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WEF ENI FinancingGreenGrowthResourceConstrainedWorld Report 2012
WEF ENI FinancingGreenGrowthResourceConstrainedWorld Report 2012
Resource-constrained World
Partnerships for Triggering
Private Finance at Scale
Contents Preface
1 Preface In 2011, floods in Thailand cost the economy US$ 45 billion (7% of its
GDP) with disruptions to many global supply chains. Floods in the
3 Introduction Philippines have claimed at least 1,500 lives and caused corresponding
negative impacts to infrastructure and land. Meanwhile, parts of China
6 India’s National Solar Mission:
have experienced their worst drought in 60 years, with over 4 million
Private Finance to Support Public
farmers facing severe water shortages. Two failed rainy seasons across
Leadership
Djibouti, Ethiopia, Kenya, Somalia and Uganda have created the worst
22 The South Africa Water Partners Network: drought since 1950, affecting more than 10 million people and pushing
Regional Funds for Adaptation food prices upward across the region. In 2010, 17 million people were
affected by floods in Pakistan, making it the country’s most expensive
30 The Southern Agriculture Growth Corridor natural disaster, while an autumn drought in the Amazon brought river
of Tanzania: Investment Models for flow to its lowest level since 1902 in some parts.
Climate-smart Agriculture Dominic Waughray
The scale and frequency of these kinds of weather shocks, combined
40 Further Resources Senior Director
with long-term economic forecasts of climate change impacts and fossil
Head of Environmental
fuel costs, are having a political as well as an economic impact.
40 Acknowledgements and Stakeholder Initiatives
Contributions Many developing country governments are changing their approach to
infrastructure and industrial planning, choosing to design more
41 End Notes
sustainable, resilient pathways to economic growth. They are developing
comprehensive national investment programmes in clean energy,
energy efficiency, water management, climate-resilient agriculture, smart
grids and low-carbon transport systems. This strategic shift has been
termed as “greening the economy” or making a “green growth”
transition.
The size of the prize is potentially large – an analysis undertaken for the
World Economic Forum’s Infrastructure Initiative estimates a market size
of US$ 18.1 trillion cumulative investment in infrastructure within
developing economies by 2030. Is 2012 the time to scale up green
infrastructure financing?
The World Economic Forum’s Green Growth Partnerships Initiative is Across our various work programmes, the World Economic Forum
designed to addresses this challenge. It invites expertise from enjoys substantive collaboration with the United Nations Framework
investment, infrastructure, energy, agriculture, transport and IT Convention on Climate Change; the Governments of Mexico, South
companies to work with officials from developing economies and the Africa, South Korea, Brazil, India and China; the Governments of the
international community to design practical ways to trigger private United Kingdom, Denmark, Germany, Sweden and Norway; the
investment at scale for green infrastructure strategies. The initiative is Development Finance Institution Initiative; the Clean Energy Ministerial;
already working with the governments of South Africa, India and Kenya the OECD; the UK Capital Markets Climate Initiative; the UK Climate
and further country partnerships are planned for 2012, particularly in Development Knowledge Network; the United States Low Emissions
Latin America and South-East Asia. The aim is to catalyse breakthrough Development Strategies Group; the World Bank Group; Asian
case studies from around the world to stimulate the new green growth Development Bank; the Global Green Growth Institute; and the Global
market. Green Growth Forum. This important network of intergovernmental
actors, organizations and government officials, underpinned by the
The Green Growth Partnerships Initiative draws together the experience, Forum’s Global Agenda on Climate Change and other associated
partners and project outcomes from multiple Forum industry Councils, helps to contextualize the Forum’s multistakeholder activities
communities that have been exploring thematic sustainability challenges squarely within – and in support of – the wider international agenda.
in developing countries, e.g. energy, transport, agriculture and water,
and working closely with Forum Partners from the financial services and Looking forward to 2012, we are delighted that the work will provide
investment communities. Its common goal is to help governments and exclusive input to the Government of Mexico G20 Chair on the design of
the international community work in partnership to design green infrastructure investment mechanisms, which will feed into the
comprehensive national investment strategies that attract significant G20 Working Group on Development. We also look forward to linking
private finance. this work to the Rio+20 processes and the COP18 discussions planned
for Qatar.
To this end, this report highlights promising examples of successful
collaborations such as India’s National Solar Mission; Kenya’s efforts to We hope you enjoy reading this report on the initiative to date, and look
design an investment-grade renewable energy strategy; the South Africa forward to engaging further partners from government, industry and civil
Water Partners Network; and the Southern Agricultural Growth Corridor society to help mainstream green infrastructure finance at the scale that
of Tanzania. These examples offer innovative financing mechanisms and the world so urgently needs.
new models for collaborative innovation and engagement of
multistakeholder communities. Each of these partnerships offers
lessons that will help others to replicate, tailor and scale up similar
approaches. In so doing, the world can begin to shape a new “bottom-
up” approach to green growth to address climate change and deliver
sustainable jobs and economic growth.
The approach draws on a strong body of work that has emerged over
recent years. This includes World Economic Forum reports and
initiatives such as the 2008 Financing for Development Report; the 2009
G20 Low-carbon Prosperity Task Force recommendations; the
2010-2011 Critical Mass Initiative; the 2011 Financing Sustainable Land
Use Initiative, the ongoing New Vision for Agriculture Initiative; the
2011-2012 Sustainable Transport Ecosystem Initiative; and the 2010
Paving the Way: Maximizing the Value of Private Finance in Infrastructure
report. It also includes the 2010 Advisory Group on Climate Finance for
the UN Secretary-General, Green Growth recommendations for the
French G20 in 2011, and public-private initiatives such as the UK
government’s Capital Markets Climate Initiative. In addition, this work
benefits from the intellectual leadership of the World Economic Forum’s
Global Agenda Council on Climate Change, a select group of high-level
experts on climate change and green growth representing Government,
Business, Academia and Civil Society.
Context: Developing Economies Fuelling Finally, the energy sector holds tremendous A New Approach: National Investment in
Global Growth ... But Environmental challenges, with the International Energy Green Infrastructure
Stresses Are Increasing Agency forecasting a 40% increase in energy
demand by 2030, driven almost entirely by As a result of this combination of long-term
As the world economy continues to rebalance, growth in developing and emerging countries. economic growth forecasts, short-term
emerging markets are forecast to contribute Without action to decarbonize energy political and environmental impacts of severe
62% of global growth between 2010 and 20151 infrastructure, BAU investments in the energy weather events and the increasing risks of
and, according to OECD, are likely to account sector will continue the world’s reliance on investing in traditional BAU infrastructure
for 60% of global GDP by 2030.2 This global emissions-intensive fossil fuels for close to approaches, an increasing number of
growth path could lift a further 3 billion people 60% of total power generation for this period. governments in developing countries –
in developing countries out of poverty3 and into In addition to increasing greenhouse gas supported by international agencies – are
the (mostly urban) middle classes within the emissions, following such an approach will changing their approach to infrastructure and
next two decades – an economic forecast to expose developing countries to increased industrial planning to make their economic
be celebrated in the midst of more challenging volatility in fossil fuel prices, as imports of oil growth more sustainable and resilient. Their
growth estimates for Europe, the United States and coal rise.6 goal, according to the Global Green Growth
and Japan. Forum, a multi-government platform hosted by
Given these scenarios, the IEA, the Denmark, is to “seek a pathway to growth that
The requisite rise in demand for energy, water, Intergovernmental Panel on Climate Change both explores the potential for economic
urban development, transportation and (IPCC) and other observers warn that, even development and job creation, while at the
agricultural infrastructure in developing with current emission reduction pledges, the same time lowers global carbon emissions,
countries to help meet this growth forecast is world is heading for a global average increase promotes sustainable use of natural resources
unprecedented. A cumulative investment in in land temperature of between 4°C and 6°C and realizes the co-benefits of responding to
infrastructure of US$ 18.1 trillion will be required by the end of the century. Climate scientists, in climate change” – in other words, a greening of
by developing economies by 2030, according contrast, have concluded that the average sustainable infrastructure development.
to a recent analysis undertaken for the World global temperature increase – compared to
Economic Forum’s Infrastructure Initiative.4 pre-industrial norms – should be maintained This is not just an abstract concept. China, for
within 2°C to avoid the negative impacts of example, has devoted key parts of its last three
Close to US$ 2 trillion a year on average is a Five-Year Plans to developing a green growth
climate change.7 The latest scientific analysis
huge investment challenge to meet, with strategy for energy, agriculture and
suggests the world has already experienced an
perhaps half of this having to come from the infrastructure, investing over US$ 51 billion in
average land mass warming of 1°C since 1950;
private sector. However, there is a further twist. new renewable energy projects in 2010 alone,
for every degree rise in average land
A gathering body of analysis suggests that a according to Bloomberg New Energy
temperature, scientists estimate the potential
business-as-usual (BAU) approach to Finance.13 Other emerging economies such as
for more extreme weather events.8
investment in traditional, emissions- and Brazil, Mexico, South Africa, South Korea and,
resource-intensive infrastructure will not This is a worrying trend, as there is concern increasingly, India are promoting green
provide the framework for sustainable growth that the impacts of increased climate change infrastructure polices to enhance the resilience
that many developing countries seek, and may will create feedback loops, placing further of their economic development.
