Investment Framework on Clean Energy & Development CDM DNA Forum Addis Abeba; 4-6 October 2007 Dr. Yogesh Vyas Lead Environmentalist African Development

Investment Frameworkon

Clean Energy & Development

CDM DNA Forum

Addis Abeba; 4-6 October 2007

Dr. Yogesh Vyas

Lead Environmentalist

African Development Bank

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AfDB Clean Energy For Development Investment Framework

1. Climate Change Impacts

2. G8 request to MDBs

3. MDB Clean Energy Investment Framework (CEIF)

4. Energy & Development nexus

5. AfDB Strategy on CEIF

6. AfDB CDM Facility

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1. Climate Change effects and impacts

1990 CO2 emissions from fossil fuel combustion and land-use change

Africa is not a major contributor to GHG emissions. Largest share of Africa’s contribution is from land use change and not from energy consumption

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More severe droughts Desertification Changing eco systems Reduced crop yields Floodings and storms Increased vector diseases Rising sea level Etc.

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G8 Gleneagles Communiqué (July 2005) Focus on Africa and on Climate Change Secure, reliable and affordable energy sources

are fundamental to economic stability and development

Action has to be taken now to slow, stop and reverse greenhouse gas emissions promote energy efficiency conservation of energy improvement of policy-, regulatory- and financing-

frameworks accelerated deployment of cleaner technologies

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World Bank and RDBs requested to develop a

clean energy investment framework to: increase the volume of investments on

renewable energy and energy efficiency assist regional member countries to identify less

greenhouse gas intensive growth options support private sector to develop and finance

cost-effective projects on energy efficiency and low-carbon energy sources

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Timeframe: July 2005: request by G8 to MDBs November 2005: meeting with finance ministers

(London) April 2006: World Bank to report at IMF Spring

Meeting 3rd / 4th quarter: RDBs to present IF strategies /

action plans to their Boards G8 summit 2007 (Germany): report progress G8 summit 2008 (Japan): report outcomes

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3. AfDB Clean Energy For Development Investment Framework

3 Pillars: Increase Energy

Access in Sub-Saharan Africa

Transition to Low Carbon Economy

Adaptation to Climate Change

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Energy in Africa

Gas Flaring in Gulf of Guinea

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Energy in Africa Africa has 13% of global population but consumes 5% of

global energy and 3% of global electricity

Only 23% of population in SSA and 91% in North Africa has access to electricity yet world average is 73%

Lowest energy consumption per capita of 0.7 toe compared to world average of 1.6 toe

Traditional biomass (wood fuel and charcoal) contributes to over 82% of energy used in SSA-less South Africa

Between 2000 and 2050, absolute number of people depending on biomass expected to rise from 583 to 823 million

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Energy in Africa

Abundant resources available (hydro, oil, natural gas, biomass) but not developed

Unevenly distributed resources yet poor interstate energy trade. (Oil and Natural gas are in North and West Africa and Coal in Southern Africa)

Energy fuel/source

reserves consumption / year

Reserves / consumption

Oil (in Mtoe) 9300 347 27 years

Natural Gas (in trillion m3)

9.9 0.14 71 years

Coal (in Mt) 61700 231 266 years

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Energy and development nexus

Energy is central to all developmental interventions

Energy is a pre-requisite for poverty alleviation and attainment of the MDGs

The poor are forced to pay a higher price for their energy. The price is paid in form of: Human time and labour Economic cost Health costs (mainly indoor air pollution), and Social and gender impact of energy services.

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4. Clean Energy Investment Framework

Two pronged approach to Climate Change: Clean energy and low-carbon economy

Focus on cleaner utilisation of fossil fuels Increased used of renewablesAttention to increasing access to energy

Adaptation to climate changeClimate proofing of investments Integration of adaptation into project cycle

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Major energy challenges : strengthening energy security for

macroeconomic stability, improving energy services for economic

growth and better quality of life, andreducing environmental and human health

threats from energy production and use.Low carbon drive must not have additional

cost on the poor“Shared but differentiated responsibilities”

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Strategies clean energy Clean energy for economic growth and

sustainable development Low-cost and high-impact solutions Project Development Fund to assist the

development of clean energy projects Changes in national energy fiscal and regulatory

policies

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Adaptation challenges: Human-induced change: combustion of fossil

fuels & land management practices Major challenges to Africa The poor are most vulnerable, having the least

means to adapt Ensure long-term adaptation strategies

compatible with short term impacts

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Adaptation strategies: Integrating adaptation in PRSPs, Country

