December 1, 2017
Since the Paris Agreement in 2015, the World Bank Group has been ramping up climate action and stepping up efforts to mobilize finance for climate action to help countries transition to a low-carbon, more resilient world.
December 12, 2017 marks the two-year anniversary of the Paris Agreement’s adoption. Leaders from around the world will gather in Paris to reaffirm the world’s commitment to the fight against climate change. Here are 12 ways we are working with our partners to help countries make the shift to a climate-smart world.
Banner and thumbnail photo credits to Jutta Benzenberg/World Bank
1. Resilient Coasts
A regional investment platform aims to crowd-in finance to manage coastal erosion and flooding in West Africa.
Challenge and Opportunity
Erosion and flooding in West Africa’s coastal areas from Mauritania to Gabon severely threaten people’s livelihoods, safety and investments. Stronger storms and rising seas are wiping out homes, roads and buildings that have served as landmarks for generations. Beaches no longer have sand, mangroves are deforested and populations are even more vulnerable to the impact of climate change. With their homes swept out to sea and fishing limited, people have no choice but to move away to make a living—a trend that is breaking up communities and changing the social fabric of lives for future generations.
Every year, an average of 500,000 people living along West Africa’s coastline are threatened by floods and aggravated coastal erosion, with economic losses estimated at more than 2 percent of gross domestic product (GDP). In some areas, the coastline is eroding by as much as 10 meters or more per year. In 2016, about a third of the region’s population (122 million) lived in areas of an elevation below 5 meters.
Rapid and often unplanned urbanization causes significant conversion of the natural landscape which once served as a buffer for erosion and flooding. About 80 percent of coastal pollution originates from land-based sources, primarily industrial, agricultural and urban.
These developments disproportionately affect the poorest and most marginalized, and will intensify due to climate change.
The coastal erosion and flooding problem is not unique to West Africa. It affects countries’ coastlines around the world. The World Bank Group is the single largest provider of climate and disaster resilience-related investment finance. It is a significant player in resilient infrastructure finance through regional programs including, Caribbean Resilience Initiative and Program, Pacific Resilience Program and ongoing national programs; and the Southwest Indian Ocean Risk Assessment and Financing Initiative. The Bank has also launched the Small Island States Resilience Initiative.
While countries have started to act to contain erosion and flooding, their finance needs are enormous. Coordinated regional action is needed as efforts to combat erosion in one country can impact the coastline in a neighboring country. Collaboration at the policy and technical levels can help countries manage erosion hotspots, and maintain the livelihoods that a healthy coastal ecosystem provides to people and economies.
West African countries are working together to address challenges posed by their shrinking coastline. The West African Coastal Areas Management Program (WACA) was developed by the World Bank Group in partnership with the program’s ultimate beneficiaries: the people who live along the West African coast and depend on it for their livelihoods, nutrition, food security, and prosperity. This program targets 17 West African countries to improve the management of shared natural and man-made risks affecting coastal communities.
The WACA program provides countries with access to technical expertise and finance to support sustainable development in the coastal zone, using management of coastal erosion and hazardous flooding as an entry point. The World Bank and its partners are pioneering this first-of-its-kind regional approach to address severe coastal erosion.
Under the WACA Program, a High-Level Investment Platform (WACA Platform) will be launched in 2018 that will crowd in public and private investments, attracting at least $2 billion to address coastal degradation and climate change adaptation. A first West Africa Coastal Investment Resilience Project (WACA ResIP) is expected to be approved in early 2018. This project is expected to provide $200 million in financing from the World Bank's International Development Association (IDA), the Global Environment Facility, and Nordic Development Fund, and will initially cover six countries (Benin, Cote d’Ivoire, Mauritania, Sao Tome and Principe, Senegal and Togo). It will work with existing regional institutions, including the West Africa Economic and Monetary Union.
Key facts & figures
West Africa’s coastal population is increasingly vulnerable to the effects of climate change, especially among the poor, whose already precarious livelihoods depend on the quality and quantity of natural resources.
Every year, about 500,000 people in the region are threatened by floods and aggravated coastal erosion, causing economic losses equivalent to about 2 percent of GDP.
In 2016, an estimated 122 million people—or a third of the population in coastal provinces from Mauritania to Gabon—lived in areas of an elevation below 5 meters.
The cost of coastal environmental degradation in Togo and Mauritania was equivalent to 7 percent in 2013 and 7.5 percent in 2014 of national GDP respectively.
2. Climate Insurance
A risk insurance program can help bolster relief efforts for vulnerable countries and speed up recovery in the Philippines.
Challenge and opportunity
In an emergency, seconds count. For a relief effort, rapid access to funds can also make the difference by enabling early action. For people who live close to the edge this can be a lifeline. In September 2017, just two weeks after two major hurricanes swept through the Caribbean, 10 Caribbean countries received over $55 million in insurance payouts through the Caribbean Catastrophe Risk Insurance Facility (CCRIF) to help with emergency response and begin the recovery process.
Insurance solutions can help bolster early action in the face of a disaster, and speed up recovery to restore livelihoods and rebuild critical infrastructure so that people, communities and economies can rebound. The World Bank, the Global Facility for Disaster Reduction and Recovery, together with partners, are developing insurance solutions and providing finance to help vulnerable countries proactively manage disaster risks through a portfolio of financial instruments.
In 2015, for example, thanks to the insurance policy it purchased through the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI), another World Bank-supported risk finance instrument, Vanuatu received $2 million to support recovery just seven days after cyclone Pam devastated the country. While it may not seem like much, the payout was eight times larger than the government’s emergency budget. It was critical in the effort to fly nurses to the most-affected areas to provide life-saving assistance.
Beyond sovereign solutions (insurance schemes where the government itself is the policyholder), individuals and households can also access insurance coverage against the impacts of disasters. The World Bank Group’s Global Index Insurance Facility (GIIF), for example, provides catastrophic risk transfer solutions and index-based insurance to smallholder farmers, micro-entrepreneurs, and microfinance institutions in developing countries. It has facilitated $151 million in insurance covering about 6 million people, primarily in Sub-Saharan Africa, Asia, and Latin America and the Caribbean.
IFC is also active in this space and has a successful collaboration with Indonesia’s PT Reasuransi MAIPARK to develop insurance solutions for the country’s agribusinesses against the increasing threat and costs of natural disaster and climate events.
Insurance solutions can help governments protect national budgets as well as the lives and livelihoods of their citizens from the impacts of disasters, ultimately safeguarding economic development and poverty reduction efforts. Every year, an estimated 26 million people are pushed into poverty by disasters such as droughts, floods, cyclones, and earthquakes. When accounting for impacts on well-being, disasters cost the global economy an estimated $520 billion a year, with vulnerable countries, and particularly their poorest communities, experiencing the brunt of disaster impacts.
