GEF Investment in Climate Change Mitigation and Sound Chemicals Management

Dr. Ming YangSr. Environment Economist / Climate Change Specialist

myang@theGEF.org

Global Environment Facility

October 5, 2011 Trinidad(Prepared in September, 2011)

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The GEF

GEF’s 20 Years’ Investment in Climate Change

Mitigation and Sound Chemicals Management

GEF 5 Resources and Strategy in Climate Change

Mitigation and Chemicals Investment

Case Studies on GEF Investments

Key Points in GEF5 Project Development

Outline

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The GEF

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The GEF Secretariat

GEF’s Operation:

Based in Washington, D.C, the GEF Secretariat reports directly to the GEF Council and Assembly, ensuring that their decisions are translated into effective actions.

GEF’s Mission: A mechanism for international cooperation for the purpose of providing new, and additional, grant and concessional funding to meet the agreed incremental costs of measures to achieve agreed global environmental benefits

The GEF is the Financial Mechanism of the UNFCCC, CBD, Stockholm Convention, UNCCD and the Nagoya Protocol. The GEF also provides assistance to International Waters and the Montreal Protocol. The GEF provides Secretariat Services to the Adaptation Fund Board.

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The GEF 1991-2011

STAP

GEF Assembly

Countries: Political FPs

GEF Secretariat

GEF Agencies

•UNDP

•UNEP

•World Bank

ADB

•AFDB

•EBRD

•FAO

•IADB

•IFAD

•UNIDO

Projects

Countries: Operational

FPs, Convention

FPs, other gov’tagencies, civil

society

Evaluation Office

Conventions

Countries: Convention FPs

GEF Council

Countries: Council

Members/ Constituencies

StrategicGuidance

Operations Action

STAP

GEF Assembly

Countries: Political FPs

GEF Secretariat

GEF Agencies

•UNDP

•UNEP

•World Bank

ADB

•AFDB

•EBRD

•FAO

•IADB

•IFAD

•UNIDO

Projects

Countries: Operational

FPs, Convention

FPs, other gov’tagencies, civil

society

Evaluation Office

Conventions

Countries: Convention FPs

GEF Council

Countries: Council

Members/ Constituencies

StrategicGuidance

Operations Action

Over 2,700 projects

US$ 16.13 billion as of June 2010

182 participating countries, private sector, and civil society

10 Agencies

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GEF 20 Years’ Investment in Climate Change Mitigation and Chemicals

Two scenarios showing synergy of a GEF Project

Cost (US$ million)

Global Environment BenefitGov’t

inv’t

Private inv’tMultilateral in

v’tBilateral inv’t

Others

Scen

ario 2:

Integ

rated

inve

stmen

t with

the G

EF

Investment savings

Scenario 1:

Individual investm

ent

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20 Years – Financing for Climate Change Mitigation

GEF Trust Fund invested about US$3 billion in over 150 countries– Mitigation– Adaption– Technology Needs Assessments– National Communications to the

UNFCCC

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20 Years – Financing for ODS and POPs

GEF Trust Fund invested about US$613 million including – $ 187 million in ODS

• 21 ODS projects• 19 individual countries and 6 regional projects

– $ 426 million in POPs • 219 POPs projects• Over 154 countries

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Catalytic – Leveraged more than US$18 billion in co-

financing on its US$3 billion of investments in CC– Leveraged more than US$875 million in co-

financing on its US$ 613 million of investments in ODS/POPs

• US$ 187 million in ODS• US$ 426 million in POPs

Cost-effective– Over 2.5 billion tonnes of CO2 avoided in CC,

less than US$ 1.2 per ton CO2

– The ODS portfolio of the GEF additionally eliminated 1.16 billion tonnes of CO2 Equivalent.

20 Years – Catalyzing investment

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Distribution of GEF Approved 851 CC Projects in Regions

Africa 252

Asia 253 East Eu-rope and

Central Asia 124

Latin America

160

Regional 13

Global 49 Russia: 3 projects;Other countries: one project each.

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Distribution of GEF US$ 187 million in 21 ODS Projects

Turkmenistan

Armenia

Estonia

Uzbekistan

Tajikistan

Latvia

Kazakhstan

Hungary

Czech Republic

Azerbaijan

Slovak Republic

Bulgaria

Slovenia

Lithuania

Belarus

Ukraine

Poland

Regional

Russian Federation

- 20,000,000 40,000,000 60,000,000 80,000,000 100,000,000 120,000,000

0.01%

0.02%

0.03%

0.09%

0.15%

0.23%

0.42%

0.84%

1.03%

1.25%

1.37%

1.68%

1.97%

2.03%

4.92%

5.31%

7.80%

8.71%

62.15%

Russia: 3 projects;Other countries: one project each.