Strategy Papers and project cycle Disaster preparedness improvement through

proactive actions – early warning systems Development of tools and checklists Research and Development

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Investment needs are huge $ 300 billion per year to meet rising energy

demands in developing countries $ 60 billion / year additionally for a low-carbon

option $ 40 billion / year as cost of adaptation

Public and private resources need to be mobilised

New financial instruments needed

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Pillar 1: Energy Access - AfDB Priorities

Enabling environment for maximising private participation

Mobilisation of financing and private participation

Electricity for the MDGsEnergy access for rural developmentEnergy for urban developmentRenewable energy and energy efficiencyTransportation sector fuel efficiency and

emissions; andFacilitating countries’ access to CDM

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Pillar 2: Clean Energy and RE/EE, AfDB Priorities

>50MW: Hydropower, Geothermal power, Co-generation, Windpower; Biofuel production.

<50MW: Promote renewables aimed at income generating activities in the agro/forest industrial sector such as co-generation and small hydro.

<5MW: Solar water heaters, windpumps and solar PVs use in remote rural dispensaries, schools, commercial wildlife and coastal tourism-linked enterprises.

< 1kW (household level):Improved biofuel cookstoves in countries where charcoal is a major fuel and indoor air pollution benefits.

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The Private Sector Department of the AfDB focuses mainly to develop (a) the wind energy area (b) the small size hydropower (c) bio-fuel, (d) Geothermal, and (e) Co-generation

The Middelgrund wind farm – Copenhagen - Denmark

30 MW hydropower - Tunisia

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The Current ADB Interventions in promoting the use of Renewable Energy

Morocco: Solar/Gas Thermal Power Station (250 MW, 30 MW Solar)

(EUR 200 Mio)

Egypt: Solar/Gas Thermal Power Station (120 to 150 MW)

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The Current ADB Investments in of Renewable Energy Madagascar: Small Hydro 15 MW – Euro14 M

Uganda: Bujagali Hydro 250 MW – Euro120 M

Cogeneration and Small-hydro Projects in the Sugar and Tea Industry in East and Southern Africa

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Small Hydro for Tea Industry in East Africa

UNEP/GEF/AFDB small hydropower initiative for the tea industry in Eastern and Southern Africa countries (Kenya, Uganda, Tanzania, Rwanda, Burundi, Malawi, Mozambique and Zambia). East African Tea Trade Association (EATTA) is the executing agency.

Key objectives:- Reduce energy cost in the tea industry- Increase reliability of power supply- Increase power supply for rural electrification- Encourage development of self sustaining small hydro industry in the region- Reduce greenhouse gas emission by replacing use of diesel run backup generators in the tea factories

Project expected to install 10 MW of small hydropower within 4 years and leverage over 82 MW in the long-term

For more information, visit - http://greeningtea.unep.org

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Small Hydro in Tea Industry project - Planned installations

4 year project period Beyond 4 years

10 MW additional installed capacity of

small hydro promotion projects

82+ MW additional small hydro capacity

capacity

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Cogen for Africa Project Project funded by GEF, UNEP and AfDB

are co-implementing agencies, AFREPREN/FWD is executing agency.

Covers 7 countries: Kenya, Uganda, Tanzania, Ethiopia, Malawi, Swaziland and Sudan.

Modeled on success of Mauritius cogen program which now accounts for close to 40% of national power supply.

Objectives Promote increased investment in efficient

cogeneration systems in eastern and southern Africa.

For more information, visit - http://cogen.unep.org

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Cogen for Africa project - Planned installations

6 year project period Beyond 6 years

40 MW additional installed

capacity of cogeneration

promotion projects

20 MW pipeline projects

200+ MW additional cogeneration

capacity

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COFAMOSA Ethanol Project Under the proposed COFAMOSA Irrigation Project, the Government

of Mozambique intends to develop an area of 29,000 ha for irrigated land under sugar cane for sugar and ethanol production.

The goal of the project is to reduce poverty levels through increased exports of sugar and ethanol from Mozambique to the region and beyond.