Accelerating this global effort, Germany, the United Kingdom, the World Bank and GFDRR and over 30 NGO and private sector partners have launched a new Global Partnership - called InsuResilience, co-chaired by the V20 and G20. The Partnership’s goal is to scale up climate risk finance and insurance solutions in developing countries. It will stimulate the creation of effective climate risk insurance markets and the smart use of insurance-related schemes for people and risk-prone assets in developing countries.
The Philippines is among the world’s most vulnerable countries to natural disasters. In August 2017, the Philippines established the first-of-its-kind subnational catastrophic risk insurance program that provides 25 provinces with more than $100 million in insurance coverage against major typhoons by pooling risk and transferring it to private reinsurance markets. This marks the first time the World Bank has entered into a reinsurance agreement with a governmental agency, and the first time it is executing a catastrophe risk transaction in local currency.
Under this program, the government-owned insurance agency, Government Service Insurance System, will provide catastrophe risk insurance to both the national government and the 25 participating provinces. The World Bank serves as an intermediary to transfer the agency’s risk to a panel of international reinsurers which were selected through a competitive bidding process–Nephila, Swiss Re, Munich Re via the subsidiary NewRe, Axa, and Hannover Re. Air Worldwide provides the underlying risk modeling for the transaction.
This is the first-ever subnational risk-pooling mechanism. The program is part of the government’s continued efforts to strengthen national and local capacity to manage and respond to disasters. It builds on six years of intensive partnership with the World Bank, including the preparation of the first catastrophe risk model for the country and the adoption of a Disaster Risk Finance Strategy by the Philippines Department of Finance.
Over the years, the government of the Philippines has invested in a portfolio of financial instruments that provide comprehensive protection against the impacts of disasters and climate shocks, including a contingent line of credit with the World Bank.
The country is expected to incur, on average, $3.5 billion in asset losses each year due to typhoons. This new insurance program will support the country in responding to impacts of severe natural disasters. By providing 25 provinces with access to rapid financing, they can take early action in the immediate aftermath of a disaster, ultimately reducing humanitarian and development impacts.
Key facts & figures
Every year, an estimated 26 million people are pushed into poverty by natural disasters.
Every year, disasters cause an average of $300 billion in economic losses. But these numbers don’t tell the full story. When accounting for impacts on well-being, disasters actually cost the global economy 60% more than usually reported, or $520 billion/year.
Quick-disbursing financial protection instruments, such as contingent credit and insurance, can reduce humanitarian impacts and save money by enabling rapid crisis response and relief efforts. In Ethiopia, for example, every $1 secured ahead of time for early drought response can save up to $5 in future costs.
Over the past 10 years, 26 countries in three regions—Africa, the Pacific, and the Caribbean and Central America—have joined sovereign catastrophe risk pools.
PRESS RELEASE: Philippines Launches Innovative Insurance Program to Boost Natural Disaster Risk Management
3. Climate-Smart Agriculture
Cocoa and chocolate producing countries and companies take action to end deforestation.
Challenge and Opportunity
Growing enough safe and nutritious food for more than 9 billion people in 2050 in a changing climate will stretch our resource endowments and require enormous ingenuity. Climate change’s impacts are already being felt in the form of reduced yields and more frequent extreme weather events that affect crops and livestock. Substantial investments in adaptation to climate change will be required to maintain current yields and to achieve food and nutrition security.
Agriculture must be part of the solution to develop a low-carbon economy: currently, agriculture, forest loss and land use changes generate a quarter of the world’s greenhouse gases—and about 80% of deforestation worldwide is driven by agriculture. Without action, deforestation and forest degradation could rise substantially as farmers encroach on forestland to compensate for falling yields.
Recent experiences have demonstrated that it’s possible to boost agricultural productivity, increase climate resilience and lower greenhouse gas emissions through climate-smart agriculture.
The World Bank is a leading financier of agriculture, with $4 billion in new commitments in Fiscal Year 2017. It works with countries, helping introduce innovation, and providing infrastructure and resources so that the food and agriculture sector is climate-smart, improves livelihoods and creates more and better jobs, includes inclusive and efficient value chains, and produces safe and nutritious food. The Bank has partnered with the International Center for Tropical Agriculture (CIAT) and Climate Change Agriculture and Food Security (CCAFS) to provide detailed country and region climate-smart profiles for a growing number of countries, and seeks to generate adaptation and mitigation co-benefits throughout its portfolio. For example, in China, the $313 million Integrated Modern Agriculture Development project supports the adoption of improved irrigation systems and other climate-smart agricultural practices in six provinces, helping about 380,000 rural households become more resilient to climate change. And in Uruguay, a World Bank-financed project is helping roll out sustainable farming and livestock practices that are climate smart – such as soil management plans, supervised by satellite, to curb erosion and increase carbon sequestration.
The International Finance Corporation (IFC) is investing in agribusiness projects in developing countries that increase productivity, enhance resilience and adaptation to climate change, and reduce greenhouse gas emissions. For example, IFC delivered a $40 million loan to Anyou Biotechnology Group in 2016 to scale up its innovative animal feed operations, whose formula cuts down on feed costs while reducing animal waste discharge and associated emissions by 30 %. And a joint IFC-Société Générale investment of €70 million to Burkina Faso’s biggest cotton company, SOFITEX will help farmers in its supply chain address productivity, water scarcity, and climate resilience concerns. In the 2017 Fiscal Year alone IFC arranged over $800 million in financing for climate-smart agribusiness projects.
Food companies facing supply chain disruptions are also taking notice of climate change and seeking to minimize volatility and insecure crop yields through more efficient and resilient agriculture. Cocoa is a case in point. Rising global demand for chocolate combined with poor agricultural practices, underinvestment, and decreasing productivity in existing cocoa plantation estates are driving deforestation and forest degradation. Cocoa is naturally a shade loving species, requiring planting under a canopy of retained forest trees.
To address this challenge of growing cocoa demand and diminishing forests, the Cocoa and Forests Initiative, brings together top cocoa-producing countries Côte d’Ivoire and Ghana with leading chocolate and cocoa companies for concerted action to end deforestation from cocoa production. This coalition, led by the World Cocoa Foundation, includes companies such as Nestlé, Mars, Ferrero, Hershey, Touton, Mondelēz, Olam, Ecom Group, Barry Callebaut, Cargill, CEMOI. There are currently 22 companies committed to the Cocoa and Forests Initiative.