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Distribution of GEF US$ 426 POPs Projects

23%

44%

3%

20%

8%2%

AfricaAsiaGlobalEast Europe and Central AsiaLatin AmericaRegional

Total$426 mil-

lion

Continued Financing Climate Change Mitigation: Strategic Objectives for GEF-5 (2010-2014)

1. Demonstration, deployment, and transfer of innovative low-carbon technologies

2. Market transformation for energy efficiency in industry and the building sector

3. Investment in renewable energy technologies

4. Energy efficient, low-carbon transport and urban systems

5. Conservation and enhancement of carbon stocks through sustainable management of land use and forestry (LULUCF)

6. Enabling activities and capacity building

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Continued Financing ODS and POPs: Strategic Objectives for GEF-5 (2010-2014)

Phase out POPs and reduce POPs releases;

Phase out ODS and reduce ODS releases; and

Pilot sound chemicals management and

mercury reduction.

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GEF 5 Resources and Strategy in Climate Change and Chemicals Investment

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Increased Resources in Climate Change (US$ million)

GEF 4 (July 2006- June 2010) GEF 5 (July 2010 - June 2014) -

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

3,131

4,250 Grow by 36%

1000

1,360 Grow by 36%

Total ReplenishmentClimate Change Mitigation

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Resources in ODS and POPs

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GEF-4 Resource

GEF-5 Target

- 50 100 150 200 250 300 350 400 450

340

425

By 25%

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Utilization of the GEF funds in POPs 1991-2010

$ 35.7 million 88%

$ 5.0 million 12%

Caribbean SeaRest of Latin Amer-ica

Total: $40.7 million

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Climate Change Allocation in GEF 5 STAR $ million

China India Russian Federation

Brazil Mexico Indonesia South Africa Average other 137 countries

0

20

40

60

80

100

120

140

160 150

9487

54

4030 26

4

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GEF 5 Set-aside Funds for Climate Change and Chemicals

Climate Change Total: US$272 million (US$1360 million X 20%)

– National Communications and Technology Needs Assessments (US$80m)

– Global and regional technology centers and network (US$42m)

– Incentives for countries to participate (with STAR) in global and regional projects (US$20m)

– Global and regional projects (targeted research, etc.) (US$10m)

– Support for carbon finance (US$20m)– Sustainable Forest Management/REDD + incentives

(US$100m)

ODS and POPs Total: US$35 million for national communications

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Key Points in GEF’s Project Development

Full-sized projects (> $1 Million)PIFs are

cleared by CEO

Council approval of

Work Program

CEO endorsement of

project

GEF Agency approval of

project

GEF Agency completion of

project & implementation

start

Agency terminal evaluation and GEF

EO evaluation

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Single –step Approval

Agency submits final MSP project document for CEO approval*

GEF Agency completes implementation followed by evaluation and financial

closure

Two-step Approval (if PPG is needed)

Agency submits PIF/PPG for CEO approval

Agency submits final MSP project document for CEO approval*

GEF Agency completes implementation followed by

terminal evaluation and financial closure

* Agency approves MSP after CEO approval of the project and starts implementation.

Medium-sized projects (< = $1 Million)

Country endorsement(by Country National Operational Focal Point)

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All Project Identification Forms should

have endorsement of Operational

Focal Point when submitted to GEF

for clearance (in case of full-sized

projects) or approval (in case of

medium-sized projects requesting

project preparation grants)

Review criteria for FSP/MSP

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• Country eligibility and ownership;

• Agency’s Comparative advantage;

• Resource availability;

• Project consistency;

• Project design;

• Baseline of the project;

• Incremental costs of the project;

• Project co-financing;

• Monitoring and evaluation; and

• Agency’s responses to comments and reviews.

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Project baseline Project Baseline: Activities that would

happen without GEF’s investment

The costs of the baseline activities: to be covered by normal development expenditures such as government budgets, bilateral aid, the private sector, NGO resources, and loans from international financial institutions, including IDA and the Multilateral Fund.

The impacts of the baseline activities (GHG emissions and global environmental benefits): to be estimated through historical projects and/or trend analyses

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Alternative project and incremental costsAlternative Project: Activities that

would happen with GEF’s investment

Incremental costs of the alternative project may include

– technology licensing;– procurement of equipment and

engineering services;– acquisition of additional natural resources,

such as land for wind farm development;– training for professionals to manage new

technologies, etc.

