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Bank aus Verantwortung
How Development Banks can Finance the Implementation of NAMAs
UNFCCC Climate Finance Briefing
Warsaw - 12 November 2013
Jochen Harnisch, KFW - Competence Center Environment and Climate
2
About KfW Group
› Development bank of Germany
› Founded in 1948 for implementation of the Marshall Plan
› More than 5000 employees
› We finance investment in Germany & Europe
› We provide international project & export finance
› We provide support for developing countries
› USD 94 bn. of new commitments in 2012 (thereof 40% climate and environment)
› USD 31.8 bn. for mitigation projects (e.g. energy, transport, waste, forestry)
› USD 0.6 bn. for adaptation projects (e.g. water sector, agriculture)
› USD 2.1 bn. of climate finance in developing countries
› Instrument: Grants, concessional and commercial loans, guarantees, mezzanine and equity
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› Network of 20 leading development finance institutions with mandates for national, sub-regional, regional and international activities around the world.
› Combined assets of more than USD 2,100 billion
› New commitments added up to approx. USD 390 billion
› Activities : Green finance mapping, exchange on good practices in private sector mobilisation and support of GCF implementation
› Current work plan: green infrastructure finance, support of SMEs, broader mapping of activities
The International Development Finance Club (IDFC)
4
IDFC Climate Finance Mapping 2013
Source: Ecofys, 2013
5
GHG Mitigation: Change Global Investment Pattern (IEA WEO 2011)
0
100
200
300
400
500
600
700
800
900
1000
Renewables Nuclear Total CCS Total FossilPlants
Trans & Distr. Biofuels Total extraction Total EnergyEfficiency
An
nu
al G
lob
al In
vest
men
t [U
SD
bill
ion
]
CPS World
NPS World
450 World
6
Dimensions of NAMAs (Nationally Appropriate Mitigation Activity)
National (low carbon) development strategy
Sectoral or cross-sectoral policy mechanism
Individual investment decisions
77
UK-German International NAMA Facility: Selection Criteria (1/2)Eligibility Criteria:
› applied at the first step of the selection process to assess all outlines submitted to the
NAMA Facility for support.
› ensure that outlined NAMA support projects fulfil the essential requirements for their
later implementation through financial and technical support instruments.
› Outlines need to fulfil all eligibility criteria in order to be further considered.
Eligibility of the
submitting entity
Endorsement by the national
government
Cooperation with a qualified
delivery organisation
Degree of maturity
Time frame for implementation
ODA eligibility
Financing volume
Feasibility
Concept for phase-out
88
UK-German International NAMA Facility: Selection Criteria (2/2)Ambition Criteria:
› applied to all outlines for NAMA support projects, which have successfully been
assessed against the eligibility criteria
› ensure that the NAMA Facility supports the most ambitious projects available
› assessed on a point-grade system to allow a ranking of all submitted NAMA support
projects
Transformational
Change Potential
Co-benefits
Financial Ambition
Mitigation Potential
Does the NAMA support project contribute to a transformation of the national
or sectoral development towards a less carbon-intensive development path?
Does the NAMA support project provide important additional development co-
benefits beyond the reduction of GHG emissions?
Does the NAMA support project foresee or enable a substantial funding
contribution from other sources?
Does the NAMA support project foresee substantial direct and indirect GHG
emission reductions?
9
Financial Instruments – OverviewDiversity of business models and regional foci and mandates
Performance of partner countries and viability of projects
e.g. adaptation projects, capacity building, REDD
Market funds
Public funds
Source of financing
Grants / Budget support loans
loans at IDA and standard terms
Development loans
Promotional loans
Structured Funds, e.g. GCPF
Project financing
Concessionalfunds
e.g. RE projects
EE- and RE-financing
103Topic of the presentation / location / date [dd.mm.yyyy]
KfW Case Study: Wind Farm Gulf of el Zayt in EgyptAfrica's biggest wind farm with 200 MW and pilot project for bird protection
Impa
ctA
ppro
ach
Pro
blem
› Rapidly growing energy requirements
› expensive energy import
› Rising pollutant emissions
› Unused wind energy potential (> 10.000 MW)
› KfW loan (EU-NIF and EIB) for wind farm with grid
connection (i.e. planning, construction, commissioning,
connection, site development, consulting)
› pilot project for bird protection (“shutdown on demand”)
› Efficient and ecologically sustainable electricity supply
› Contribution to global climate protection and to Egypt's
economic development
› bird protection with a positive signal beyond the region
Total investment ca. 340 Mio. €; KfW ca. 191 Mio. € /zv. loan
11
KfW Case Study: Energy Efficiency in Residential Buildings in India Adopted experiences from the German subsidy practice
› Share of private households on primary energy requirement: 37,5%
› Ø electricity consumption of urban middle class: 8,000 kWh p.a.