even decrease economic resilience in some strain on infrastructure, water, agriculture and
cases. environmental systems, particularly in Many other developing countries are following
developing countries. Some commentators suit. According to the Global Status Report of
For example, if BAU trends in water use suggest that we are already seeing the early the Renewable Energy Network (REN21), by
continue, a 40% gap between global water signs of things to come, with changing weather the end of 2010, 96 countries had enacted
demand and supply is forecast by 2030.5 This patterns (droughts and heavy rainfall events) in renewable energy targets, 60 had bio-energy
gap will be worse for those developing mandates and at least 30 were developing
many parts of the world.
countries (particularly in the Middle East and some form of low-carbon growth path.14 The
Asia) that are already using freshwater supplies For example, in 2011, unprecedented floods in goal of these national strategies – which
on an unsustainable basis. Building traditional Thailand have cost the economy US$ 45 billion include policies on renewable energy, energy
infrastructure to augment the water supply is according to the World Bank,9 with disruptions efficiency, transport and agriculture, as well as
not an environmentally or economically to many global supply chains. China has market-based carbon tax and trade
sustainable answer. The same is true in the experienced its worst drought in 60 years, with mechanisms – is to direct significant
agricultural sector, where following BAU over 4 million farmers facing severe water investment flows into resource-efficient,
investment in traditional practices to meet the shortages. Recent floods in the Philippines job-creating growth.
expected doubling of demand for production have claimed at least 1,500 lives, with
by 2030 could increase land under cultivation corresponding negative impacts to The move among many developing countries
from 1.5 trillion hectares to 3.2 trillion hectares, infrastructure and land. And, in 2010, 17 million to green their infrastructure investment and
leading to large-scale deforestation in many people were affected by floods in Pakistan,10 their growth strategies in general has important
developing countries, with resulting negative making it the country’s most expensive natural economic implications. Bloomberg New
land, water and climate change impacts. disaster, while an autumn drought in the Energy Finance estimates that, in 2011, global
Amazon brought river flow to its lowest level investment in new renewable power plants
since 1902 in some parts.11 This is by no means (US$ 187 billion) surpassed that of power
a comprehensive list of recent weather impacts plants fuelled by natural gas, oil and coal (US$
on emerging economies, but the trend is 157 billion) for the first time. 2011 was also the
leading insurance companies to assess the first year when expenditure on renewable
implications of providing financial protection energy in developing countries, driven by
against extreme events in the longer run.12 China, exceeded that of the industrialized
world.15
And it is a wider trend than energy Three themes are emerging as developing Given the scale of the investment challenge,
infrastructure alone. A move towards greening economies increasingly move towards greening current fiscal constraints in many historically
plans for sustainable economic growth has their infrastructure and economic growth plans: richer countries (and the need to focus the
emerged throughout the World Economic Green Climate Fund on the poorest and most
1. Despite progress during the COP17 talks in
Forum’s partnership programmes with climate-affected countries), there is a strong
Durban, the world is not waiting for a new
developing countries, including the New political and economic case for more strategic
climate accord. Developing countries are
Energy Architecture, New Vision for Agriculture, use of complementary public investments to
taking unilateral national action to green their
Sustainable Transport Ecosystem and Water lower investment risks, thereby unlocking a
development plans in a substantive way.
Resources Group. At the recent United Nations step change in additional flows of private
Examples include the South African
Climate Change Conference (COP17) in finance into green infrastructure in developing
Renewables Initiative, India’s National Solar
Durban, the Government of South Africa countries.
Mission and the Southern Agricultural Growth
partnered with the Forum to host the Durban
Corridor of Tanzania. Supporting this action The Green Growth Partnerships Initiative:
Growth Series – a set of public-private
are several pluri-lateral partnerships (such as Addressing the Sustainable Infrastructure
discussions focused on practical examples of
the C-40 cities network, REDD+ Partnerships, Investment Challenge
how developing countries can green their
the Water Resources Group and the New
energy, water and agricultural growth plans. The combination of these three trends – the
Vision for Agriculture), as well as enabling
Over 100 officials, ministers and business emerging momentum in bottom-up national,
institutions and platforms, including the Global
sector representatives engaged in these pluri-lateral and sector-based strategies to help
Green Growth Institute and related Global
discussions, including President Zuma and green emerging economy development plans;
Green Growth Forum. Two years after the UN
several members of his cabinet. the increasing role of substantive public-private
climate meeting in Copenhagen failed to
deliver a “top-down” deal, a critical mass of collaboration to achieve scale and speed; and
national activity, networks and case studies the recognition of the need to trigger a step
providing momentum for “bottom-up” change in private investment flows into these
initiatives is arguably emerging. investments – creates the core green growth
agenda for the World Economic Forum to
2. Substantive public-private partnerships are
address in the coming 12 months. The Forum’s
becoming a central tenet of delivering
Green Growth Partnerships Initiative aims to
successful green infrastructure programmes
address these challenges by finding practical
and projects. Domestic and international
ways to trigger private investment at the scale
companies with technology, project
that developing countries will need to green
implementation and strategic analytical skills
their sustainable development strategies and
are working more closely than ever before
infrastructure programmes in the coming
with governments and the international
decade.
community to provide analysis, plans and
proposals for programme and project This is based on a strong body of work that has
implementation and, increasingly, project emerged over recent years, including World
execution. “Lighthouse” public-private Economic Forum reports such as the 2008
projects such as the solar energy Desertec Financing for Development Report; the 2009
Foundation in North Africa and the G20 Low Carbon Prosperity Task Force; and
partnership between Ericsson and the the 2010 Critical Mass Initiative on Climate
Brazilian city of Curitiba to deliver improved Finance as well as recent work on Climate
public transport management are good Finance for the French G20 and the 2010
examples. At COP17, with support from the
We must form strong Gates Foundation, the UNFCCC for the first
Advisory Group on Climate Finance for the UN
Secretary-General.
partnerships between time recognized the importance of these
public-private partnerships as a necessary,
business and government complementary and supportive activity to the
Recent public-private initiatives such as the UK
government’s Capital Markets Climate Initiative
to lead the transition to a multilateral negotiations through its (bringing together government and IFI officials
Momentum for Change Initiative.16
greener economy ... the and private finance expertise to help
developing countries create bankable climate
3. The rapid scaling of private investment into
World Economic Forum is green infrastructure project and programme investment strategies) and the International
helping us to do this. activities in developing countries is crucial. Development Finance Club (bringing together
19 national, regional and international DFIs to
With the large scale of investment required
within the next two decades, public funds develop “smart partnerships” for climate
alone will not suffice and may not be the most investment strategies) offer further
economically efficient (or politically attractive) opportunities for practical partnership to
Jacob G. Zuma option available to policy-makers to finance develop such mechanisms.
President of South Africa, speaking at the green infrastructure projects in most
Durban Growth Series during COP17, developing countries. An increasing body of
December 2011 evidence suggests an alternative approach –
the use of limited but well-targeted public
funds and overseas development assistance
to catalyse, rather than fully finance, the
transition to green infrastructure in developing
countries.
The key to creating practical outcomes is to This report features detailed descriptions of the The World Economic Forum welcomes the
convene specialists from the financial services, Green Growth Partnerships Initiative’s work on invitation by the Government of Mexico in its
investor, energy, transport, agriculture and India’s National Solar Mission and in other capacity as Chair of the G20 for 2012 to link its
information technology sectors with developing countries that are in the pipeline for 2012. With public-private work on green growth
government officials and developed country several countries developing Nationally investment to the G20 Chair’s green growth
(e.g. UK CMCI) and donor (e.g. IDFC) initiatives Appropriate Mitigation Actions (NAMAs) under theme. Specifically, the Government of Mexico
in a combined effort to identify how to leverage the UN climate change process, there is a clear has asked for evidence-based examples of
more private finance into low-carbon opportunity to bring in the private sector in a next-generation national, sector or regionally-
investments in emerging economies. more substantive way to co-design investment- based public-private finance mechanisms that
ready plans. The text box on page 20-21 looks would trigger a step change in private
This is a role that the World Economic Forum at such an opportunity related to the investment in green growth strategies and
plays for the international community in its development of Kenya’s clean energy plan. green infrastructure in developing countries.
multi-industry, public-private Green Growth Water and agriculture are also promising areas
Partnerships Initiative. During 2012, the initiative for green infrastructure development that A session at the World Economic Forum
will bring industry, finance and investment deliver critical climate adaptation benefits. Annual Meeting 2012 will discuss this work, its
specialists together to work with developing Pages 22-29 outline a new national public- relevance to the green growth agenda and the
country officials, developed country officials, private partnership on water that South Africa work programme for 2012. In response, the
government and development initiatives such is developing with leading companies, as part Forum will form a Green Growth G20 working
as the CMCI and the IDFC, organizations such of the Forum/IFC Water Resources Group. group to develop a blueprint for green
as the Global Green Growth Institute and the Once the plan is developed, the partnership infrastructure finance for the G20 Development
Global Green Growth Forum and other will need to design an innovative investment Working Group, including proposals for a suite
networks and platforms to develop several strategy to attract finance. of catalytic public-private investment
“investor-ready” green growth strategies and mechanisms for financing green infrastructure
associated financing mechanisms. In a similar vein, farmers across sub-Saharan in developing countries using limited public
Africa are increasingly feeling the impact of funds.