Net incremental costs can be negative

Long run average cost – NON-HCFC chillers

Long run average cost – HCFC chillers

Operation years

Unit Cost

Net incremental cost

Year 2Year 1

Net incremental cost

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Example of baseline and GEF investment scenarios

Investment (US$ billion)

Energy saving (Million metric tons of oil equivalent MMToe)

14 MMtoe

20 MMtoe

11th Five Year Plan

$7.3 bn $12 bn

$11 bn 0.18 0.82

Dire

ct p

roje

ct in

vest

men

t

Indi

rect

pro

ject

inve

stm

ent

1.36 MMtoe

0.3 MMtoe

12th Five Year Plan

Baseline Scenario

GEF project Scenario

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Case Studies on GEF Investments in EE and ODS

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Case study 1: Commercialization of CFC-Free Refrigerators in China

1998-2006GEF Financing 9.86 ($mn)

Co-financing Total Government Private Other

32.29 ($mn)1.38

29.72.20

Ratio of co-financing 1: 3.3

GHG Emission Mitigation 42 (million tCO2e)

Cost of carbon reduction US$1/tCO2e)

Increased Efficiency of Household Refrigerators

29% (weighted average)

Institutional Framework and Governance Impacts

-Transformed the refrigerator market by promoting energy efficient models- Reduced GHG and CFC emissions via CFC-free appliances

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Case study 2: Financing Energy Efficient Building Chillers in Thailand

GEF Financing 2.50 ($mn)

Co-financing Total Government Other

2.73 ($mn)0.262.47

Ratio of Co-financing 1: 1.1

GHG Emission Mitigation 1.224 (million tCO2e)

Technology Transfer 17 CFC-based chillers replaced

New Chiller Installations Per Year 25% in 2005; by 2010 two-thirds of remaining inefficient chillers were replaced

Institutional Framework and Governance Impacts

-Achieved target energy savings and ozone depleting substances reduction- Demonstrated successful replacement of CFC chillers with non-CFC chillers for further replication

1998-2005

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GEF Financing 18.2 ($mn)Co-financing Total 40.0 ($mn)Ratio of Co-financing 1: 2.2Expected GHG Emission Mitigation

15.6 (million tCO2e)

Expected Institutional Framework and Governance Impacts

-Introduce more energy efficient designs through technology transfer in the refrigerator and air conditioning manufacturing sectors

-Building capacity for greater market share of energy efficient technology through greater consumer awareness and demand

-Meet 2015 Montreal Protocol

Case study 3: Promotion of HCFC-free Energy Efficient Refrigeration and Air-Conditioning Systems in the Russian Federation

CEO Endorsed 2010

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GEF Co-financing

Total of cash and in-kind resources committed by:

– governments, – other multilateral or bilateral sources,

private sector, – NGOs, project beneficiaries, and

concerned GEF agencies. Essential for meeting the GEF project

objectives

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Historical GEF Co-financing (US$ million)Ratio in climate change mitigation 3:18

Biodiversi

ty

Climate Change

International Waters

Land Degradation

Multi areas

Ozone Depletions

Persiste

nt Organic

Pollutants

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

GEF - 0GEF - 1

GEF - 2GEF - 3

GEF - 4

2,410

6,899

2,591

1,655 2,515

13 523

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Key for HCFC/EE project development

Policy and regulation of the government;Involvement of multilateral and local commercial banks;Development of energy service companies (ESOCs);Incentives to technology users;Capacity building and development for technology users

and commercial bank professionals; Removing other barriers; andWorking together.

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Conclusions (1)

GEF’s achievements in climate change– Financial mechanism for the UNFCCC– US$3 billion, over 850 projects, 150 countries– Leveraged US$18 billion co-financing in climate change

projects– Mitigated about 2.5 billion tons of CO2

GEF’s achievements in ODS and POPs– Invested US$ 613 million – Leveraged US$ 875 co-financing– Mitigated 1.155 GT of CO2 Equivalent

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Conclusions (2)

Looking forward Climate Change GEF5 (2010-2014)– US$1.36 billion in climate change– Six strategic objectives– Greater positive impacts on global environment benefits– Baseline and co-financing are important in project development

Looking forward ODS and POPs GEF5 (2010-2014)– Three strategic objectives– More funds available– Developing projects that meet strategic objectives of CC, ODS,

and POPs has high priority in the GEF. Linkages can be made with ODS and Hazardous Waste Management and ODS and Energy Efficiency.

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Thank you for your attention!