Côte d’Ivoire and Ghana have announced plans to introduce a new approach for improved management of forest reserves, based on the level of degradation of the forests. Up-to-date maps on forest cover and land-use, as well as socio-economic data on cocoa farmers and their communities will be developed and publicly shared by the governments. The chocolate and cocoa industry agree to put in place verifiable monitoring systems for traceability from farm to the first purchase point for their own purchases of cocoa, and will work with the governments of Côte d’Ivoire and Ghana to ensure an effective national framework for traceability for all traders in the supply chain.
The governments of Ghana and Cote d’Ivoire and companies have agreed through Frameworks for Action to accelerate investment in long-term sustainable production of cocoa, with an emphasis on “growing more cocoa on less land”. Key actions include provision of improved planting materials, training in sustainable agricultural practices, and development and capacity-building of farmers’ organizations.
The World Bank’s agriculture, forest and climate teams are working together with the Cocoa and Forests Initiative. The World Bank is providing analytical and strategic support to Ghana and Cote d’Ivoire together with the Program on Forests (PROFOR), the BioCarbon Fund Initiative for Sustainable Forest Landscapes, and the Forest Carbon Partnership Facility.
The public and private resources required to transform the West African cocoa sector are in the order of several billion dollars.
Ghana and Côte d’Ivoire are the world’s two largest cocoa producing countries, contributing 60% of global cocoa supply. In both countries, cocoa contributes significantly to GDP and provides livelihoods for about a quarter of the population.
The Cocoa and Forests Initiative could improve the lives of millions and generate positive environmental returns. As an example of the potential impact, investments in sustainable cocoa in Ghana could increase cocoa yields by 50 %, generating significant benefits for farmers and the government.
Key Facts & Figures
Agriculture can help reduce poverty, raise incomes and improve food security for 80% of the world's poor, who live in rural areas and work mainly in farming. Climate-smart agriculture refers to a range of proven and innovative practices that increase productivity, strengthen climate resilience and reduce agriculture’s greenhouse gas emissions.
Currently, agriculture, forestry and land use changes generate about 24% of the world’s greenhouse gases – and about 80% of deforestation worldwide is driven by agriculture. Rising food production will also increase the use of water by 40 – 50% in the coming decades.
The World Bank is a leading financier of agriculture, with $4 billion in new commitments in Fiscal Year 2017. IFC investments were $3.8 billion.
Meeting growing global demand will require an estimated 50% increase in food production between 2012 and 2050, with large potential for job creation in the food sector in developing countries.
4. Resilient Cities
A City Resilience Program will help connect hundreds of cities access the finance they need to become climate-smart.
Challenge and Opportunity
Unprecedented urbanization is transforming the planet and the way we live. For the first time in history, more people live in cities than in rural areas. Some 90 percent of this urban expansion is taking place in developing countries, with another 2.5 billion people expected to move into urban areas in the next 25 years. Much of this urban expansion occurs near natural hazards, along rivers and coastlines, and through informal and unplanned settlements. Lack of adequate infrastructure, land use planning and building codes exacerbate the risks to which urban dwellers are exposed. This greater concentration of people and assets means that the impact of natural disasters and a changing climate can be devastating, in lives lost and livelihoods destroyed. The poorest people are always the most vulnerable.
Currently, there is a disconnect between investors seeking opportunities and city leaders looking to finance their infrastructure needs. In some developing countries, the market is not yet sufficiently developed to enable the flow of capital into urban infrastructure projects. Many cities need support to make the most of their existing assets and apply risk-mitigating and capital enhancing mechanisms. Despite strong investment interest in emerging market infrastructure, perceived risk, a lack of well-prepared projects and high transaction costs can inhibit deployment of capital.
The World Bank Group is working to overcome these challenges. For example, in the city of Can Tho in Vietnam, a package of investments across six development sectors is helping increase the city’s physical, financial and social resilience to extreme climate events. And, as part of its financial and advisory services to cities in more than 60 countries, the IFC recently committed a $50 million loan to support the development of a low-emission, climate-resilient urban transportation system under the City of Buenos Aires, Argentina Urban Transformation Project. The project supports new efficient bus lines and new infrastructure for bicycle transportation.
A new City Resilience Program (CRP), supported by the Global Facility for Disaster Reduction and Recovery (GFDRR), will assist city governments to build resilience to climate and disaster risks by connecting them to the finance they need. It will catalyze a transparent pipeline of well-prepared and bankable investment opportunities, enabling private and institutional investors to enter new markets. It will facilitate strategic investments that address the vulnerabilities and risks that cities are now facing.
CRP will catalyze deal flows for investors by supporting city governments in the design of large-scale investment programs. The focus will be on reducing transaction costs including through capacity-building to governments to move to investment readiness, and facilitating negotiations between cities and investors. It will leverage the World Bank Group’s risk mitigation instruments and help mobilize other co-financing institutions. CRP advises cities where and how to access capital for infrastructure investments, through direct lending, public private partnerships and strategic use of land assets.
In the medium to long-term, CRP is working to catalyze a transparent pipeline of climate smart investment opportunities. It will create a marketplace that connects cities and investors. The first phase starts with 30+ cities but is expected to scale up to 500+ cities within 10 years. If CRP is successful, this will become business as usual, no longer a frontier barrier of opportunity and undue complexity.
Key Facts & Figures
In recent years, the World Bank has worked in more than 7,000 cities and towns across 130 countries, investing $4.2 billion during fiscal year 2017 in disaster risk management, and committing over $50 billion through more than 900 projects with climate-related activities.
With its innovative tools and powerful financing products and services, the WBG is helping the urban poor and boosting resilience at the household, community, city and regional levels.
IFC’s Cities Initiative focuses on addressing the financing gap for sustainable urban infrastructure by attracting private capital to the sector. This is achievable through capacity building and financial structuring solutions. In the last 10 years, IFC invested more than $12 billion in over 350 urban improvement projects and provided advisory services to cities in more than 60 countries.
A bus rapid transit system in Senegal will enhance urban mobility, reduce pollution and promote economic growth.
Challenge and Opportunity
Building safer, cleaner, more efficient and accessible transport systems is necessary to transform the world’s mobility. By 2030 the UN projects that there will be more than 8.5 billion people on earth, and aspirations for mobility will continue to rise. Transport is crucial for economic and social development, creating livelihood opportunities for the poor and enabling economies to be more competitive. Transport infrastructure connects people to jobs, education, and health services, enabling the supply of goods and services around the world.
The need to scale up climate friendly mobility solutions globally is critical to reach the target of the Paris Agreement which would require reducing transport-related emissions from the current 7.7 gigatons CO2 equivalent to 2-3 Gt by 2050. This will require significant investment. The challenge lies in helping countries make the transition to low-carbon transport systems. A vital aspect of this transition involves encouraging the use of public transport so that the transport sector will contribute to reducing global emissions.