The Green Growth Partnerships Initiative uses climate change and population growth on
a three-part process involving: agricultural productivity. There is potential for In combination with the Green Growth
governments, farmers, international Partnerships Initiative, Forum gatherings in
1. In-country analysis and stakeholder
organizations and the private sector to Mexico, Ethiopia, Thailand and Turkey during
engagement to verify the investment climate,
co-shape solutions that map out an investment the spring of 2012 will be used to develop these
availability of finance, policy landscape and
blueprint for climate-smart agriculture. Pages inputs. Events after the G20 Summit in June,
growth potential
30-38 highlight the Southern Agricultural such as Rio+20, the Forum’s Annual Meeting of
2. Design of new financial, insurance and policy the New Champions in China in September,
Growth Corridor of Tanzania, which exemplifies
tools that address the high cost of finance the Global Green Growth Forum in October,
an innovative public-private partnership that is
and policy risk the India Economic Summit in November and
delivering sustainable agricultural growth in
3. Engagement of the host country government Tanzania, related to the Forum’s New Vision for COP18 in Qatar in December will also provide
and donor governments to target funds and Agriculture Initiative. The next key stage will be opportunities to discuss the implementation of
policies and develop tailored mechanisms to to help create the investment mechanisms that these ideas.
de-risk investments, including renewable can turn the blueprint into action.
energy resources like solar, wind, geothermal By the World Economic Forum Annual Meeting
and bio-energy; energy efficiency through Leveraging National Leadership to Achieve 2013, it is anticipated that a series of case
building retrofits and other opportunities; Impact in Investment through the World studies of “investment grade” green growth
cleaner, more efficient urban transport Economic Forum strategies in developing countries will be
systems; and green growth agricultural available and the work for the G20 will have
The Green Growth Partnerships Initiative’s generated new ideas for the kinds of public-
corridors
approach is to bring together governments, the private financing mechanisms that these
The work has already generated some early private sector and other key constituencies to strategies will require, building on the work to
tangible successes. For example, as a result of develop practical investment blueprints and date in India and other countries.
discussions among public and private sector mechanisms to catalyse investment into green
representatives convened by the World sustainable development strategies. As the During 2012, the Forum will drive forward
Economic Forum to address scaling up initiative gains traction during 2012, it is linkages between the Green Growth
investment in India’s National Solar Mission, expected that these experiences will also Partnerships Initiative and other key industry
the Asian Development Bank (ADB) launched a inform the international community. This will initiatives – such as the New Energy
US$ 150 million Partial Credit Guarantee help generate new ideas on constructing an Architecture, New Vision for Agriculture, Water
mechanism to mitigate legal, political, outcome-focused public-private architecture Resources Group and Sustainable Transport
commercial and technical risks encountered by for the new Climate Change Accord by 2015. Ecosystem projects and the green
solar project developers. Several projects infrastructure investment/public-private
representing over 600 megawatts (MW) of new agenda of both the G20 and UNFCCC – to
solar capacity are now in the due diligence develop its case study set of investment
stage, and seeking to benefit from this new strategies and public-private finance
facility. The UK government has provided an mechanisms. We extend an open invitation to
additional £6 million to support the extension of join the Green Growth Partnerships network to
the Partial Credit Guarantee, and estimates all industry Partners, interested governments
that these public monies will catalyse £265 and other stakeholder organizations.
million in additional private sector finance for
solar projects in India.
Executive Summary
India’s energy and environmental challenges create an imperative Progress has been made in deploying innovative financing
to scale up renewables structures
• India’s energy supply is dominated by coal (42%), oil (27%) and • As India’s solar sector scales up, additional private finance is
biomass (26%) with non-hydro renewables accounting for 0.2%; needed to reduce the pressure on state lenders and the donor
based on this path, the IEA expects carbon emissions to rise 132% community
by 2030
• Historically, private investment in the sector has been limited by
• To meet forecast energy demand by 2030, India will have to concerns and perceptions of technology, regulatory and market
expand energy production by 400 GW risks and a high cost of financing
• India must also increase energy access for 364 million citizens • To help unlock private finance, innovative partnerships have
without electricity created financing models that use public funds to mitigate risks and
attract private investment
• The challenge facing India is how to meet demand in a clean,
cost-effective and accessible way • The Asian Development Bank’s Partial Credit Guarantee and the
US Overseas Private Investment Corporation’s solar insurance
• Bold steps have already been taken, with a target to achieve a products are creating momentum in the market
cumulative, grid-connected renewable energy capacity of 74 GW
by 2022; India has the fifth largest wind power sector in the world
(11.8 GW); costs are approaching parity with coal Public-private partnerships can move the agenda forward
• To accelerate delivery of its renewable targets, India needs to draw • To accelerate solar investment, the World Economic Forum is
on its significant solar resource potential and apitalize on the identifying financial innovations with the potential to catalyse private
advantages of modular solar technologies to deliver rural power sector investment in Indian solar by targeting public monies
Context
India’s Focus on Solar Power Has Been Driven by Three Primary Considerations
Energy Security: To maintain existing growth rates,17 India faces a significant energy supply
challenge. According to the Indian government’s Planning Commission, by 2030, India’s primary
energy supply will need to increase four to five times (5.8% per annum) and its electricity
generation capacity by six to seven times 2004 levels.
India’s energy mix (see Figure 1) is dominated by coal (42%)18, oil (27%) and biomass (26%), with
renewable energy providing 0.2% of total energy.19 India lacks sufficient domestic supplies and
imports as much as 25% of its total energy needs.20 Without further action, India’s import
dependency is set to increase dramatically (see Figure 2). Developing renewable energy provides
a key strategy to reduce the country’s energy dependence and redirect foreign exchange
outflows. The expansion of solar power has, in itself, the capacity to replace up to 30% of
imported coal by 2022.21
42,1%
% Share 27,3%
5,7% 26,3%
1,6% 0,2% 0,6% 0,1% 0,0%
-4,0%
India’s total energy import dependence 2008 -2030 India’s energy import dependence by fuel type in 2030 under low
and high estimates (as % and total forecasted consumption in Mtoe)
2008 2030
9% 6% 20%
34%
43% 43%
25% 66% 57% 57%
91% 94% 80%
42%
58% 736
75% 520
362
300
135
25
Climate Change: The government aims to Long-term Economic Competitiveness: India A Cohesive Regulatory Framework Has
deliver a robust response to the challenge of needs to sustain growth at 9% over the next 20 Been Delivered at the National and State
climate change while simultaneously years to eradicate poverty and meet its human Levels
maintaining growth and raising living development goals. Meeting the energy
standards.22 In this context, the government requirements of its citizens in a sustainable National Initiatives – The National Solar
has announced its intention to decouple manner presents a major challenge. In a Mission: The National Solar Mission (NSM) was
emissions from growth and reduce the country where as much as 45% of rural launched in November 2009. The NSM is one
emissions intensity of its GDP 20-25% by communities lack access to electricity, of eight missions laid out in India’s National
2020.23 Expanding the national renewables expansion in distributed solar power is a Action Plan on Climate Change (NAPCC). It
base is a key strategy to reduce emissions growth imperative. The development of a aims to incentivize the installation of 22,000
intensity. India has already had tremendous domestic solar industry could also act as a MW of solar power by 2022. The NSM will be
success in developing domestic wind powerful spur to endogenous industrial growth rolled out in three phases (see Figure 3).
resources: with 13.2 gigawatts (GW) of installed and underpin industrial energy security.25
capacity,24 it is the world’s fifth largest wind Phase one (2010-2013) focuses on establishing
market and continues to demonstrate rapid The solar value chain in India presents a an enabling environment and capturing
growth. potential US$ 110 billion market in the next low-hanging options in solar thermal,
decade.26 In addition, the expansion of solar promoting off-grid systems to serve
Solar also has a vital role to play at the utility power has the potential to create a significant populations without access to commercial
scale and to meet rural power needs, with the number of new jobs in India, up to 1 million in energy, and modest capacity addition in
potential to replace widespread reliance on the period 2017-2022.27 This is in addition to grid-based systems. Following this learning
kerosene and diesel power generation. The the economic benefits of increased rural phase, capacity is expected to be aggressively
expansion of solar power could offset as much electrification and reduced health impacts scaled up in phases two and three (2013-2017).
as 7% of emissions from India’s electricity associated with burning fossil fuels.
sector and contribute more than 10% of India’s
voluntary emissions reduction target.
One of the eight National Missions laid out in India’s National Under the NSM a high level target and phased set of targets per
Action Plan on Climate Change (NAPCC) technology has been set under three phases:
• Phase I: 2010-13
• Phase II: 2013-17
• Phase III: 2013-17
4,000
1,000 2,000 0
2: Enhanced Energy Efficiency
4: Water 1,000
200
5: Sustaining the Himalayan Ecosystem
Phase 1 Phase 2 Phase 3
15
7: Sustainable Agriculture
7
* Includes both targets for PV and CSP technologies , MNRE Mission Document, 2010 Low est. High est. MW M sqm
It is envisaged that, as a result of the NSM, solar power costs will come To implement these policies, India has created a robust institutional
down significantly and ultimately deliver power at grid parity with coal. structure (see Figure 4). Regulatory and policy interventions – both
These expected cost decreases will allow the government to reduce before and after the National Solar Mission – have provided a conducive
preferential tariffs while the share of solar power in the energy mix environment for developing solar power. The transformation of the Indian
continues to increase. energy sector under the 2003 Electricity Act created a key driver via
obligations for utilities to purchase renewables.
To support this goal, a series of important regulatory structures have
been introduced, including: Further, the creation of the Ministry for New and Renewable Energy
(MNRE) in 2006 provided resources and centralized responsibility for
• An incentive structure that aims to provide attractive feed-in tariffs defining and rolling out the government’s strategy for deploying solar.
