June the 22nd, 2011

Investing in Policy Transformation : Experience from a Development Bank

Isabelle VINCENT

1.1

Fossil energy business model

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Lack of change in trends from supply side

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1.3

Lack of change in trends from demand side

Passenger vehicles in the New Policies Scenario

Million

1 600 1 400
1 200 1 000 800 600 400 200 0 1980 1990 2000 2008 2020 2035

China Other non-OECD United States Other OECD

Source : World Energy Outlook 2010

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1.4

Wrong economic drivers Non sustainable growth since the industrial revolution
Goods and services are under-priced E&S externalities are not valued

Scarcity is not correctly valued

Path taken is the one of inaction although action would be economically relevant
Stern report : cost of CC inaction = 5% of global GDP each

year ; cost of action = 1% of global GDP each year

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1.5

Change our representations Change indicators of progress :

Green GDP
Sustainable development index (vs. HDI) GDH : Gross Domestic Happiness

Give economic value to environment and resources

Technical, human, social and natural stock Use new methodologies : increasing value of limited

resources, rethink the use of discounting rate

Shift form pre-supposed abundance to

management of shortage of resources ; DSM

Investing in Policy Transformation : Experience from a Development Bank

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2.2

Technology or methodology ?

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2.1

Where can development finance add value ? Promoting Systemic approaches

Innovative economic and policy making methodologies

factoring environmental externalities and scarcity of resources ;

New institutional organizations favoring cross-sector and

inter-ministerial dialogue to improve quality of political, budgetary, technical decision making ;

Social engineering, to ensure proper design, appropriation

and implementation of enabling, effective and sustainable clean energy policies by all stakeholders (including civil society and private sector) ;
R&D and massive dissemination of new technologies.

Focus on risk analysis : building resilience against energy shocks to come

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Example of capital stock valuation : Mozambique

2.3

Technical K

Investing in Policy Transformation : Experience from a Development Bank

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2.4

Challenge of urban density

Different sizes of suburb hosting 500 households and corresponding population within the range of public transportation

Associated GHG emissions related to transportation (Vietnam)

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Investing in Policy Transformation : Experience from a Development Bank

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2.5

Resilience of Mexicos economy to fuel prices

Ruiz Npoles, Pablo (Sermanat)

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3.1

AFD Group

French ODA Agency: Public Company & Bank

AfD, PROPARCO : financing of the private sector, French GEF secretariat

Present in 80+ countries

6.8 billion committed in 2010

Energy & climate change agenda ~ 40% ; Asia ~ 1 billion

Wide range of financing tools

Untied aid

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3.2

Climate change policy lending (Vietnam)

National Steering Committee of NTP-RCC Excecutive Board of NTP-RCC

Loan to GOV : dialogue on a policy matrix TA : to support this dialogue on specific issues

MONRE, MOF, MPI Eg : elaboration of a road map on EE in the steel sector Line agency A Line agency B Line agency C Line agencies elaborate sectorial policies contributing to CC response
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Eg : elaboration of a CC action plan in Danang Province A Province B Province C

Investing in Policy Transformation : Experience from a Development Bank

Provinces implement local climate change action plans 22/06/2011

Thank you for your attention

vincenti@afd.fr

AFD Groups geographic implantation

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AFD Groups committments, M

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Breakdown of (C)lean Energy commitments in 2009 (Total US$ 3.0 bn)

5% 26%
Policy loans Energy Efficiency Renewable Energy

35%

Fuel switch Credit lines Urban transport

18%
Investing in Policy Transformation : Experience from a Development Bank

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11%

Policy matrix SP-RCC

Pillars Policy Action Sectors
1) 2) 3) 4) 5)

Main Responsible Ministries

MOIT MOT, MOC, MOIT MARD MOC Related ministries

Mitigation

Energy (Renewable Energy and Energy Efficiency) Transportation and Construction Forestry and Agriculture Waste Disposal CDM

Climate Change related strategies, policies, etc.

Adaptation

6) Water 7) Integrated Coastal Management 8) Disaster Prevention 9) Forestry, Biodiversity and Agriculture 10) Transportation and Construction 11) Health Care

MOC etc MARD etc MARD MONRE MARD, BCA etc MOT, MOC MOH MOST MOF, MPI MPI MOET

CrossCutting

12) Assessment, Monitoring & Evaluation 13) Financial Mechanism 14) Mainstreaming CC issues to development planning and Program Management of NTP-RCC and SP-RCC 15) Awareness Raising and Human Resource Development

Investing in Policy Transformation : Experience from a Development Bank

To build up overall capacity for climate change actions in cross sectors in the Government of Vietnam 22/06/2011

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Content of Policy matrix, Vietnam

Outcome/Target
Achieve 3 % of renewable energy and new energy of primary energy consumption by 2010 (about 5% in 2020 and 11% in 2050)
*The number to be reconfirmed

Mitigation RE&EE Adaptation Cross-Cutting

CY2009 Actions (1st Cycle)

Formulate Strategy and Master plan for Renewable Energy Development (20152025)

CY2010 Actions (2nd Cycle)

Finalize the draft Decree on encouraging and supporting Renewable Energy development Conduct a study how to finance additional costs of renewable energy via Renewable Energy Fund

CY2011 Actions (3rd Cycle)

Establish Renewable Energy Fund as stipulated in the Renewable Energy Master plan

Develop policy framework to save 5-8% of the total energy amount consumed nationwide in the period of 2011-2015

Prepare the legislative framework for improving energy efficiency and conservation activities in Vietnam