Today, the entire transport sector – the mobility of people and transportation of goods – accounts for approximately 23% of CO2 emissions from fossil fuels or 15% of global GHG emissions. Moving from a high to a low-carbon transport sector requires combining tested success strategies that focus on urban integrated multi-modal transport and transit systems – using road, rail, maritime and air transport – and disruptive trends like shared mobility, autonomous driving, and electrification. This entails trillions of dollars in public and private sector investments through the next decade.
The World Bank Group collaborates with multiple partners to promote sustainable mobility around the world and is helping to create the conditions that attract investors. This includes support for building a conducive and competitive business environment, providing supply-chain support and innovative financing for infrastructure projects and emerging technologies such as electric vehicles, automated self-driving vehicles, and ride-sharing platforms.
The International Finance Corporation (IFC), a member of the World Bank Group, is also working to promote sustainable mobility around the world. In 2017, it made a $10 million equity investment for Blackbuck, an Indian technology company focused on business-to-business logistics solutions for long-haul trucking. Blackbuck’s technology platform facilitates the booking of freight for inter-city transportation between shippers and truckers. Blackbuck is helping maximize efficiency while minimizing downtime for trucks. By reducing the number of trips taken by trucks with empty or partially full loads, Blackbuck is effectively reducing GHG emissions in India.
The World Bank is working with its partners to help develop a new intelligent transport system for Dakar, Senegal aimed at moving 300,000 passengers per day. The Dakar Bus Rapid Transit (BRT) Pilot Project will improve travel conditions and reduce by half the average rush hour in-vehicle travel time by public transport. It combines de-risking finance from the World Bank and other development partners and concessions that are attractive to the private sector. The BRT project also lays the foundation for technology upgrades. Senegal's Nationally Determined Contribution (NDC) in the Paris Agreement lists the BRT as central to reducing the country’s transport-related carbon emissions.
The Dakar BRT project will reshape the public transport economy and environment in Dakar and will induce sustainable urban transformation along its core route and feeder routes, but also in other parts of the city. The BRT project includes the construction of an 18.3-kilometer bus line fully separated from other traffic, connecting main passenger terminals as well as 20 additional stations. This will provide a safe, fast, and reliable transport service, improving accessibility to jobs and inducing sustainable economic growth.
The entire transport sector now accounts for approximately 23% of CO2 emissions from the burning of fossil fuels (representing 15% of total GHG emissions). Under a “business as usual” scenario, the share of transport in fossil fuel CO2 emissions could rise to 33% by 2050.
The Paris Agreement targets require reducing transport-related emissions from the current 7.7 Gt (gigatons) CO2 equivalent to reach a goal of 2–3 Gt CO2 by 2050.
Electric-drive technologies powered by renewable sources can reduce total lifecycle emissions for trucks by over 90% by 2050.
From July 2016-June 2017 the World Bank invested $4.9 billion in sustainable transport in 32 countries – and this includes $1.2 billion for transport mitigation and $500 million for adaptation.
A unique collaboration helps the coffee industry in Ethiopia become more resilient to climate change and restore vital forests.
Challenge and Opportunity
Forest landscapes are an essential part of development and climate change action, contributing to the livelihoods of 1.3 billion people as well as the health of our planet. But forests are under threat. The demand to use land for agriculture drives deforestation. Transportation, energy infrastructure, mining and wood-based energy, also affect forest cover.
More than 100 countries have recognized the need for stronger forest protection and have included actions related to land-use change and forests in their Nationally Determined Contributions (NDCs) for carbon emission reductions. Forests are nature’s own carbon sink and if protected and managed well, can increase the resilience of rural landscapes.
The land use sector, including forests, is critical to achieving climate targets. Enhanced efforts to preserve forests and restore degraded lands can help address an expected global gap in emission reductions needed to keep the global temperature increase under 2 degrees C.
Trees growing in crop fields help to reduce soil erosion, and can serve as sources of fertilizer, while reducing water and heat stress affecting crops. Trees can also increase households’ food security by providing food and fodder when crops become unavailable, and increase people’s coping capacity by providing assets that can be harvested in times of need.
The World Bank’s Forest Carbon Partnership Facility, BioCarbon Fund Initiative for Sustainable Forest Landscapes (ISFL) and Forest Investment Program work with more than 50 tropical forested countries building sustainable landscape programs. These funds build on a decade of experience and have provided a wealth of knowledge on how to quantify emission reductions from different land-use activities and have helped pave the way for other large-scale, land-use carbon initiatives.
Private sector commitment around deforestation-free commodity supply chains is critical to conserving forest resources and reducing risks for businesses that rely on commodity supplies. Through the International Finance Corporation (IFC), the World Bank Group encourages responsible corporate investments across the forest products supply chain and works to create a more level playing field for legitimate forest-sector enterprises that adopt sustainable practices.
In Ethiopia, land that was long considered to be too dry and infertile to invest in, now attracts attention and investment from smallholder farmers. Working at the intersection of water and land management, land rights and land use since 2008, the World Bank’s Sustainable Land Management Program has led to more resilience and income for Ethiopia’s farmers. The government of Ethiopia, working with the World Bank and other partners, implemented the national program—more than $150 million overall—investing in land use plans, in terracing the land and land certification, all of which have helped revive local economies.
In 2017, the government of Ethiopia and the World Bank signed an $18 million grant to support the Oromia Forested Landscape Program. Implemented in a region the size of Norway, the program is part of the World Bank’s BioCarbon Fund Initiative for Sustainable Forest Landscapes.
Working closely with the IFC, the Initiative for Sustainable Forest Landscapes partnered with Nespresso, providing a $3 million grant to the Nespresso Sustainability Innovation Fund to provide farmers in Ethiopia’s Oromia region with intensive, field-based agronomy and business training to advance sustainable coffee production. IFC also provided a $3 million loan to Nespresso to increase shade tree planting within coffee farms and enhance the sustainability of wet mill processing.
This first-of-its-kind collaboration is based on shared goals of ensuring a ‘greener’ approach to planting and processing, higher productivity for farmers, and making the coffee industry in Ethiopia more resilient to climate change. The successful partnership can serve as a model for scaling up similar activities in other countries that focus on other commodities.
Similarly, IFC has also helped leverage institutional financing for the forestry sector by issuing a first-of-its-kind Forests Bond in 2016. The Bond raised over $152 million from major institutional investors to support Wildlife Works’ Kasigau Corridor REDD Project in Kenya, which allows rural farmers to benefit from conserving local forest resources and protecting the Kasigau wildlife migration corridor, while providing employment opportunities for women and other community benefits.
By 2020 more than 1 million hectares of land will be sustainably managed across Ethiopia and more than 15,000 landless youth will receive land-rights certificates. About 9,000 hectares will be reforested in the Oromia Region and 25,000 people will directly benefit from the new Oromia project.