(FITs) while using a reverse auction process designed to enable MNRE’s ownership of the renewable agenda, its effective links to the
price discovery and drive down the total cost of the FITs Planning Commission and the supportive relationships that have been
cultivated with other ministries have allowed MNRE to operate
• A single-window application process for developers bidding for
effectively.
access to FITs
To assist in delivering its strategy, MNRE can draw on the resources of
The national government has also introduced Renewable Purchase
the Indian Renewable Energy Development Agency28 and the new Solar
Obligations (RPO) that require states to generate a portion of their Corporation of India, two institutions tasked with helping to support the
energy from solar. The introduction of a FIT at the national level and sector’s development.
within certain states has also served to provide an accompanying
incentive for solar power generation. To complement this framework,
since March 2011, the Indian government has introduced a tradable
market in solar power generation credits to provide a cross-state market
mechanism to allow renewable energy generation obligations to be met.
State-level Initiatives Are Delivering Rajasthan: Under plans laid out in Rajasthan’s Strong Results Have Been Delivered under
Significant Results 2011 Solar Energy Policy, Rajasthan has the National Solar Mission and State Level
announced its intention to deliver 200 MW Initiatives
A number of states have developed their own under the NSM by 2013 and deliver an
policies for encouraging solar power additional 10-20 GW by 2022. This is in parallel Under the first phase of the NSM (2010-2013) a
development, over and above the NSM. The to its intention to establish the region as a hub tariff for 1,000 MW of solar power projects has
states of Gujarat and Rajasthan have now for manufacturing of photovoltaic modules. been made available and will be allocated in
become major hubs for solar development in Like Gujarat, Rajasthan sees solar parks as a two batches. Under the scheme, a 50:50 split
India. major channel through which to scale solar between solar photovoltaic and solar thermal
investment. 1,000 MW of solar capacity has power projects has been mandated.
Gujarat: With high irradiation rates and
been identified at specific sites and the state
significant land availability, Gujarat is an Batch one ran from 2010 to September 2011.
plans to deliver multiple plants over the next 10
obvious location for solar power generation. In In September 2011, MNRE issued its progress
years totalling 3-5 GW of generation capacity.31
2009, Gujarat became the first Indian state to report showing that 500 MW of solar thermal
launch a solar policy. Gujarat has maintained In September 2011, the state government and 150 MW of PV projects were successfully
its position as a frontrunner by issuing a released the master plan for a solar park in the bid for (see Figure 5). As a result, batch two will
generous 25-year fixed tariff.29 It also Jodhpur district covering 10,500 hectares. require bidding for the remaining 350 MW of
differentiates itself from the NSM through Rajasthan has plans to develop a second solar solar photovoltaic projects.
operating a closed bidding process.30 park in the Jaisalmer district covering 16,000
hectares. Combined, these two sites will State policies are forecast to have built a
In addition, Gujarat has placed a requirement pipeline of over 1 GW of solar power projects,
eventually accommodate up to 10 GW of solar
on power generators to source an increasing with the majority expected to be operational by
generation capacity.32
proportion of their energy from renewables 2013.33 This growth, if delivered, will provide
with solar expected to account for 0.5% in evidence that states can be strong drivers in
2011-2012 and 1% in 2012-2013. Gujarat has encouraging solar development.
also recently announced a commitment to
directing a high proportion of state support
through solar parks, and plans to establish
Asia’s largest solar park at 500 MW installed
capacity.
1,000
650MW of projects have already been allocated under NSM Phase 1
350 • Under the first phase of the NSM 1,000 MW has been allocated with a
500 50:50 split between solar photovoltaic and solar thermal power
650
Remaining
• Projects in phase one are allocated in two Batches
150 allocation
in Batch 2 • The entire 500 MW of solar thermal projects was successfully bid for
under Batch I of phase I of the Mission
Building on Success: Leveraging Private Sector Financing through Regulatory Change, Feed-in Tariffs
Financial Innovation
At the most basic level, a feed-in tariff (FIT)
The Indian government has delivered on its early goal of creating a sizeable domestic solar pays renewable energy producers a set rate
industry by 2012. However, due to the limited public funds available to subsidize solar power, (tariff) for each unit of electricity fed into the
private sector finance will become an increasingly important element in delivering a sustainable grid.
national solar industry. 34 Reverse Auction Feed-in Tariffs
The first phase of the NSM alone requires an estimated investment of US$ 3-4 billion and the total A reverse auction inverts the normal buyer-
investment needed until 2022 ranges between US$ 20 billion and US$ 38 billion.35 seller relationship. Renewable providers (solar
power producers) have to compete to provide
Given the scale of capital needed, it is unlikely that state institutions will be able to raise sufficient a service to utilities – with a minimum price for
funds. Similarly, the availability of on-balance sheet finance from developers is limited, suggesting that service assured under the FIT.
that private debt finance is needed to continue growth in the solar market. The limited history of
non-recourse debt financing in India, the novel nature of solar technologies and the inclusion of Under a reverse auction solar project,
renewables within existing power sector investment limits are all factors that could act to limit developers submit bids for the tariff they wish
investor participation. to access, with the knowledge that the
regulator will choose the lowest bidders. This
The central challenge now facing the government is how to create a policy landscape that competitive process keeps costs down and
encourages the private sector to transact while not creating unsustainable public incentives. In theoretically provides effective price discovery
this context, the World Economic Forum – through its involvement in CMCI and in close by ensuring that bidders submit requests at the
collaboration with the Asian Development Bank and Clinton Climate Initiative – convened level required to make them commercially
domestic and international financiers and project developers through a series of workshops in viable but not at a level that would deliver
2011. excessive profits.
The workshops identified a set of financial and market challenges (see Figure 6) facing the investor
community. In addition, CMCI has identified a range of potential policy and regulatory suggestions
for the Government of India to consider (see Figure 7).
Power purchase agreements (PPAs) provide a guaranteed revenue stream for project operators
who are able to produce solar power. This gives lenders the confidence they need to provide debt
finance. However, in their current form, Indian solar PPAs are viewed as suboptimal and lender
confidence in this guarantee is limited. This can be attributed to uncertainly over responsibility for
ensuring grid access and the assignability of PPAs. Finally, the financial health of the guaranteeing
state distribution companies (the designated buyers of solar power) is in question, creating
additional risk for lenders.
Financial
• Project economics and debt capacity
• Availability of financing instruments
• Lack of non-recourse financing
• Sector limits and bank market appetite
Policy
• PPA issues (tariff changes)
• Project size and pipeline, timelines
• Policing of RPO obligations
• Viability of Renewable Energy Certificates
Market
• EPC1 availability
• Land and water access
• Evacuation infrastructure
• Experience with technology
Related to the issue of confidence in state utilities are concerns over the willingness of the
government to enforce compliance with renewable purchase obligations: A number of
stakeholders suggested that a clear commitment to RPO enforcement will provide greater
investor confidence and support the emerging market for renewable energy certificates.
Project size and transparency: The first wave of solar projects allocated in India under the NSM
(between 5-10 MW per developer) is viewed by some investors as of insufficient project size to
justify transaction costs. This has already been recognized as an issue by MNRE, which has
expanded the total capacity allowed per developer under Batch two of the National Solar Mission
to 50 MW. This is encouraging and should go some way to allowing investors to build a pipeline of
projects, lower transaction costs and access financing.
Investors also frequently cited the cost of financing solar power projects, which can be highly
sensitive to the cost of debt as a substantive issue. India’s base interest rates – nearly 13% – make
the domestic cost of borrowing high and can put significant pressure on financing solar project
deals. Despite an established tariff under the NSM and state level initiatives, the gap between
financing costs and the established tariff may be narrower than in other solar power producing
geographies.
Policy Recommendations
1. Introduce pre-qualification for bidders • Ensure viable bidders with long-term
interest in solar involved in bidding process
2. Strengthen the bid bond to penalise
non-compliance • Ensuring higher quality developers
3. Extending time for projects to achieve • Enabling higher quality project due diligence
financial closure • Improving market intelligence, to reduce
4. Re-affirm government’s commitment to investor risk perception
dynamic NSM review process • Direct money to solar sector
5. Allocating money from the coal cess
Typically, investors can turn to financing instruments like insurance or loan guarantees to help
improve the financing terms on projects. However, in India, stakeholders have cited the limited
availability of appropriate financing instruments as a challenge. The solar industry in India is young
and the perception of regulatory and technology risks mean that the deployment of targeted
financial products will be required to provide sufficient comfort to financiers.
However, unlike European and US markets – where project financing models are well established
– the Indian financial sector has limited experience with limited or non-recourse project financing.
As a result, institutional capacity to structure non-recourse deals is limited, with solar project
developers often relying on their ability to finance projects on their own balance sheets.
Addressing Finance Challenges through Public-private Innovation Private finance leveraged through
reduction in the cost of the ADB’s Partial
The financial challenges outlined above are well known to investors. In addition to pursuing the Credit Guarantee
suggested regulatory fixes, the next step is to create effective financing vehicles to mitigate these
risks. In this context, building on the work of previous multistakeholder initiatives,36 the UK • The injection of £6m by the UK
government’s Capital Markets Climate Initiative was established to bring together international Government will reduce the fee rate for
and domestic Indian financiers along with policy-makers, donors, developers/operators and solar the ADB partial credit guarantee (PCG)
sector experts.
• This will encourage commercial lenders to
In collaboration with CMCI members, the World Economic Forum is coordinating the design utilise the guarantee, leveraging an
process. The initiative, throughout 2011, aimed to provide a further push to development of the estimated £265m in additional private
solar industry in India by bringing together transactional expertise from the international capital sector finance for solar projects in India*
markets with domestic industry experts and policy-makers to create stronger deal flow. £265m
This approach has already shown results. Earlier stakeholder discussions at the India Economic
Summit37 recommended that the ADB launch a partial credit guarantee (PCG) to provide cover
against legal, political, commercial and technical risks encountered by solar project developers.
