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How Development Banks can Finance the Implementation of NAMAs

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How Development Banks can Finance the Implementation of NAMAs UNFCCC Climate Finance Briefing Warsaw - 12 November 2013 Jochen Harnisch, KFW - Competence Center ... – PowerPoint PPT presentation

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Title: How Development Banks can Finance the Implementation of NAMAs


1
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

3
The International Development Finance Club (IDFC)
  • 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

4
IDFC Climate Finance Mapping 2013
Source Ecofys, 2013
5
GHG Mitigation Change Global Investment Pattern
(IEA WEO 2011)
6
Dimensions of NAMAs (Nationally Appropriate
Mitigation Activity)
National (low carbon) development strategy
Sectoral or cross-sectoral policy mechanism
Individual investment decisions
7
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
Degree of maturity
ODA eligibility
Endorsement by the national government
Time frame for implementation
Feasibility
Cooperation with a qualified delivery organisation
Financing volume
Concept for phase-out
7
8
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
Does the NAMA support project contribute to a
transformation of the national or sectoral
development towards a less carbon-intensive
development path?
Co-benefits
Does the NAMA support project provide important
additional development co-benefits beyond the
reduction of GHG emissions?
Financial Ambition
Does the NAMA support project foresee or enable a
substantial funding contribution from other
sources?
Mitigation Potential
Does the NAMA support project foresee substantial
direct and indirect GHG emission reductions?
8
9
Financial Instruments Overview Diversity of
business models and regional foci and mandates
Source of financing
e.g. RE projects
Project financing
Market funds
EE- and RE-financing
Structured Funds, e.g. GCPF
Promotional loans
Concessional funds
Development loans
e.g. adaptation projects, capacity building, REDD
loans at IDA and standard terms
Grants / Budget support loans
Public funds
Performance of partner countries and viability of
projects
10
KfW Case Study Wind Farm Gulf of el Zayt in
Egypt Africa's biggest wind farm with 200 MW and
pilot project for bird protection
  • Rapidly growing energy requirements
  • expensive energy import
  • Rising pollutant emissions
  • Unused wind energy potential (gt 10.000 MW)

Problem
  • 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)

Total investment ca. 340 Mio. KfW ca. 191
Mio. /zv. loan
Approach
  • 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

Impact
3
Topic of the presentation / location / date
dd.mm.yyyy
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)

Problem
  • 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

Total inv. 60 m KfW financing 50 m
Approach
  • 73 buildings in 11 housing projects certified
    (gt20,000 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

Impact
12
KfW Case Study The Global REDD Programme for
Early Movers Bridge 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

Problem
  • Innovative approach to greater outcomes
    orientation
  • Provide bridge financing between today and a
    future climate regime
  • Remunerates achievements of forest protection
    pioneers

Initial investment volume 36.5 m
Approach
  • Reduce emissions from forest destruction
  • Contribute to preserving biodiversity
  • Create positive REDD examples at an early stage

Impacts
12
13
NAMA Pilot Ecocasa Program Mexico
Level of ambition
National interest and ownership
  • 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
  • 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

Maturity and bankability
MRV system
  • 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
  • Robust and pragmatic MRV methodology for a
    baseline and different standards for energy
    efficient houses (EcoCasa I, EcoCasa II, Passive
    House)

14
Results based sectoral approaches under EU
AIF/LAIF
  1. Carbon-Linked Incentive Scheme Indonesia (AIF)
  2. Facility for Performance Based Climate Finance in
    Latin America (LAIF)


EU KOM KfW Regional Partners Total EU
Grant Funding 17 million
Sector I
I. Concept Development Capacity building
for Implementation EU TA grants
Sector II
Sector n
Governments, public private sector, local
banks, consultants
II. Roll-out Pilot Incentive Schemes EU grants
to finance perfomance based incentive schemes
  • 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

18
Contact Details
  • Competence Center Environment and Climate Dr.
    Jochen Harnisch Head of Division
  • KfW Bankengruppe Palmengartenstrasse 59 60325
    Frankfurt am Main Germany
  • Phone 49 69 7431 - 9695 Fax 49 69 7431 -
    3796 Jochen.Harnisch_at_kfw.de
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