Over the 3-year project, the initiative in Ethiopia with Nespresso aims to train 20,000 farmers and register 77 coffee processing wet mills, and assist 9,540 hectares of traditional coffee production on upgraded standards under the Nespresso AAA Sustainable Quality Program™. After one year in operation the public-private joint effort is on target to reach its goals. Over 17,000 farmers, 34 percent of whom are women, have been trained on sustainable coffee production practices.
Key Facts & Figures
Forest degradation and land-use change contribute about 12 percent of the world’s greenhouse gas emissions.
Although the pace of global deforestation has slowed since the 1990s, it remains high with about 13 million hectares (gross) lost each year. This is partially offset by reforestation, making the total annual net forest cover loss 5.6 million hectares—an area larger than Costa Rica.
Over the last five years, the World Bank committed $1.3 billion to forest-related work.
STORY: Communities Manage Ethiopia’s Forests to Improve Livelihoods, Resilience, and Shared Benefits
REPORT: Harnessing the Potential of Productive Forests and Timber Supply Chains (World Bank, PROFOR and Climate Investment Funds)
New and modernized hydromet services will strengthen early warning and response systems across Africa.
Challenge and opportunity
Hydrological and meteorological (or “hydromet”) hazards are responsible for 90% of total disaster losses worldwide. With population growth, rapid urbanization and climate change, this is projected to become more severe. Hydromet services provide real-time weather, water, early warning, and climate information products to end users, based on weather, water and climate data.
Less than 15 years ago, even the small amount of hydromet investment that existed was fragmented, with little hope of producing sustainable results. Governments around the globe are now expressing a demand for better and more effective hydromet services and early warning systems, as success stories continue to highlight their value in saving lives and livelihoods. In addition to their live-saving impact, improved weather forecasting and early warning could increase productivity globally by $30 billion a year, save $13 billion a year in reduced asset losses and save another $22 billion a year in avoided losses.
For the past decade, the World Bank and the Global Facility for Disaster Reduction and Recovery (GFDRR) have been working with partners to increase awareness of, and investments in, reliable and sustainable hydromet services. They have partnered with leading national meteorological services across the globe to strengthen the network of hydromet services. The current portfolio of World Bank hydromet projects, both active and in the pipeline, is about $900 million.
In Africa, countries have made significant development achievements in the last few decades; annual growth has averaged 4.5 percent, but increasing weather, water, and climate risks threaten these gains. Since 1970, Africa has experienced more than 2,000 natural disasters, with just under half taking place in the last decade. During this time, natural disasters have affected over 460 million people and resulted in more than 880,000 casualties.
Less than 20 percent of Sub-Saharan African countries currently provide reliable weather, water and climate services to their people and economies. African governments often juggle competing priorities for investment, and National Meteorological and Hydrological Services (NMHSs) are rarely prioritized. Inadequate funding inhibits NMHSs from providing the services needed for climate-resilient development and adaptation planning.
To step up hydromet modernization in Sub-Saharan Africa, the World Bank, World Meteorological Organization (WMO) and African Development Bank launched its Africa Hydromet Program in 2015, to support long-term planning for sustainable development and provide reliable and timely early warning services. The partnership now includes UNDP, AFD and WFP.
The regional program aims to improve hydromet services at the national, sub-regional, and Africa-wide levels. At the national level, the program seeks to modernize or build infrastructure such as radar, and automated weather stations, as well as strengthen institutions and service delivery. Sub-regional efforts include standardizing procedures to promote trans-boundary collaboration, while Africa-wide efforts ensure hydromet services across the continent will be linked to regional and global centers, improving data and promoting partnerships.
The World Bank, WMO and GFDRR are also working on the Climate Risk Early Warning Systems (CREWS), launched at COP21 in Paris. This French-led multi-donor initiative aims to finance weather stations, radar facilities, and early warning systems in Least Developed Countries and Small Island Developing States. CREWS has already launched initiatives in Mali and Burkina Faso, and has recently approved additional funding for Niger and Democratic Republic of Congo. In Niger, this will help establish warning systems for rapid-onset events like river and flash flooding. In the Democratic Republic of Congo the project will ensure optimal use of the national meteorological and hydrological service capabilities to protect river navigation, urban development in 10 cities, and agriculture against severe weather.
The first phase of the Africa Hydromet Program will see an investment of approximately $600 million for the modernization of hydromet services and systems in 15 countries and four regional climate centers for the strengthening of early warning and response systems that build resilience against climate and disaster risks.
This program will strengthen national and regional leadership of weather, water and climate services, improve socio-economic benefits of hydromet services and enhance collaboration with private sector, civil society, academia, user groups and other stakeholders.
Key Data Points
Hydrological and meteorological (or “hydromet”) hazards – weather, water, and climate extremes – are responsible for 90 percent of total disaster losses worldwide.
The economic cost of recorded weather related disasters in Africa in the last 20 years is estimated at $10 billion. Given the increasing climate variability, these disasters are projected to increase in frequency and intensity.
8. Green Bonds
The largest new green bond fund dedicated to emerging markets is expanding financing for climate-smart investments.
Challenge and Opportunity
Capital markets can play a key role in mobilizing financing to support the Paris climate commitments. Green bonds are among the financing options available to private firms and public entities wanting to back climate and environmental investments. Green bond issuance is projected to surpass $130 billion this year , compared to $81.6 billion issued last year. Investors are attracted to green bonds because they can invest in climate-smart business and track the impact of their investment through reporting required under the Green Bond Principles.
The World Bank Group, through the World Bank and International Finance Corporation (IFC), have been pioneers in developing the green bond market. The World Bank issued the first green bond in 2008, and in 2013 IFC became the first institution to issue a $1 billion global benchmark green bond, contributing to the transformation of the green bond market from niche to mainstream. The World Bank and IFC have been market leaders as the largest issuers of green bonds, raising funding for climate finance from a wide variety of institutional and retail investors and introducing many first-time investors to the green bond asset class. The Bank and IFC have also played an instrumental role in defining market best practice for transparency and reporting.
The World Bank leverages its experience and its position as a market leader in this space to bring greater diversity of issuers and investors to the market, and works with countries to help them put in place market frameworks that support green bond issuances. Most recently, the Bank participated in establishing green financing frameworks that resulted in the first issuance of a green Islamic bond (in Malaysia), and the first issuance of a green bond by an emerging economy (Fiji).
The International Finance Corporation (IFC), a member of the World Bank Group, and Amundi, a leading European Asset Manager, are finding new ways to encourage more local financial institutions to issue green bonds. They have created the largest green-bond fund dedicated to emerging markets—a $2 billion initiative that aims to deepen local capital markets and expand financing for climate investments.