+4,317%
The ADB has now successfully launched a US$ 150 million PCG facility, which covers 50% of the
payment default risk on bank loans made to solar project developers, replacing half of a project’s
risk (estimated at B-BB equivalent) with ADB’s AAA credit risk.
£6m
This enables extension of loan tenors to over 15 years and allows ADB to leverage financial
support for projects that are too small for typical commercial project financing. The facility is
available to local and foreign commercial banks that are looking to finance private sector solar
PCG Expansion
power plants in India. The ADB is conducting due diligence on three local banks, which are
expected to become partner banks under the programme and to extend credit to solar
developers/operators. UK investment (£m)
Estimated private sector leverage (£m)
A number of projects are now in the due diligence stage and are seeking to benefit from the PCG
representing in excess of 600 MW. The UK government has also provided additional funding to * DECC provided data December, 2011
support the extension of the PCG, catalysing an estimated £265 million in private sector
investment. Supporting these developments, the US Overseas Private Investment Corporation
(OPIC) has developed an innovative political risk insurance policy that covers up to US$ 250
million; this policy has already been used to support solar projects.38
The World Economic Forum has identified several additional solutions that could be pursued to
unlock greater private sector investment in the solar sector (see Figure 8). These solutions are
outlined below; proposals are under development with an expected launch in 2012. It is hoped
that, with the sustained support of the Government of India, these actions can be delivered to
unblock financing bottlenecks and support the further scaling of solar in India.
Figure 8: Overview of Solutions under Consideration by the Forum-led Working Group of the
Capital Markets Climate Initiative
Designing a PPA breach of contract insurance Secures a reliable revenue stream to borrow
1 instrument against
Detailed design and launch of a Solar Park Provides a channel to access international
3 Financing Vehicle (SPFV) debt markets through bond issuance
Catalyse the emergence of a Credit Default Supports the evolution of the bond market and
6 Swap market to serve the solar market increases capital for solar projects
Each of these potential solutions is being detailed by the network of CMCI banks, experts and DFI
specialists to:
1. Understand the benefits: Pinpoint issues in the market that create a need for novel financial
solutions, understanding what a potential solution would require in public funding and what it
would deliver in leveraging private capital
2. Assess what is needed to deliver the solution: Design the solution in more detail with the
perspectives of multiple industry and government stakeholders
3. Define a roadmap for implementation: Understand the actions that are needed to take these
solutions forward between December 2011 and June 2012
Solution 1: Designing a Solar PPA Breach Solution 3: Detailed Design and Launch of Solution 4: Expanding the Asian
of Contract Insurance Instrument a Solar Park Financing Vehicle Development Bank’s Partial Credit
Guarantee Facility
Concerns over the long-term viability of Multi-developer utility-scale41 solar parks could
national and state solar power tariffs are a deliver transformative change in India’s solar The ADB has created a Partial Credit
challenge for international investors assessing sector. Both Gujarat and Rajasthan States Guarantee (PCG) facility, which covers 50% of
the Indian solar market. The availability of an have made solar parks a priority for delivering the payment default risk on bank loans made
appropriately priced insurance product to their solar goals. Creating a solar park to solar project developers. This facility is now
“backstop” the PPA would eliminate a major financing vehicle (SPFV) could allow parks to operational and is lending to projects in India
barrier to international investment and financing channel new sources of capital and issue through domestic and international banks. In
from equity investors and lenders. The Forum bonds. An SPFV would act as a debt 2011, the UK government provided additional
is bringing together international lenders and aggregator for a series of individual projects. funding for the facility; other donor funding
political risk insurance providers to design a This entity could issue solar bonds and raise could expand the PCG, allowing for a greater
commercially attractive and viable insurance funds from the domestic and international debt number of lenders to extend financing to solar
instrument with the goal of underwriting all or markets at lower costs than are available today. projects.
part of the risks associated with entering into a
solar power PPA. Reducing the cost of capital through a viable CMCI is exploring options for supporting the
and Indian AAA rated SPFV would reduce the ADB to extend its model PCG in the market.
The intention is to take this structure to cost of capital and drive down the cost of This would allow for a greater quantity of
international development agencies to electricity. With targeted quantities of private sector investment to be “crowded in” to
consider for funding and identify an international development seed funding, a the solar sector using a tested structure. In
appropriate private institution to maintain and viable SPFV could access new pools of addition, allowing private financial institutions to
offer the product book. With PPA risk institutional capital. A detailed design of the on-lend will support the emerging non-
mitigated, a larger quantity of international structure of the SPFV is required, as is recourse financing industry in India.
investors and lenders would deploy capital to cooperation with development agencies to
solar projects in India. A mechanism to credit-enhance the structure so it could
significantly reduce the cost of political risk achieve a sufficient credit rating to issue bonds. Solution 5: Supporting the Emergence of
insurance would ensure that international an Indian Market for Renewable Energy
capital is priced competitively, helping lower The Clinton Climate Initiative has worked with
Certificates
the tariffs required to make these projects the Indian rating agency CRISIL to develop a
economically viable in the longer term. model that allows solar parks to access debt Renewable energy certificates (RECs) are
markets by issuing bonds through an SPFV. granted to producers per unit of clean energy
Through CMCI, further development and that they contribute to the grid. These RECs
testing of this model can take place with a can be traded on exchanges, with producers
Solution 2: Making Long-term Foreign
range of investors and donors to develop the selling to buyers to allow for compliance with
Exchange Hedging Available at an
concept and enhance its market viability. This RPOs. The RECs market in India is nascent,
Affordable Cost for Solar Projects
work will include establishing the gap between but its potential as a market mechanism to
Exposure to foreign exchange fluctuations can the SPFV rating (Indian BBB to AAA) and incentivize investment in the solar energy
act as a disincentive for foreign investment in institutional investor requirements; identifying sector could be significant. To support this
solar power projects.39 While markets exist to credit enhancement tools to bridge this gap; emerging market, CMCI is exploring how the
hedge medium-term FX risk, rates are and outlining the steps needed to launch the creation of an REC floor price or collar
prohibitively expensive and the swap market is concept, including engaging donors to fund an mechanism could be used to lock in a
not sufficiently long-dated.40 Developing a SPFV. minimum price for solar power production –
mechanism to hedge against long-term FX risk providing certainty and consistency in solar
at scale would allow greater international power prices and RPO enforcement for
capital flow into the solar sector. investors.
In 2011, the Reserve Bank of India issued rules The Indian government has expressed an
for a new credit default swap (CDS) market. A interest in creating a solar guarantee fund. This
CDS is an insurance contract that protects the could be used to provide comfort for lenders
buyer of an instrument (bond, corporate debt, against a potential default by state utilities on
etc.) against the risk of a default. A CDS market their existing RPO obligations or by helping to
would allow investors to hedge the risk of underwrite a floor price for REC contracts. As
investing in solar power and support a liquid further details emerge (see Figure 9), CMCI will
domestic bond market. To help nurture this share the perspective of international lenders
market, CMCI is undertaking three tasks: with the Government of India as it designs the
fund. An initial work plan has been defined for
1. Defining a contractual structure for a CDS
the next six months, at which point it is hoped
that would apply to the Indian solar
that solutions will be viable in the market.
market
2. Identifying an appropriate corporate entity
to act as a market-maker in writing a CDS
contract
3. Supporting the convening of potential
buyers to test the transaction
A functioning CDS market would unlock a
significant quantum of debt capital for
infrastructure investment (including solar). It
would also allow market-makers to provide credit
protection for entities (like mutual funds) that
could, in turn, help infrastructure companies that
want to raise money through bonds.
Figure 9: Timeline for the CMCI Working Group to Explore Potential Solutions
Key Activities NOV DEC JAN FEB MAR APR MAY JUN
Design solutions
Define ‘ideal’ structure of priority financial instruments/
vehicle Requiring pro bono support from
financial institutions/CMCI members
Determine what can be delivered under commercial
terms
Supported by CMCI
members
Explore different scenario’s for degree of donor support
Quantify benefits
Deliver directional estimate of benefits under priority Requiring seed
scenarios (donor £ spent vs. private £ leveraged) funding from donors
Conclusion
The potential for solar power in India is significant, in both utility-scale and rural, distributed
applications. The challenge to scaling up solar is not technological, but one of delivering a
supportive policy and investment environment in which sufficient financing can be found to propel
the sector’s growth towards its 20 GW target by 2022.
The Indian government has delivered a clear strategy for deploying solar power through the
National Solar Mission and created a supportive regulatory structure. The early stages of the NSM
have been positive and phase one (2010-2013) is expected to meet the 1 GW target. The next
step is to accelerate the pace of deployment by attracting private financing to make the industry
self-sustaining and drive towards delivering power at actual grid parity.
To increase the flow of private finance, innovative public-private partnerships are already
mitigating investor risks. The World Economic Forum and CMCI have identified practical solutions
that can trigger scale transformation in solar financing in India. Building on the early results
facilitated through interaction with ADB and the UK government, this work illustrates the potential
of bringing together expertise from banks, institutional investors, governments and development
finance institutions to co-design instruments to unlock finance at scale.
These efforts have already been recognized by the UNFCCC’s Momentum for Change Initiative
as representative of the positive progress that can be delivered to address climate change
through bottom-up initiatives rooted in national green growth imperatives.