Based on the preliminary studies, the project aims to: develop 29,000 ha of irrigated land in possibly 3 phases, over a period of ten

years (first and second phase 10,000 ha each and the third phase of 9,000 ha)

re-settle over 500 farmers in the project area make use of already existing investment in Corumana Dam and available

good irrigation soils; create 18,000 jobs (70%) of economically active people in the area); and make permanent impact in districts of Moamba and Magude and the overall

Mozambican national economy. Currently the Bank is funding, through the African Water Facility a

consultancy srevice to undertake an integrated feasibility study for the envisaged project. The Study will commence early next year

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Types of Carbon Project Eligible for CDM

Hydroelectric power offsetting the need for coal- or gas-fired generation

Extending grid to reach customers currently using diesel or kerosene

Reducing CO2 and possibly methane by generating energy and bio-fuels from sugar industry by-products -- bagasse and molasses

Replacing firewood/kerosene/cowdung with biogas from livestock and human wastes

Extracting methane from landfills or avoiding its generation trough composting organic waste in urban dumpsites

Extracting methane from disposal of sewage sludge Capturing No2, a powerful greenhouse gas, from fertilizer

production Sequestering CO2 by tree planting, small plantations, land

restoration (limited capacity to buy though)

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ADB CDM Facility (1)

ADB intends to establish a CDM facility Objectives:

Integrate climate change in Bank operations Help remove reg. bottlenecks to clean energy and

scale up investment in modern technologies: Suppressed grid energy demand and Off-grid energy access Modern waste management Afforestation and reforestation projects

Build carbon capacities in public and private sectors Pioneer innovative approaches that combine multiple

stream of revenues from carbon offsets, micro credit, weather insurance, etc

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ADB CDM Activities

technical assistance for identification and design of CDM-eligible projects,

preparation of PDD;development of new methodologies for

programmatic or bundling of CDM opportunities for small-scale regional projects;

technical studies to identify interested countries’ range of prospective projects and programs eligible

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ADB CDM Activities (cont)

policy assistance to address regulatory barriers to the development and execution of CDM projects;

capacity-building and awareness raising by organising training programs and information dissemination; and

strengthening national designated authorities (DNA).

AfDB Carbon facility would be announced formally at the 13th UNFCCC CC in Bali, Dec 2007

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Pillar 3: Adaptation: AfDB Priorities

Promote development and use of climate risk assessment and management methods to minimize climate change and variability risks

Application of climate risk screening tools to development programs and investment projects

Support mainstreaming of climate issues into key regional, national, local and sectoral planning, policies and decision making processes,(e.g PRSPs, etc)

Plan to introduce AfDB Policy on Climate Risk Management & Adaptation

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Climate Information for Development in Africa

Objective: Improve the availability and use of climate information and services in support of sustainable development and achievement of the MDGs.

Raising Policy awareness of politicians, planners and the public for broad ownership, support and commitment to adaptation to climate variability and change.

Climate Risk Management for strategic MDGs development planning, sectoral management, livelihood strategies and disaster risk reduction.

Climate Services for the use of MDGs decision-makers in government, the private sector and civil society.

Observations, data management and infrastructure upgrading to provide essential data for climate services, risk management and policy development.

The results are to be achieved in part by drawing on, and strengthening the capacity of existing climate institutions in Africa.

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Examples of climate risk management operations (3)

African Development Bank: Malawi, agriculture

Climate Adaptation for Rural Livelihoods and Agriculture (CARLA)

US$ 3.3 million added to US$ 24 million baseline

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CARLA: Managing climate risk to sectoral investments in Malawi

ADB Smallholder Crop Production and Marketing Project

(SCPMP) Irrigation development Farmer support programme

Recurrent floods and droughts

are affecting investments, and

reducing development

outcomes.

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CARLA objectives

strengthen the climate resilience of baseline

investments and their outcomes

while at the same time enhancing broader climate

risk management in relation to agriculture and food

security in Malawi, including integration in strategic

and operational planning in the agriculture sector.

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CARLA components

COMPONENT 1 – INVESTMENTS, e.g.:• Crop diversification, • Adjusting timing of farm operations• Changes in tillage practices• Food reserves and storage• Irrigation and efficient water use

COMPONENT 2 – EARLY WARNING SYSTEMS

COMPONENT 3 – ENABLING ENVIRONMENT• Policy, legislative, and institutional frameworks• Capacity building of key institutions • Targeted knowledge and monitoring systems • Multi-stakeholder dialogues

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Thank you for your attentionYogesh Vyas

African Development [email protected](216) 71 10 21 78

Documents

Investment Framework on Clean Energy & Development CDM DNA Forum Addis Abeba; 4-6 October 2007 Dr. Yogesh Vyas Lead Environmentalist African Development