The Green Cornerstone Bond Fund will buy green bonds issued in emerging markets. Initially, the fund will focus on countries and banks that have a high potential to issue green bonds, before spreading into other markets. IFC will also provide first-loss coverage, helping lower risk and mobilizing financing from the private sector. This will help ensure that the fund can operate in challenging markets, including the poorest countries and conflict-affected areas.
The World Bank is also helping countries create new markets for climate finance. For example, Fiji is the first emerging market to issue a sovereign green bond, raising 100 million Fijian dollars, or US$50 million, to support climate change mitigation and adaption. The proceeds of the bond will finance Fiji’s transition to a low carbon economy while building climate resilience. The issuance of this green bond took just four months.
IFC's investment of up to $325 million in the Green Cornerstone Bond Fund will serve to open up the green bond market in client countries by allowing the fund to manage emerging-market debt by purchasing green bonds issued by banks in Africa, Asia, the Middle East, Latin America, Eastern Europe, and Central Asia.
The World Bank Group is among the world’s leaders and largest issuers of green bonds. It has raised over $16 billion in over 200 green bonds since 2008 for climate and environment-related investments.
As of September 2017, the Bank has issued a total of 135 green bonds in 18 currencies totaling more than $10.2 billion equivalent and IFC had issued 90 bonds worth $7.25 billion across 12 currencies.
WEBSITE: Fiji Green Bond
9. Carbon Pricing
A coalition of global leaders is driving for effective carbon policies worldwide.
Challenge and Opportunity
A dangerously warming planet is not just an environmental disaster. Fundamentally, it is an economic and social challenge. Putting a value or price on carbon emissions tackles climate change at its source. This creates an incentive for firms and individuals to change their investment, production, and consumption patterns. Through a clear and strong price signal, carbon pricing sets the right incentives for the much-needed large-scale transition to a low-carbon economy.
The momentum to act and price carbon pollution is clearly growing. Since 2012 the number of implemented or scheduled carbon-pricing instruments has nearly doubled. Today, 42 national and 25 sub-national jurisdictions put a price on carbon emissions. The value of these carbon pricing initiatives—including emissions trading schemes (ETS) and carbon taxes—reached $52 billion, an increase of 7 percent compared to 2016.
According to a World Bank report State and Trends of Carbon Pricing 2017 jurisdictions raised revenues of more than $20 billion from carbon-pricing schemes, for the second consecutive year and with the potential to raise much more.
Through the World Bank’s platform, Partnership for Market Readiness (PMR), countries can better prepare and implement climate-change policies, including carbon-pricing instruments. The PMR leverages partners’ experiences to share knowledge and best practices. The result involves sharing highly technical and complex details of designing carbon-pricing schemes, such as allocation, legislation development, emissions registry, as well as systems to monitor, report and verify (MRV).
Putting a price on carbon is an important step, and many in the private sector believe strongly that governments need to go in this direction to effectively address climate change. A rapidly increasing number of companies are preparing for a world with a higher cost of carbon emissions—in 2017 nearly 1,400 companies disclosed the use of an internal carbon price, including more than 100 Fortune Global 500 companies with collective annual revenues of $7 trillion.
Despite this progress, 85 percent of emissions are still not covered by carbon pricing. Further, most current carbon prices are significantly lower than $40-80 per tonne CO2 by 2020 and $50-100 per tonne CO2 by 2030. The High-Level Commission on Carbon Prices, co-chaired by Joseph Stiglitz and Lord Nicholas Stern and supported by the World Bank, found these carbon- pricing target goals to be consistent with the temperature goal of the Paris Agreement.
Carbon pricing represents a simple, fair and efficient policy option to address climate change. It can also deliver additional benefits, reducing air pollution and congestion while avoiding the increased costs of remedial measures associated with the world’s current high-carbon growth path.
For businesses, carbon pricing enables them to manage risks, plan their low-carbon investments, and drive innovation.
But it is clear that stronger action is needed on the carbon pricing front. Current carbon price initiatives only cover 15 percent of global emissions, and 75 percent of these emissions are priced at under $10 per tonne. More progress is needed to help achieve the Paris Agreement goals.
Officially launched at COP21 in Paris in December 2015, the Carbon Pricing Leadership Coalition (CPLC) brings together leaders across national and sub-national governments, the private sector, and civil society with the goal of putting effective carbon-pricing policies that maintain competitiveness, create jobs, encourage innovation and deliver meaningful emission reductions. The Coalition drives action through different fronts:
Building a repository of global experience on carbon pricing policy design and implementation, including knowledge products such as the Report from the High-Level Commission on Carbon Prices, the Carbon Pricing Dashboard, webinars with business leaders, while synthesizing latest analysis on key issues.
Convening the public and private sectors through global events.
Collaborating with stakeholders in deepening sectoral engagement: including the construction value chain, banking sector, and maritime sector.
The goal of the CPLC, which the World Bank Group helped to convene and supports, is to advance effective carbon pollution pricing systems and expand their use globally, helping countries to maintain competitiveness, create jobs, encourage innovation and achieve meaningful emissions reductions.
As of 2017, the CPLC has more than 25 national and sub-national government partners, more than 150 private sector partners from a range of regions and sectors, and more than 50 strategic partners representing NGOs, business organizations and universities.
The CPLC works with partners toward the long-term objective of a carbon price applied throughout the global economy, with targets to double the percentage of global emissions covered by explicit carbon prices to 25 percent by 2020, and to double it again to 50 percent within a decade.
Key Facts & Figures
42 national and 25 sub-national governments are pricing carbon.
Additional $700 billion a year will be needed annually by 2030 to finance the transition to low-carbon economies.
Carbon pricing revenues raised more than $20 billion for the second consecutive year.
Almost 1,400 companies factor an internal carbon price into business plans, including more than 100 Fortune Global 500 companies with collective annual revenues of $7 trillion.
A 750 ultra-mega solar plant will help power Delhi’s metro rail system in India.
Challenge and Opportunity
Solar power is set to grow rapidly in developing countries, displacing fossil fuels. Solar photovoltaic (PV) generation costs have been decreasing rapidly. In several countries, the cost of PV power is already lower than coal and gas. The trends are encouraging: renewables are leading power-generation deployment globally, solar is leading renewables’ deployment, and developing countries already represent more than half of global solar deployment.
Bringing markets to scale has led to reductions in prices. Clearly defined deployment strategies by governments, transparent financial and institutional structuring, and competitive procurement, including auctions, have helped de-risk and scale up markets. In certain countries guarantees or concessional financing are necessary in the initial stages of market growth. The World Bank Group is seeing a surge of interest from its clients in solar power as a result of the dramatic cost decreases over the past few years.