In early 2012, work will continue on the seven solutions identified by this work – with the ambition
of launching financial innovations in 2012. Further, the initiative will seek to extend its geographical
reach by testing its collaborative partnership model in other regional markets including Africa (see
text box) and Latin America. Engagement in India will also deepen in 2012 through convening
stakeholders to support the growth of the distributed solar sector through business model
innovation.
To respond to these growing energy needs, reach its action plan goals and, at the same time,
implement its climate change strategy, Kenya will need significant investment. Overall, the
National Climate Change Response Strategy identifies total resource requirement of 236 billion
KES (US$ 2.4 billion) per year. Increasing power generation to exceed 21 GW will require up to
US$ 45 billion by 2030, including US$ 18 billion to develop 5 GW of geothermal power.49
While some of the items of the action plan may be less amenable to private investment in the
short run and would require dedicated public finance, most of the financing that would allow
Kenya to scale up clean power generation would have to come from private sources. However,
despite the country’s attractiveness as a gateway into the East African economic community,
many of the macroeconomic parameters and limited experience with clean technologies present
challenges to investors in deploying the required financing. There is a role for domestic and
international public finance to support the deployment of private financing through targeted
mechanisms that respond to some of the larger systemic obstacles. There is also a need for
improved enabling frameworks that allow the more widespread and scaled-up implementation of
its development, growth and climate change objectives.
To address this challenge, the Kenyan government is working with the UK government, the
Climate Development Knowledge Network and other donors to design and implement its Climate
Change Action Plan. Early in the process, the Government of Kenya highlighted the need to
identify appropriate sources of finance to invest in the action plan’s implementation. It is working
with these donors through the UK government’s Capital Markets Climate Initiative to develop a set
of investor-friendly Nationally Appropriate Mitigation Actions under the United Nations Framework
Convention on Climate Change. These will identify specific actions that can be scaled up and
financed to catalyse private investment.
Unlocking Private Low-carbon Financing for Kenya – A Collaborative Public-private Approach Taking the Work Forward
Kenya’s lower interest rates and the expansion of bank branches into rural areas have driven up To help address Kenya’s challenges in scaling
participation rates in the formal banking sector and increased the deposit base. The total assets up the financing required for closing its clean
under management in the banking system rose 23% by June 2010.50 Market capitalization energy gap, areas for further work include:53
increased by 58% and bond turnover for the year up to November 2010 rose 316% on 2009
levels. Kenya’s sovereign ratings, which were downgraded following the post-election violence in • Tailor new financing structures to
early 2008, were upgraded in late 2010 to positive B from stable B. underwrite PPA/tariff risk for utility-scale
clean power and develop other tools to
Infrastructure investment was a focal point under the government’s economic stimulus cover first-loss risk or ensure off-take of
programme and in the 2010-2011 budget with a highlight on transport networks – both roads and electricity: These products are offered by
ports – and energy supply. Significant funds were allocated to improving roads (US$ 922 million) institutions such as the Multilateral
and diversifying energy sources through the expansion of the electricity grid, and further Investment Guarantee Agency (MIGA), US
investments (US$ 399 million)51 were dedicated to geothermal energy. OPIC, the International Finance
Corporation and GuarantCo (on currency
Despite the relatively positive outlook, recent discussions with domestic and international risk), but need to be tailored to enable
business and investor participants in the clean energy market in Kenya52 identified two categories lower cost and broader lending to project
of challenges: financing and market maturity. Within these two categories, policy barriers were developers on a non-recourse basis.
described as implicit, in particular the need for the Government of Kenya to establish a more
robust “enabling environment”. • Perform equity matchmaking to bridge
the information gap: Explore the creation
Financing challenges include: of a platform to match early stage equity
investors, concessional finance providers
• Raising debt financing and early stage equity: More could be done to “match make” and export credit agencies with
between investors and recipients at this level and nurture Kenya’s vibrant SME community developers/operators that are looking for
• Availability of working capital for distributed renewable energy models: This is especially due funding.
to the extended import time horizons and the need to retain high stocking rates • Enable low-cost debt: Loan guarantees or
• Currency volatility: For those players who are unable to negate this risk through running credit lines for domestic banks (possibly
dollar-denominated operations or who do not have the ability to pass currency risk directly building into a rotating fund) would allow
onto the consumer local banks to extend financing for
distributed or large-scale projects. There
• Feed-in tariff/PPA risk for larger utility-scale renewable energy: There are varying views on is also merit in exploring carbon
the bankability of PPAs and the associated utility counterparty risk depending on the size of underwriting mechanisms to enable SME
the project or developer, and whether the developer or funder are domestic or international access to lower-cost, creditworthy debt
entities and equity streams.
• Availability of financial products to mitigate risk for grid-connected projects: For those able to • Investigate the prerequisites for the design
overcome the up-front costs, there is relative confidence in the availability of political risk of green/climate bonds: Bring together
insurance through multilateral institutions; however, high costs make this insurance difficult private investors and development banks
to obtain for smaller investors to examine local power market conditions
and discuss the potential for bond
• Uncertainty/inability of investors to build a reliable project pipeline: This creates challenges in
issuance, using green bond models that
raising additional equity capital and reducing individual transaction costs
have been used in other markets. The
Market challenges include: European Investment Bank, African
Development Bank and World Bank could
• Lack of renewable technology performance/time series data: This impacts on capital asset be involved in light of their experience with
pricing and impacts lenders’ willingness to extend financing at a viable premium green bonds, climate bonds and clean
• Infrastructure adequacy: For distributed renewable companies, the ability to deliver goods energy bonds.
and components in a timely manner impacts market uptake • Explore availability of early stage capital
• Product spoilage: Poor regulation of component quality and lack of trust in renewable for small and medium project developers:
technologies impacts technology uptake Investigate available structures such as
public-private funds, impact investment
• Skills gap: There are few reliable construction service providers with a track record; this limits funds, fund of funds and other
developers’ ability to subcontract out construction risk; there is also limited financial sector infrastructure funds that can address risk.
expertise in financing renewables projects on a limited/non-recourse basis The aim is to draw in large-scale equity
• Reliable and timely land availability and permitting: Land access issues and construction providers looking to gain exposure to
delays are barriers; solar/wind parks could be advanced as aggregators to ease land access renewable projects in Kenya by reducing
issues risk through carbon market instruments or
development finance. Potential examples
• Import taxes: The existing classification of renewable energy components within the broader include the African Carbon Asset
power sector categories exposes providers/operators to higher taxation Development facility, the Frontier Markets
Fund and the Seed Capital Assistance
Facility.
The South Africa
Water Partners
Network:
Regional Funds
for Adaptation
Executive Summary
• There is an increasing consensus that water resources are being −− Water-use efficiency and leakage reduction
affected by climate change through increased drought, water −− Improving water use efficiency in supply chains (in particular in
scarcity and floods; these impacts will have profound social, agriculture)
economic and political consequences with impacts on food, −− Effluent partnerships (e.g., wastewater treatment and reuse)
energy, trade, the environment and – potentially – international
relations, as water-scarce nations increasingly search for ways to • SWPN will replicate existing good practices and examples of
ensure their long-term growth and sustainability partnership projects
• Due to projected growth, South Africa’s potential water supply- • Findings from this process will provide input to a South Africa Water
demand deficit in 2030 might be as much as 2.7 billion m3, about Summit in 2012; this will help the country to design a strategy to
17% of the country’s overall demand. Factoring in potential take forward recommendations to transform its water sector and
impacts from climate change, analysis suggests a potential deficit position water as a catalyst for growth and development
of up to 3.8 billion m3.
Recommended Actions
Progress in Innovative Partnerships and Collaboration Models • Enhance the SWPN to become a cross-ministerial,
• South Africa is responding to its water challenges through an multistakeholder institutional commons
innovative partnership with the Water Resources Group, designed
to draw together the expertise, knowledge and experience of • Build capacity and experience across sectors
public and private actors to build a more resilient economy for
• Define South Africa’s water research and development agenda
growth and development
• Engage financing agencies and investors from the start to help
• Two areas have the most opportunity for strategic public-private
design investment-ready water infrastructure projects
collaboration and intervention: water conservation/demand
management and diversifying the water mix
Context
South Africa has defined an ambitious and transformative national growth strategy to achieve The Water Resources Group
economic prosperity and social development. Realizing the goals of this strategy, entitled the New
The Water Resources Group is a neutral
Growth Path, South Africa will realize 5 million jobs by 2020 and bring unemployment down to
platform for water collaboration. It mobilizes
15%. South Africa must, however, do so in the context of climate change, which is impacting one
stakeholders from the public and private
of the most critical resources to achieving these growth targets: water.
sector, civil society, centres of academic
There is an increasing consensus in the international expert community that water resources are expertise, bilateral development agencies and
being affected by climate change through increased drought, water scarcity and/or floods. multilateral development banks.
Increasing water scarcity and flood events will have profound social, economic and political
Working at the invitation of governments, WRG
consequences with impacts on food, energy, trade, the environment and – potentially –
engages in fact-based, analytical approaches
international relations, as water-scarce nations search for ways to ensure their long-term growth
and establishes in-country capacity to help
and sustainability.
governments catalyse sustainable and
What is clear is that sustainable economic growth in the context of climate change adaptation comprehensive water sector transformation to
must ensure water security. Water security will only be derived from a new model of collaboration support their economic growth aspirations.
that plans, manages and uses water resources in an efficient and productive manner. A new
paradigm for water-led growth must become a reality.