› Biggest economic energy saving potential in new residential housing
complexes (up to 46%)
› Credit line to the National Housing Bank (NHB) to refinance housing
loans in new energy-efficient buildings (at least 30% more efficient than
reference buildings)
› Introduction of an energy efficiency programme (Fraunhofer-TERI
cooperation) and certificate)
› Intensive complementary advice to NHB, building financiers and real
estate developers
› 73 buildings in 11 housing projects certified (>20,000 apartments,
emission reduction of 32,000 tonnes of carbon p.a. so far)
› Three large housing financiers (80% market share) participating
› International awards such as ADFIAP-Merit
Pro
ble
mA
ppro
ach
Imp
act
Total inv. 60 m €KfW financing 50 m €
1212
KfW Case Study: The Global REDD Programme for Early MoversBridge financing for pioneers
› Deforestation accounts for some 17% of global carbon
emissions.
› When the forest disappears, so do biodiversity and
(poor) people's livelihoods
› Decisions under the Framework Convention on Climate
Change have yet to be made
› Innovative approach to greater outcomes orientation
› Provide bridge financing between today and a future
climate regime
› Remunerates achievements of forest protection pioneers
› Reduce emissions from forest destruction
› Contribute to preserving biodiversity
› Create positive REDD examples at an early stage
Pro
ble
mA
ppro
ach
Imp
acts
Initial investment volume: € 36.5 m
13
NAMA Pilot: Ecocasa Program Mexico
› First NAMA in the sustainable housing sector
› Supply of mortgage for low carbon housing and financial incentives for EE investment (incl. TA): Support for up to 27,000 low carbon houses
(-20% CO2) and 800 passive houses (-80%
CO2)
› Co-financing to provide large-scale financing of EUR 160m and allow transformational effects
Level of ambition
› Mexico as one of the first non-Annex I countries pledging to reduce its GHG emissions voluntarily
› NAMA program launched by the ntl. government in 2011 and integrated into the broader national climate strategy (PECC)
› Co-benefit of poverty reduction: focus on low middle income households
National interest and ownership
› Detailed NAMA concept developed by the National Housing Commission (CONAVI) and GIZ supported by the German Environment Ministry
› Detailed economic analysis of the NAMA with a significant NPV
› High modularity of the NAMA program
Maturity and bankability
› Robust and pragmatic MRV methodology for a baseline and different standards for energy efficient houses (EcoCasa I, EcoCasa II, Passive House)
MRV system
14
Results based sectoral approaches under EU AIF/LAIF
EU KOMKfW
Regional Partners
Total EU Grant
Funding:€ 17 million
1. Carbon-Linked Incentive Scheme Indonesia (AIF)2. Facility for Performance Based Climate Finance in Latin America (LAIF)
I. Concept Development & Capacity building for Implementation EU TA grants
II. Roll-out Pilot Incentive Schemes EU grants to finance perfomance based incentive schemes
Sector I
Sector II
Sector n
Governments,
public & private sector,
local banks,
consultants
Initiation of substantial investments for pilot projects including leverage through bank lending
Competence for stakeholders in implementing performance based incentive schemes
15
Key Elements of Project Preparation and Execution with KfW
1. Project scoping and priorisation
2. Bilateral government negotiations
3. Project prepraration by project executing agency & consultant
4. Project appraisal
5. Financing decision
6. Financing agreement
7. Project implementation by project executing agency incl. monitoring
8. Start of operation and final inspection
9. Performance review and final evaluation
16
Strengthen the Pipeline of Bankable Projects
› Huge uncovered investement needs and wealth of ideas for climate related
projects exists
› Scarcity of bankable climate projects, resulting from e.g.
- weak regulatory frameworks (e.g. energy subsidies, collection of fees, lack of
enforcement)
- missing economic viability including concessional funding or missing sustainabilty of
business model
- inappropriate project implementation partner e.g. insufficient implementation
capacíty, no realistic means to meet international fiduciary or environmental and
social stantards, missing credit-worthiness
Involve development banks and other financiers no later than in design of
feasibility study
17
How to Make Supported NAMAs a Success?
› Realistic expectations on private sector involvement in NAMAs implementation
- simplicity, transparency and predictability are expected by private sector
- be ready to accept the risk-return profiles of the private sector
- state aid issues and distortion of (inter)national competition to be considered
› Keep NAMA implementation simple
- complexity adds perceived and real risks and transactions costs
- focus on proven instruments: loans, grants, equity and guarantees
- predictable selection criteria: use positive and negative lists for regions and technologies
- flexible and cost-effective framework for monitoring and evaluation needed
› Early focus on bankable NAMAs
- firm alignment with national development priorities
- transformational ambition should be commensurate with available funding
- focus on win-win programmes in selected sub-sectors and countrie
- involve your future financier early on
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Contact Details
Competence Center Environment and ClimateDr. Jochen HarnischHead of Division
KfW BankengruppePalmengartenstrasse 5–960325 Frankfurt am MainGermany
Phone +49 69 7431 - 9695Fax +49 69 7431 - [email protected]