The World Bank is working with governments to strengthen energy institutions, develop legal frameworks, and improve policies and regulations, which has helped set the stage for a major expansion of wind and solar power in countries like India, Morocco and Turkey. The World Bank is also making detailed resource data available for free through tools like ESMAP’s Global Solar Atlas, which has helped boost solar development in Vietnam.
The International Finance Corporation (IFC) supports renewable energy across the entire value chain: from advising governments on regulations and public-private-partnerships and helping firms improve their carbon footprint, to financing equipment manufacturers, supporting grid-tied renewables through project finance, accelerating the development of renewable energy and energy storage markets, and improving people's access to modern off-grid energy services.
In October 2017, IFC finalized a landmark $653 million debt package that will finance the construction of 13 solar power plants in Egypt’s Benban Solar Park, generating up to 752 megawatts of solar power and capable of powering over 350,000 residential customers. Once complete, the 1,650-megawatt solar park will be the largest solar installation in the world, and is expected to avoid 2 million tons of greenhouse gas emissions per year.
India’s power system is among the largest in the world. Yet per capita electricity consumption is less than one-third of the global average. An estimated 300 million people are not connected to the national electrical grid. With a rapidly growing economy the need for reliable power is only going to grow.
The World Bank and the IFC are helping India establish large-scale solar parks and supporting the government of India’s plans to install 100 gigawatts (GW) of solar power out of a total renewable-energy target of 175 GW by 2022.
As recently as 2012, India had no major rooftop solar projects contributing towards this goal. Seeking to achieve its target of installing 500 megawatts of solar PV by 2014, the government of Gujarat province sought advisory support from IFC in designing an innovative public-private partnership (PPP) model to add power generating capacity, develop contractual models for further projects, and demonstrate the viability of rooftop-based solar power. This helped an industry emerge, and today India has 1,650 megawatts (MW) of rooftop solar power. IFC is helping spread the rooftop model with projects in Odisha and other states—attracting $37 million in new private investment and enabling 27,000 people to gain increased access to power.
One of the efforts that the World Bank Group is supporting is the 750 MW Rewa Ultra Mega Solar Ltd. Project, which has brought record low solar prices to India and is expected to attract over $500 million in private investment. The World Bank and the Clean Technology Fund are helping to de-risk and buy down the cost of the solar park infrastructure as part of a $100 million financing package to support solar parks in India.
The 750 MW Rewa Ultra Mega Solar Ltd. project doubled the solar capacity of the state of Madhya Pradesh and is one of the largest single-site solar plants in the world. The energy generated will help power metropolitan rail transportation in New Delhi. It has achieved record low tariffs for a solar project in India, putting solar costs on par with coal. With support from both the World Bank and IFC, this project is projected to save 1 million tons per year in greenhouse gas emissions, which is equivalent to taking 215,000 cars off the road every year.
In 2016, for the fifth consecutive year, investment in new renewable power capacity was roughly double the investment in fossil fuel generating capacity, reaching $249.8 billion. A total of 161 gigawatts (GW) of renewable capacity was added, with solar PV accounting for 47 percent of the total additions.
The cost for electricity from solar PV continues to fall rapidly. Record-breaking tenders for solar PV occurred in Argentina, Chile, India, Jordan, Saudi Arabia and the United Arab Emirates.
Currently, 300 million people in India lack access to the electricity grid, which seriously hampers their economic, sustainable and social development.
Demand for electricity in India is growing fast; 8 times more electricity is needed compared to the 1970s.
India made a commitment to connect its population to 24/7 electricity by 2030 by making vast investments in solar power, innovative solutions and energy efficiency.
FEATURE STORY: IFC Rewa Solar Power Plant Feature
POSTCARD: IFC India Solar
PRESS RELEASE: IFC RenovAr Creating Markets
FEATURE STORY: Solar Powers India’s Clean Energy Revolution
A new risk mitigation facility aims to encourage investment in large-scale geothermal energy in Indonesia.
Challenge and Opportunity
Tapping into pockets of hot water or steam below the Earth’s crust is increasingly being used as an affordable and sustainable alternative to fossil fuels. Geothermal energy is one of the few renewable sources of energy able to produce steady power on a 24-hour basis. Under the right conditions, it can be cost-competitive with coal or natural gas, which means countries can depend less on imported fuels and increase their energy security. Being a cleaner source of electricity, geothermal energy can also play a major role in decarbonizing the power sector.
Despite this potential, high upfront costs for the initial exploration stage and the risk of unsuccessful exploration continue to be barriers for making use of this natural resource on a large scale. Global experience shows that risk mitigation, especially during the initial exploratory phase, can effectively unlock investment. A global scale-up of geothermal energy will require major mobilization of private sector investments facilitated by risk mitigation mechanisms that include using concessional funding from public resources, climate finance and guarantees.
The World Bank’s Energy Sector Management Assistance Program (ESMAP) leads the Global Geothermal Development Plan to mobilize new funds for the initial investment phases which carry the greatest risk. So far, the plan has raised $235 million.
The International Finance Corporation (IFC), a member of the World Bank Group, is also providing financial and advisory services to support the exploration and development of private sector geothermal power projects in emerging markets. For example, in 2010, IFC arranged a $190 million financing package to support construction of Nicaragua’s largest greenfield geothermal power project. Once completed, the 72 megawatt San Jacinto project will provide nearly 20 percent of Nicaragua’s power needs. And in 2013, IFC signed an agreement with international reinsurer Munich Re to develop and pilot geothermal exploration risk insurance products in Turkey. The four pilot projects are funded by $420 million of private investment and are expected to add 140 megawatts of geothermal capacity.
Indonesia has the world’s largest geothermal potential. The World Bank’s support to the development of geothermal power in Indonesia is a key component of the World Bank Group’s Country Partnership Framework for Indonesia, which focuses on government priorities that have potentially transformational impact.
At present, Indonesia is highly dependent on fossil fuels such as coal, its primary source of electricity production. Shifting to geothermal energy will help Indonesia reduce greenhouse gas emissions considerably, and support the national climate mitigation goals set out in its Nationally Determined Contribution (NDC) to the Paris Agreement. To meet its increasing energy demand in an environmentally responsible way, the government has embarked on an ambitious plan to develop its geothermal resources.
To achieve its target of adding 5.8 gigawatts (GW) of electricity production with geothermal resources by 2026, Indonesia will need an estimated $25 billion of investments over the next eight years, a major portion of which is expected to come from the private sector.
With support from the World Bank and other partners, the government of Indonesia is planning a new Geothermal Risk Mitigation Facility. This would leverage several billion dollars in private sector funding, unlocking investments through risk mitigation for exploration and early production drilling. This would allow investors to prove sufficient resources to attract commercial finance for large-scale development. Over the next seven years it is expected that the facility will lead to the development of more than 1 GW of new geothermal capacity.
