expanded Public Works Programme (Adaptation focused) $375M
Climate finance tracking challenges
1. Donor driven vs. country driven agendas
2. Definitional challenges – recognition of climate finance vs development assistance
3. Common frameworks needed for donors and ring fencing of individual concerns
4. Pledged, committed and disbursed, currency challenges
5. Counting “climate finance” is difficult - donors engage directly with intermediaries and domestic partners and not always engaging through national structures and reported in “aggregate” (potential double counting)
6. Degree of sophistication of country level tracking system relative to the suite of instruments (grants, loans, guarantees, tech transfer) – “nationally appropriate climate support measures”
7. Tracking concessionary support “passed through” to the projects
8. Impact of donor funds at project level in leveraging additional resources
9. Detailed resourcing needs at country level needed to make bilateral negotiations more effective
10. Utility value of grants (e.g pilot studies) in delivering sustainable outcomes
11. Creating support for growing family of domestic green funding mechanisms
Recognition of need for coordination platform to improve efficacy of international & domestic interventions
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Supporting country ownership: Creating a national investment plan for transition
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National Green Fund – R800m
Enabling direct access: Providing support where needed along project cycle
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Civil society & CSI
[Rxx bn]
National budget
$2.25bn
Bilateral & multilateral [ca. $2bn]
Domestic DFIs
$3.1bn –$5bn
Commercial Banks
$3.75bn
Institutional investors
10% ESG
Insurers
Rxx bn
TRACKING FINANCE ALONG A RISK TOLERANCE SPECTRUM
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
The Relationship between Private Sector Investment and Development Finance
Development Finance Cost (bn) Private Sector Investment
Green Transition 2015
Green Transition 2021
Low carbon & resource efficient &
climate resilient economy - 2030
Emerging principles to advance climate finance effectiveness @ country level
1. Own the definitions - equity, pragmatism, trust, innovation, transparency, accountability
2. Power of planning – what, when, where and how @ programme level
3. Power of the package (product) – finance, technology transfer, technical assistance
4. Power of the pack – Right partners for the right programmes
5. Power of the innovation – relevant and appropriate resources
6. From commitment to action – Prototype for immediate application
7. Lighthouse watch – Focus on the long road, not short term
6Ps – Planning, policy, programmes, processes, package, partners
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Ms Chantal Naidoo
Development Bank of Southern Africa
Environmental Finance
[email protected] +27795048724
National Climate Change Response White Paper
Creating a sustainable framework to finance green & climate investments
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Additional information: Creating platforms for coordination
Population Growth
Migration Patterns
Rate of urbanization
Consumption
Energy Supply patterns
Diminishing Natural
Resources
Regional Integration
Institutions & implementation
Access to resources
Sustainability & development
We are
living
in a resource
constrained world
climate finance
(grants/loans/guarantees)+
Technology transfer +
Technical assistance/cooperation
PLUS: private sector,
civil society and capital markets
National Climate Change Response Policy1
National Treasury have the mandate to establish an effective and enabling climate finance architecture and financing strategy for South Africa’s climate change and green economy response.
Climate finance responsibilities (in addition to multi-donor coordination) include:
• Establish an interim climate finance coordination mechanism to resource programmes referred to in White Paper.
• Appoint initial custodian of the mechanism
• Lead a multistakeholder task team to work on long term funding framework for climate finance within 3 years of publication (i.e. October 2014) (Ministers of Finance, EDD and DEA)
17 1. National Climate Change Response White Paper, (referencing Chapter 8 and 11.1.