Prepare the regulations to enforce the Law on energy efficiency and conservation

Complete the research of the financial mechanism for improving energy efficiency and conservation activities in Vietnam

Summary

Investing in Policy Transformation : Experience from a Development Bank

GoV develops a policy framework to promote the development of commercial renewable energy and energy efficiency and conservation. 19 22/06/2011

Projects cycle
1st Cycle (2008-9)
4 5 6 7 8 9 10 11 12
1st TM : identification 2nd TM : supervision 3rd TM : assessment

2nd Cycle (2010)

4 5 6 7 8 9 10 11 12 1

3rd Cycle (2011)

4 5 6 7 8 9 10 11 12

Policy Dialogues between ministries and donors

GoV

Implementing Policy Actions (PAs) Monitoring PAs by ministries and donors

Donors and NGOs (JICA) (AFD)

Evaluate the achievement of 1st Cycles PAs Based on the result, funds are made available to GoV

Evaluate the achievement of 2nd Cycles PAs Based on the result, funds are made available to GoV

Evaluate the achievement of 3rd Cycles PAs Based on the result, funds are made available to GoV 20 22/06/2011

Investing in Policy Transformation : Experience from a Development Bank

Examples of EE/RE (and pollution abatement) credit lines

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EE/RE credit line in China First credit line through 3 banks : HuaXia, China Merchants Bank, SPDB -> 60 million euros ; Financing of 12 projects in EE/RE : heat recovery in cement and steel plants, up-grading of power generation plant, waste-to-energy projects, power generation from biomass, etc. 1,9 million tCO2/year saved TA for capacity building on EE/RE financing within the banks 2nd line for a total amount of 120 million euros

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EE/RE credit lines in India 70 million RE credit line with IREDA (Indian Renewable Energy Development Agency)

Small and medium sized projects targeted (max amount of loan = 15 M) Criteria : hydropower < 25 MW with limited E&S impacts, wind IPP, biomass cogeneration (high steam pressure), biomass power generation < 10 MW, solar heat/electricity generation 50 million EE credit line with SIBDI (Small Industries Development Bank of India) Minimum EE / GHG savings criteria Potential projects : heat recovery, fuel shifts, A/C improvements, etc.
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EE credit line with Mandiri, Indonesia 100 million dollars credit line

Criteria : EE projects (heat recovery, replacement of chillers, etc.), co-generation projects, fuel switchs, small scale renewable energy projects, harnessing/use of GHG (eg : capture of gas from waste disposal)
Projects financed include the addition of a steam cycle to a simple cycle gas power plant

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Global strategy

Climate change and cities

Municipalities can play a key role in CO2 reduction

As direct energy consumers with potential energy conservation

(street lighting, public buildings, municipal transport fleets, schools, hospitals )

As owners of urban infrastructures (local electricity grid, waste

treatment units, public transport )

As urban planners (land use, transport, urban waste and sewage

schemes)

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Global strategy

Sustainable urban planning

URBAN SUSTAINABLE DEVELOPMENT: SIX KEY ENTRIES

URBAN PLANNING Master plan taking sustainable development into account: Durbans urban fringes URBAN MORPHOLOGY Urban Shape Urban network and compactness: sizes of streets, heights of buildings, etc. URBAN DEVELOPMENT Environmental approach to urban development Eco-friendly neighbourhoods BUILDINGS: energy efficiency

EQUIPMENTS: heating, air conditionning

Investing in Policy Transformation : Experience from a Development Bank

USERS HABITS

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Case studies: AFD direct financing to LAs

Examples of projects financed by AFD

Colombia - Medellin - social housing and green transport programme - Direct financing to Medellin Municipality 250MUSD
Brazil Curitiba support to local environment programme for urban transport and environment (urban biodiversity) Direct financing to Curitiba with Central Gov. guarantee 36M Morroco Al Omrane financing and capacity building to implement an environmental approach in the national urban and social housing programme Direct financing to Al Omrane - 50M

Tunisia 5 municipal projects upgrading municipal infrastructures (waste collection, sewage, etc.) Financing to Central Government transferred to public LA financing body 147M

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Case studies: AFD direct financing to LAs

Examples of technical cooperation and study supported by AFD

Turkey Gaziantep: support to GHG emission inventory and to the city action plan (+ financing of the dedicated investment programme) Study to be launched: learning from experience of French and European cities climate action plan to better support emerging cities, 8 case studies (4 European cities, 4 emerging cities), will imply exchange of experiences between the cities studied (seminar to present conclusions) AFD strategy to support LAs through capacity building and financing investments will be explained through the presentation of 2 projects as case studies Vietnam and South Africa

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Case studies: AFD financing To LAs through the state

Cities in Viet Nam

Ho Chi Minh City

First economic city: GDP 3,094 USD/inhab., increase: + 3.5 %/yr,

produce 50% of VN GDP 7.1 M inhabitants: population doubled from 1989 to 2005 Congestion, insufficient public transport and equipment despite significant efforts

Danang / Can Tho 2 secondary cities (+/- 1 M inhbts), economically dynamic highly vulnerable to climate change the will to build up a dedicated strategy over the next 20-30 yrs
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Case studies: AFD financing To Las through the state

3 cities programs

Background: Supporting HCMC, Danang and Can Tho sustainable development programs and master plans taking into account adaptation to climate change, a major constraint -> emerging thoughts around climate change at the national level (CCAP)
Issues: support for design and implementation of public policies, particularly in the environmental sector Can be implemented through partnerships with other institutions (vulnerability assessement)

HCMC: sustainable social housing, waste management Danang: Climate change action plan with ADB Can Tho: urban planning, sustainable urban projects
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