This new facility builds on a long engagement around geothermal energy in Indonesia. In 2012 the World Bank supported the government through a grant from the Global Environment Facility (GEF) to undertake key reforms to enhance the investment climate for geothermal development. It also helped Pertamina Geothermal Energy (PGE) to kick-start its ambitious geothermal expansion program through a $175 million IBRD loan, along with concessional financing of $125 million from the Clean Technology Fund (CTF).
More recently, in 2017, the World Bank provided $55.25 million in grants to support the Geothermal Energy Upstream Development Project in Indonesia, which aims to facilitate investment in geothermal power generation in the country. The Clean Technology Fund (CTF) is contributing $49 million to support infrastructure development and exploration drilling. The Global Environment Facility (GEF) contributes an additional $6.25 million to support technical assistance aimed at building capacity in geothermal exploration, including safeguards due diligence. The Ministry of Finance and PT. Sarana Multi Infrastruktur, a state-owned infrastructure financing company, will match the CTF funding for the Project.
Indonesia has a target of increasing the share of new and renewable energy in its primary energy mix to 23 percent by 2025, including by adding 5.8 GW of geothermal capacity. The Geothermal Risk Mitigation Facility will help Indonesia meet this target by leveraging billions of dollars in commercial financing to develop more than 1 GW of new geothermal capacity. Indonesia currently has around 1.8 GW of geothermal electricity; its total potential is 29 GW. Using Indonesia as a model, other countries can potentially apply a similar approach to scaling up the use of geothermal energy.
Key Facts & Figures
Global geothermal power generation potential is between 70 to 80 gigawatts (GW). However, just 15% of known geothermal reserves around the world are exploited for electricity production, generating just 13 GW.
An exploration campaign and initial test drilling program of three to five geothermal wells costs anywhere from $20 to $30 million.
Geothermal power is the second-largest renewable energy resource in Indonesia after hydropower and a clean alternative to coal-fired power generation. Some 30 million Indonesians – or 12 percent of the population – lack access to modern and reliable electricity.
REPORT: Comparative Analysis of Approaches to Geothermal Resource Risk Mitigation: A Global Survey
12. Energy Efficiency
An energy services company drives down prices of LED bulbs and unlocks energy efficiency potential in India.
Challenge and Opportunity
Energy efficiency—including residential, industrial and municipal energy savings—is central to achieving the energy and climate goals of countries around the world. It remains the lowest-cost option to meet national climate change commitments. For this reason, energy efficiency is often referred to as the ‘first fuel’, the resource to be used before all other energy options.
In addition to reducing emissions, energy efficiency has other development benefits: enhanced energy security, reduced pressure on household and national budgets, improved power-system reliability, increased competitiveness, and improved operations in critical areas like education and health.
But despite this enormous potential, energy efficiency continues to be underutilized because of policy, technical, and financial barriers. Countries and development institutions such as the World Bank Group have learned that successfully implementing energy-efficiency programs at scale requires long-term engagement. Financing needs to be designed to suit local markets, and backed up by strong policies, regulations, and in some cases, incentives.
Countries are now developing the next generation of programs to tap this huge potential, including by aggregating purchases of energy-saving appliances and equipment; by creating revolving funds; and by improving national standards.
The International Finance Corporation (IFC), a member of the World Bank Group, promotes sustainable growth and private-sector development by investing in critical industrial and commercial infrastructure resource efficiency projects. IFC has been successful in aggregating smaller deals through credit lines paired with advisory support and blended finance, including through the China Climate Finance Advisory Program (CHUEE) which has provided over $625 million under risk-sharing facilities provided by IFC. This has financed 222 energy efficiency and renewable energy projects expected to reduce over 20 million tons of carbon dioxide every year.
In India, energy efficiency is critical to helping the country address the multiple challenges facing the power sector, moderate demand growth, and meet its climate change goals. India’s energy savings potential is enormous—about 15-30 percent across all sectors, with an estimated value of more than $11 billion. Industry and residential sectors offer the highest saving potential. But India’s energy efficiency potential remains largely untapped, in part due to limited financing for these types of investments.
The World Bank has been developing a growing partnership with Energy Efficiency Services Limited (EESL), which aggregates and finances residential and public sector energy efficiency in India. Established in 2009, EESL’s approach includes aggregating demand for energy-efficient appliances and equipment through bulk purchase agreements, providing financing, and aggressive marketing and promotion. Using a combination of financing sources, including equity capital from its promoters, along with loans from development partners and commercial lenders, EESL provides upfront financing for investments and can be repaid based on energy saved by consumers.
By developing a successful business model to serve smaller consumers, EESL is expanding markets for energy-efficiency products by driving down prices, making them more affordable to the broader market. It has already deployed more than 275 million LED bulbs, 4.2 million LED tube lights, and 4 million street lights in municipalities. As a result, retail prices of LED bulbs are now at parity with CFL bulbs, and further price reductions are expected. By 2020, LED is expected to account for 60 percent of the Indian lighting market.
The World Bank and EESL are now finalizing the preparation of a $300 million operation which combines the Bank’s Program for Results instrument. This will contribute to meeting India’s energy efficiency and climate change objectives by supporting EESL in the implementation of energy efficiency initiatives. A Guarantee instrument will leverage existing financing sources by mobilizing commercial financing to help maximize finance for development. This operation will complement the World Bank Group’s growing program supporting supply and demand side efficiency in India, combining investment lending and technical assistance activities, including the ongoing Partial Risk Sharing Facility for Energy Efficiency (PRSF) project, with $18 million from the Global Environment Facility (GEF) and $25 million from the Clean Technology Fund (CTF).
Going forward, the EESL-World Bank Group engagement will focus on market transformation in the residential appliance sector–including creating sustainable markets for LED lights and energy efficient ceiling fans; facilitating well-structured and scalable investments in public street lighting; and helping develop sustainable business models for emerging market segments such as super-efficient air conditioning and agricultural equipment. The engagement will also focus on enhanced access to commercial financing, including through access to capital markets and other structured financial solutions. The EESL model is replicable and can be adapted to the contexts of countries all over the world.
Key Facts & Figures
Energy efficiency is the lowest-cost energy option to meet the greenhouse gas reduction targets under the Paris Agreement.
India’s energy efficiency potential is enormous, with an estimated value of more than $11 billion.
EESL has distributed more than 275 million energy-saving LED bulbs, avoiding 29 million tons of CO2 emissions equivalent per year.
Industrial and commercial energy efficiency is a $360 billion global market with significant greenhouse gas reduction potential.
DASHBOARD: India street lighting energy savings dashboard