Based on South Africa’s growth projections and current efficiency levels, analysis conducted by
the Water Resources Group (WRG) suggests a water supply-demand deficit of 2.7 billion m3 in the
year 2030, representing about 17% of the country’s overall demand (see Figure 10).
The increase is largely attributable to a growing middle class with larger water consumption, and
industrial growth. Within urban growth, household requirements are projected to increase from
2.1 billion m3 per year in 2005 to 3.6 billion m3 per year in 2030.
Industrial requirements, which include mining, manufacturing and power, are expected to
increase from 1.5 billion m3 per year to 3.3 billion m3 per year. While demand is flat, agricultural
irrigation still constitutes the largest single driver of demand at 7.9 billion m3 per year.
South Africa will have to resolve tough trade-offs between agriculture, industrial activities such as
mining and power generation, and large and growing urban centres. The 2030 WRG analysis is
built on a 1.1% compound annual growth rate (CAGR54), representing the base case of economic
and population growth estimates.
Moreover, in factoring in the potential impacts of climate change in South Africa under a plausible
scenario, the situation worsens. The yield of existing supply sources drops by 10% and, with a
modest decline in rainfall of 3% from historical levels, the water supply-demand gap increases to
3.8 billion m3 per year in 2030, compared to 2.7 billion m3 per year in the base scenario. This
illustrates the significant vulnerability of South Africa’s water availability to climate change and the
need for adaptation measures.
Source: WRG Analysis, and presented at the World Economic Forum on Africa 2011
According to the DWA, the foremost action is the concerted implementation of water
conservation and demand management measures. Additionally, the reuse of water offers an
immediate practical supply for cities and fast-growing towns, and desalination of seawater offers
security to coastal centres and opportunities for groundwater development.
This focus on water-use efficiency and using alternative water sources is consistent with WRG
analysis concluding that water conservation measures, supply diversification and water quality
improvement can help South Africa close its 17% water gap in 2030. Addressing water
conservation/demand management measures targeted at the industrial and municipal sectors
has the potential to realize 54 million m3 water per year (see Figure 11).
Water conservation
Diversifying water mix
Edna Molewa
Water quality/WWT1
Minister of Water and Environmental Affairs,
South Africa; speaking at the World Economic
1
Additional WWT initiatives (e.g. collection of municipal waste water and central treatment for reuse) not quantified
Source: WRG Analysis, and presented at the World Economic Forum on Africa 2011 Forum on Africa 2011, Cape Town
South Africa is responding to the challenge through an innovative partnership with WRG. In May
2011, South Africa’s Minister of Water and Environmental Affairs Edna Molewa, together with
Peter Brabeck-Letmathe, Chairman of the Board, Nestlé, Switzerland, and Chairman of the WRG,
announced a Declaration of Partnership at the World Economic Forum on Africa in Cape Town.
The partnership was developed to draw together the expertise, knowledge and experience of the
private sector, development agencies, civil society and expert organizations to support the South
African government’s response to its water challenge and build a more resilient economy for
growth and development.
Drawing from analysis completed by South Africa’s DWA, the WRG and other international and
local expert organizations, and following discussions with DWA’s senior leadership and other
South African stakeholders, two activities were identified as having the most opportunity for
public-private collaboration and intervention.
Focus Area A: Water Conservation/Demand Management The South African Strategic Water Partners Network
• Increasing water-use efficiency (in agriculture, industry and A crucial component of the DWA-WRG partnership is government
households) ownership of the process and the domestic development of public-
• Leakage reduction from distribution networks (municipal and private support structures. To this end, a public-private-expert
others, including irrigation) leadership group, called the South Africa Water Partners Network
(SWPN) was formally established in November 2011 at its inaugural
Overview of leakage reduction material in South Africa
meeting hosted at the DWA. This group is chaired by the Director-
General of DWA and co-chaired by the South African Breweries
Net marginal
MCM/year Company, offering balanced public-private leadership to oversee the
cost in 2030
$/m3 activities and progress of the work. The leadership group represents a
progressive platform and mechanism to foster enhanced collaboration
Bulk ~4 -0.44 and joint solutions to solve the water challenge. This formalized
partnership was publicly presented by the Director General of the DWA
Industrial ~33 -0.27 and other key partners at the UN Climate negotiations, COP17 in
Durban, South Africa in December 2011. A first publication has been
Municipal ~21 -0.44 produced by the partnership titled, “Closing the water gap by 2030
• Reuse of effluent
• Desalination (sea water and acid mine drainage)
• Use of groundwater (development and sustainable management of
groundwater resources, particularly for rural areas)
New dams
1 978 0.16
Artificial aquifer
recharge 1 042 0.10
Groundwater
879 0.09
Removing alien
vegetation 698 0.36
Transfers – pumped
550 0.34
Raising dams
511 0.13
Desalination
460 0.91
Transfers gravity
400 0.29
Unfeasible potential
projects 2 019 N/A
Water Resources Group – Spotlight on the additional water demand will mostly be driven added value from irrigated agriculture and
Jordan Country Partnership by industry, energy generation and an increase provide about 15,000 new full-time equivalent
in population and consumption per capita. jobs in agriculture. However, economic choices
The WRG-South Africa partnership is one in a
in agriculture – such as moves to high-value,
series of country partnerships. The WRG is However, the analysis demonstrates that, even water-efficient crops – could reduce the water
also working with India, Mexico, Mongolia and in this constrained environment, Jordan can allocation need for agriculture by up to 100
Jordan. The following is a summary of the achieve its growth aspirations by taking an MCM while sustaining agricultural employment
Jordan country activities, and also presented economy-wide approach to water, ensuring the at approximately current levels and increasing
at the World Economic Forum’s Special most economically and socially productive use added value from agriculture.
Meeting on Economic Growth and Job of this scarce resource. The analyses
Creation 2011 at the Dead Sea, Jordan. conducted as a result of the WRG-Jordan The decision of which economic choice
collaboration suggest an integrated solution scenario in agriculture to pursue (see Figure 12)
Jordan is among the most water-scarce
along three axes: given the tradeoffs required must be made by
countries in the world, with about 80% of its
policy-makers in alignment with the relevant
food security depending on virtual water 1. Increase the efficiency and productivity of stakeholders.
imports (the water used in the production of water use as a priority. The analyses identify
food). The scarcity of water is projected to relatively easy to implement efficiency 3. Ensure water security through efficient,
worsen due to climate change, involving more measures across agriculture, industry, energy supply-side mega-projects. The potential of
intense and numerous droughts. Water supply and municipal sectors that can save about 130 MCM of additional supply exists
currently relies heavily on pumping approximately 400 MCM of water. Several from relatively cost-effective supply measures.
groundwater to major demand sites, resulting existing demand-management initiatives can Within this, the greatest potential for additional
in severely overexploited groundwater be accelerated, such as increased water supply comes from wastewater reuse
resources. Pumping drives significant energy enforcement of water-efficiency regulations. (62 MCM). The JRSP is needed for long-term
demand; water supply is responsible for about supply security, but its high cost and potential
25% of the country’s total electricity demand. 2. Gain flexibility through economic choices in implementation risks make it essential to
In addition, Jordan cannot rely on significant agriculture. Increasing the water productivity of optimize the size and timing of its phases
fossil fuel reserves and has practically no agriculture is important in Jordan, as against flexibility gained from “must-do”
hydropower potential. agriculture consumes about 60% of total water efficiency measures and economic choices in
use while its contribution to GDP and total agriculture.
Jordan has aggressive plans for economic employment are only about 3%. According to
development, especially across industrial and current plans, current crop mix and agricultural H.R.H. Prince Feisal Bin Al Hussein, Chairman
energy sectors. Targets have been set to techniques, Jordan’s annual water-allocation of the Jordan Royal Water Commission, and
double GDP between 2009 and 2017 and needs for agriculture will remain at current senior officials at the Ministry of Water and
reduce unemployment from 12.5% in 2004 to levels of approximately 510 MCM. Irrigation have announced their plan to use the
6.8% by 2017. Through collaboration with WRG analysis to revise Jordan’s national water
and a joint analysis, it is projected that, by But in a high-value agriculture scenario, Jordan strategy 2008-2022, Water for Life, of which a
2030, this increase in economic activity and would see an alternative crop mix that keeps key component will be the establishment of a
wealth will require almost a doubling of water current supply, expands irrigated land and National Water Council, a cross-ministerial,
demand under a business-as-usual scenario shifts water supply from water-intensive trees multistakeholder group to support national
to 1,550 million m3 (MCM), 650 MCM more to high-value, low-water vegetables. This will decision-making, planning and use of water
than the currently available supply. The raise demand to 550 MCM but will double the resources.
a BAU b High value agriculture c Basic water reduction d Low water agriculture
Highlights the
Investment 955 950 830 800 implementation cost for
required - a b c d + efficiency measures and
JD mn new supply
In its first phase of activity, SWPN has decided to further focus its scope South Africa has the opportunity to use the SWPN to bring in new
of activities to ensure delivery of tangible results, action and replication. finance sources to address its water (and other infrastructure) needs.
