Asia-Pacific Consultation on Climate Finance and Green Climate Fund Design Sep 2, 2011 @ Singapore

Proposals on Scope, Modality and Process of the Green Climate Fund (GCF)
Perspectives for Private Sector Engagement in Climate Change Adaptation and Mitigation
Kyosuke Inada (Mr.) Advisor (Climate Change) JICA Global Environment Department

Proposals for the GCF (Scope)

GCF should address the importance of integrating climate actions (especially adaptation) into the sustainable development goal of developing countries.

Providing a platform at the national level for policy coordination will likely to enhance effectiveness of interventions by the GCF through ensuring coherence among policy, program and project activities.

Bangladesh: Khulna Water Supply Project

Loan Agreement Signed: May 18, 2011 Loan Amount: 15,729 Mil. JPY (approx. 200 Mil USD)
Only about 22% of residents in Khulna, the third largest city in Bangladesh, have access to piped water supply service. Many unconnected households rely on shared public taps and spend on average 90 minutes to fetch water The objective of the project everyday. is expansion of reliable access to safe water. The project also functions as climate change adaptation thru salinity control facilities.

Adaptation

Khulna is located on the coastal belt of Bangladesh, and rivers running near the city are affected by salinity intrusion from Bengal Bay especially during dry season, and thus it is not easy to secure potable fresh water.

Scope

Adaptation

Adaptation is a new concept used to describe response to climate impacts - but a closer look at the concrete actions indicate that they are diverse and closely associated with usual business activities (e.g. infrastructure development). The scope of the GCF should address the importance of integrating adaptation and sustainable development goal of developing countries.
Projects formed to reduce the climate change vulnerability in the existing system Projects which are not mainly aimed to reduce the vulnerability, but is designed to adapt to the impacts of the climate change in achieving its main objective
Expected yield reduction due to climate change = vulnerability Compensating the expected shortfall

Yield reduction due to climate change = vulnerability Yield Present Without Project

Project compensating for yield reduction = adaptation Project benefit = Adaptation benefit Yield

Expected yield increase in project

= adaptation options

Adaptation benefit Project benefit

With Project

Present

With Project

With Project

With Project

In absence of With climate change+ adaptation options climate change

Mitigation

Scope

Adaptation

Providing a platform at the national level for policy coordination will likely to enhance effectiveness of interventions by the GCF through ensuring coherence among policy, program and project activities. Strategic and Multi-layered Assistance
(Examples from Indonesia and Vietnam)
Platform for Policy Coordination

Policy, Program and Project Activities

Proposals for the GCF (Modality)

The risks, opportunities and exposures that businesses face are diverse. Choosing the right tool and adjusting the level of GCF intervention must be determined on a case-by-case basis. All kinds of ex-ante and ex-post risks need to be covered. It is crucial that the GCF establish a special window operated by experts familiar with the private sector. Grant may be preferred to give experts greater freedom to create tailor-made solutions.

Modality

Adaptation

The risks, opportunities and exposures that businesses face are diverse. Choosing the right tool and adjusting the level of GCF intervention must be determined on a case-by-case basis. It is crucial that the GCF establish a special window operated by experts familiar with the private sector.
Category of risks and opportunities 1. Direct exposures of core operations Examples of exposures
Extreme weather (damage to assets, business interruption)

Examples of sectors most affected

Agriculture, Tourism, Mining, Infrastructure operators

2. Indirect exposures
3. Business opportunities (solution providers) 4. Corporate citizenship

Disruption of supply chain, Rising insurance cost

New markets or increased demand for existing products Opportunities for doing good by helping others adapt

Food retail, Finance, Insurance

Risk management services, Engineering & construction Business with strong philanthropic activities

Source: PricewaterhouseCoopers (2009) Business leadership on climate change adaptations

http://www.pwc.com/mx/es/eventos/archivo/2011-01-Encouraging-engagement-and-action-Full-Report-PUBLICATION.pdf

Mitigation

Modality

All kinds of ex-ante and ex-post risks need to be covered. Grant may be preferred to give experts greater freedom to create tailor-made solutions. Case of PPP Geothermal Power Development Ex-ante Ex-post

- Exploration and Drilling Risk - Regulatory / Political Risk - Transmission Access Risk

- Production Risk - Tariff Risk - Currency Risk

Proposals for the GCF (Process)

Financial intermediaries and funding agencies play key roles when the private sector is facing financial, regulatory barriers - they serve as home doctors providing prescriptions for their clients. By enabling access from existing financial intermediaries and funding agencies, the GCF can make better use of its funds.

Process
Renewable Energy and Adaptation to Climate Technologies (REACT) window under the Africa Enterprise Challenge Fund (AECF) [funded by UK DFID]

Adaptation

Launched Nov -Dec 2010 Kenya, Tanzania, Rwanda, Uganda, Burundi. Open competition to companies for innovative business ideas that help communities to cope with climate change and increase access to low cost clean energy. Open to for-profit companies, grant up-to 1.5 mil USD. To qualify for funding, a business must provide matched funding and the idea must demonstrate a positive impact on the rural poor through increased incomes, employment & productivity or reduced energy costs.
http://www.dfid.gov.uk/Documents/UK%20FAST%20START%20CASE%20STUDY%20-%20REACT%20RENEWABLE%20ENERGY.pdf

Started in fiscal 2010, 19 projects in Asia have been selected through 3 calls for proposal. Up to 150 mil JPY (around 2 mil USD) support by JICA.

Preparatory Survey For PPP Infrastructure [funded by JICA]

Interested private sector entities submit study plans for infrastructure projects to be implemented based on public-private cooperation, along with proposals for necessary policy and regulatory improvements (funding by JICA to conduct preparatory survey). Some of the approved projects are in sectors contributing to climate resilient development in urban Asia (e.g. water supply and sewerage).
http://www.jica.go.jp/english/news/press/2011/110620.html

Mitigation

Process
JICA discusses with the Government of Indonesia on private sector engagement policy in geothermal Regulatory environment is improved

Case of Indonesia Geothermal Power Development

Private sector finance is crucial to develop geothermal, a low-carbon solution to Indonesias power supply JICA listens to the private sector to identify barriers for participation Technical Cooperation for preparation of master-plans Concessional Loans for construction of high priority geothermal power plants Public funds not enough to develop the estimated 27,000 MW potential in Indonesias geothermal power

Thank You for Your Attention! Contact:

JICA Global Environment Department

Kyosuke Inada (Mr.), Advisor (Climate Change)
E-mail: gegoc@jica.go.jp URL: http://www.jica.go.jp/english/operations/climate_change/index.html