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Prototype for a National Green Fund
National Green Fund
[with defined programme windows]
Game plan to establish the interim mechanism
1. Leverage initial capitalisation: Capital raising to leverage initial investment (3x per year)
2. Impact: Transition SA to a green economy
3. Programme windows: Waste, natural resources, energy, build institutional capacity
4. Alignment: Climate policy proposes a National Climate Finance Coordination Mechanism which the fast start option could fulfil in the short term
Capital raising to market to crowd in at least $1bn financing commitments for first five years
Technical Partners
Product offering: 1. Performance
based grants 2. Concessional loan
facilities 3.Technical green
project support 4. Programmatic
support
NT initial capitalisati
on $100m over
3 years
Grants
International &
national sources
Loans and guarantee
s
Project implementers • Municipalities • Private sector • NGOs • Intergovernmental
Support and
advisory
Grants / Loans /
Guarantees
Proposed Climate Coordination Mechanism
19 Source: DBSA climate finance and green economy research, Dec 2010 – October 2011
CTCN
Global Green
Climate Fund Governments
Policy alignment
Implementation
mandate
Inclusive
consultations Channel
funds
MRV
Programmes and projects
Operational
phase subsidy/
grants
Working capital
needs
Promoter
contribution
(equity/ other)
Reporting progress
Representative
process on
priorities
Supplemented by
other sources:
Grants, loans,
specialist credit
lines, export credit
agencies, technical
assistance etc
Co-financing
and
development
with private
sector
Role of coordination mechanism in leveraging private and public capital
Source: Adapted from output of workshop of developing country DFIs hosted by the DBSA, AfD and World Resource Institute (29-31st August 2011)
Matching &
facilitation
Climate Coordination
Mechanism
Implementing agents
Other climate
finance sources
Benefits of coordination mechanism
• Integration: Existing development priorities with climate response
• Ownership: Country owned response strategy
• Demand driven: Bridging gaps that exist within domestic finance sector
• Clarity: Increased capacity to absorb appropriate & relevant technology transfer
• Partnerships: Financing, technical assistance, technology, institutional strengthening
• Transition: Scaled up infrastructure & industrial programmes to unlock growth
• Tracking: Performance based monitoring & evaluation and support
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Background Information: National Climate Programmes with additional information on Renewable Energy IPPs
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Additional information: Renewable Energy Programme in South Africa
Current national green & climate programme landscape
“Near term Priority Flagship Programmes” (DEA)
Green Economy Summit (DEA, DBSA)
Green Accord (DW&EA, NEDLAC, IDC, EDD, DTI, DOE, DPE, DHET, DOT, DIRCO)
Climate Change Response Public Works
Green buildings and the built environment Green cities and towns
Retrofitting
Water Conservation & Demand Management
Resource conservation & management Water management
Investment in the green economy
Renewable Energy Clean energy Rollout of renewable energy
Energy Efficiency & Energy Demand Management
Energy efficiency
Energy efficiency Rollout of solar water heaters
Transport Sustainable transport
Carbon emission reductions on roads
Waste management Sustainable waste management practices Sustainable consumption and production
Waste recycling, reuse & recovery
Carbon Capture & Sequestration Clean coal
Adaptation Research Agriculture, food production and forestry
Electrification of poor communities & reduction of fossil fuel open fire cooking & heating
Biofuels
Localisation strategies (youth, coops, skills)
Cooperation at COP17 and follow up
Monitoring and evaluation 23
Parameter
Policy Integrated Resource Plan 2, Integrated Energy Plan
National development aims Energy security, access
Green aims Shift fuel source & reduce energy demand
Target 3745 MW of “clean energy” by 2016/17
Approved programmes South African Renewables Initiative
Funding facility REFIT, Renewable Energy IPP Fund
Current priorities: Renewable energy
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National Climate Change Response White Paper (Dept of Environment)
National Renewable Energy Programmes
Integrated Resource Plan (IRP2)
(Dept of Energy)
Green Accord (Economic Development
Dept)
Renewable Energy Programme – current status
• Significant investments remaining for IRP2 programme to be implemented (ca $11bn)
• Future focus on job creation, localisation of technology and creating technical capacity within South Africa for industrialization of clean energy and advancing efforts of small IPPs
• Resource mobilisation strategy will go into “high gear” requiring alternate instruments including investment and risk guarantees, connective infrastructure support and tech transfer agreements
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South Africa – IRP 2 Allocations to date
Source: Dept of Energy & National Treasury, 2011 Source: DBSA indicative estimates (2012)