Three working groups were established at the inaugural SWPN meeting
• Goldman Sachs estimates the current water market at US$ 400
aligned with the focus areas:
billion; while OECD estimates an average annual investment of US$
1. Water use efficiency/leakage reduction 772 billion is required for water and wastewater services around the
world by 2015
2. Improving water use efficiency in supply chains (in particular in
agriculture) • The African Development Bank estimates the investment required
to meet Africa’s water at US$ 50-54 billion per year for the next 20
3. Effluent partnerships (e.g. wastewater treatment and reuse) years and forecasts an increased need for non-traditional funding
sources
These working groups are also aligned with the South African National
Planning Commission’s recently launched National Development Plan, • Future annual global spending on water supply and sanitation is
which identifies the need for national programmes on water estimated at US$ 21.9 billion, compared with current spending
conservation and efficiency and on using alternative sources of water, levels of US$ 7.6 billion; the US$ 14.3 billion gap is equivalent to 2%
such as treatment and reuse of wastewater effluent. For each working of the total GDP of sub-Saharan Africa
group, a private sector champion has been identified to lead the work,
and support organizations have volunteered to help take the work • Since 1989, the annual global price increase for oil has been 6.2%,
forward. It was agreed in the inaugural SWPN meeting that these versus 6.3% for water; in the same period, price volatility rose by
working groups are to focus their work in the first stage to: 42.9% for oil, versus 4.2% for water
• Identify leading examples and share experiences of partnership Taking a long-term view, water sector investment presents a relatively
projects within each working group topic steady, non-volatile return. The long-term risk-adjusted returns suggest
a match with the interests of institutional investors (especially pension
• Identify key challenges that were encountered in the development and endowment funds), who are an important new finance actor in the
and implementation of such partnerships that should be addressed climate arena for low-carbon investment. Through its public-private
if wide-scale replication is to be achieved collaborative approach, SWPN has an opportunity to address the
important issue of stimulating the flow of domestic and international
• Recommend interventions and incentives that, if implemented, private finance towards sustainable water infrastructure.
would support widespread adoption and replication
At the heart of SWPN is a multistakeholder collaboration platform based
• Identify potential projects – whether for their own organization, on comprehensive analytics. This model is based on the experience of
jointly with others or a new sector – to explore the design and the Forum’s pilot Water initiative, which explored multistakeholder
implementation vehicles to design “win-win” water projects identified during the project
planning and development process. As stakeholders from all groups
Working group findings will be used as input to a South Africa Water – government (national and local), industry, communities, development
Summit to be held in the first quarter of 2012, where stakeholders will agencies and commercial/development finance institutions – have
draw together the findings to help South Africa design a strategy to take already been involved in the process from the start, there is a strong
forward the key recommendations – including design of pilot projects – opportunity to attract project finance from public and private sources.
to transform its water sector and continue to position water as a catalyst
for growth and development. A pilot public-private stakeholder platform in Jordan, called the Jordan
Business Alliance on Water, used initial funding of US$ 100,000 from the
The SWPN network has already identified a number of leading examples US Agency for International Development, the Jordanian government
of partnerships for each working group topic that can be considered and the German Agency for International Cooperation to jump-start the
models on which to define the key bottlenecks and draw funding of two industrial wastewater treatment plants in stone and
recommendations for replication strategies. Discussions are underway marble cutting regions. The treatment plants will support industrial water
between organizations on how to work on joint projects in locations efficiency by treating water discharged from the manufacturing process,
where they share a common water basin. freeing water for other productive uses.
With this focus on demand management and water mix diversification, a In one project near the Sahab area, the plant will be established at a cost
sub-component of the DWA-WRG partnership will look at wastewater of 650,000 Jordanian dinars (US$ 910,000) of which approximately 60%
treatment facilities. A small public-private task force will explore the was financed by the public sector and 40% secured from private sector
potential for industry-municipality collaborations to upgrade and funds. A similar model was agreed for the other project of slightly smaller
rehabilitate inadequate and deteriorating infrastructure (noting however, scale at 270,000 Jordanian Dinars (US$ 380,000). The initial US$
that wastewater treatment remains the responsibility of municipalities). 100,000 investment thus resulted in project finance of approximately
This exploration will be placed within the wider economic analysis of the US$ 1.3 million – a leverage ratio of 1:13.
contributions such collaboration can provide to closing the water
demand-supply gap by 2030. This example demonstrates the ability of the multistakeholder approach
to leverage a relatively small investment into large-scale water resource
projects that attract significant public-private financing. In South Africa, if
the leverage ratio of 1:13 is maintained, the US$ 250,000 financial
commitment from South African Breweries to support SWPN has the
potential to stimulate up to US$ 3.25 million in public-private project
co-financing for a pipeline of projects.
A Success Story for Replication – eMalahleni Water Reclamation Plant Recommendations, Actions and Policy Suggestions
The eMalahleni water reclamation plant – situated in the Witbank coalfields of There is no single solution to South Africa’s water challenges: the right
the Mpumalanga province – has turned a major challenge into a valuable solutions will be highly dependent on political and cultural contexts at
asset that has created benefits for the environment, the local community and sub-national and local levels. South Africa and SWPN must define the
the associated mines that feed into the water reclamation plant. The country’s pathway through solutions that are tailored and appropriate
award-winning project is a public-private partnership that was jointly for the country’s context. Drawing on previous analysis of the key
undertaken by Anglo Thermal Coal, BHP Billiton Energy Coal South Africa blockages of public-private partnerships and potential ideas to
(BECSA) and the eMalahleni Local Municipality, and has been described as a overcome them, as well as the experience of other countries engaged
world-class initiative and an exemplary model for development. with WRG, SWPN may wish to consider the following elements:
Following over a decade of research and development, Anglo American – 1. Enhance SWPN to become a cross-ministerial, multistakeholder
through its Thermal Coal division – entered into a 300 million ZAR (US$ 36.6 effort. The shared resource or “space” created by individuals and
million) joint initiative with BECSA (15% water input) and a bulk supply organizations that are linked by mutual needs and interests allows
agreement with the water-stressed eMalahleni Local Municipality. for sharing ideas and innovations. The SWPN is an excellent
Commissioned in 2007, the plant desalinates rising underground water from beginning and can be enhanced through direct engagement of
Anglo American Thermal Coal’s Landau, Greenside and Kleinkopje collieries, other ministries and authorities, e.g. agriculture, energy, planning,
as well as from BECSA’s defunct South Witbank Mine. By doing so, it finance and local government. A similar process is ongoing in
prevents polluted mine water from decanting into the environment and the Jordan, where the Ministry of Water and Irrigation has requested
local river system, while alleviating serious operational and safety challenges. WRG’s help in the structure and mandate for the creation of a
Purification and Distribution of Water National Water Council, which will bring together ministers across
sectors, business representatives, civil society and academia to
Using the latest in water purification technology, it is currently desalinating debate the key economic choices and joint solutions.
record production volumes of up to 30 megalitres of water to potable quality
per day, most of which is pumped directly into the municipality’s reservoirs, 2. Build capacity and experience across sectors. Stakeholders from
meeting some 12% of its daily water requirements. Additional water is piped public, private and civil society sectors are not accustomed to
to Greenside, Kleinkopje and Landau collieries as well as various nearby engaging with one another to identify, develop, budget, invest and
Anglo American Thermal Coal service departments for domestic use and hold each other accountable for water use, and often lack the
mining activities. These operations are now self-sufficient in terms of their leadership skills needed to do so. A long-term approach and
water requirements (neutral water footprint), which eases the serious supply strategy are required to fully achieve this vision, but practical steps
problems of the local municipality. built into each project can be taken by individuals and
organizations to initiate the transformation. The SWPN can draw
Critical Need for Water
counterparts from all sectors (engineers, financiers, government at
The eMalahleni municipality has long grappled with supply and demand national, municipal and local levels, grassroots organizers) with a
problems to cater to the water needs of an area experiencing considerable curriculum designed to motivate and build trust towards the
industrial, commercial and residential growth. The plant is also aiding the development of partnership projects.
provincial government in meeting its Millennium Development Goals target to
ensure that no household goes without a potable, reliable and predictable 3. Define South Africa’s research and development agenda. The
water supply. experience in South Africa and other countries suggests that a
robust and credible fact base – of the water supply-demand
Apart from benefiting the local community by supplementing the low situation, its main drivers and potential solutions to minimize the
domestic water supply, it has created a number of job opportunities. During gap – leads to better decision-making. The partnership should
the construction phase, between 650 and 700 temporary jobs were created, identify information, data and analysis that are required to enable
while 60 permanent positions were created for running the plant. Eighty-six South Africa to address challenges, given strategic priorities,
per cent of the workforce comprises Historically Disadvantaged South growth targets and hot spots. Perhaps a next step is to focus on
Africans, while 91% have been sourced from surrounding communities in an specific sectors or components within a sector to develop analysis
area of high unemployment. of potential solutions.
Zero-waste Facility 4. Begin to design the process to attract larger-scale public and
The plant operates at a 99% water recovery rate, and the ultimate goal is to private finance for project implementation. Building on the
be a zero-waste facility through 100% use of its by-product. The 200 tons of experience of other countries (see text box on Jordan), SWPN has
gypsum it produces daily are not only costly to dispose of, but also an the potential to leverage significant public-private investment in
environmental and post-closure liability. Through an extensive research water-efficient infrastructure. The stakeholders involved in the
project, Anglo American Thermal Coal has transformed the gypsum waste planning groups should integrate development agencies and other
into useful by-products for the housing industry, and built 62 houses of funders into the process from the start so they have a stake in the
gypsum brick in 2010. These three-bedroom, 62 m2 houses for employees project proposals that result and can quickly dedicate funds to
from Anglo American are part of the Sustainable Housing Charter to help implement them.
workers in South Africa and in the mining industry to afford their own homes.
Future Developments
Anglo American approved US$ 106 million to embark on phase two of the
plant, which will see the facility desalinate 50 megalitres (with a maximum
capacity of 60 megalitres) of water per day from the end of 2013. The project
has been designed to take into account the remaining 20-25 year life of
contributing mines and cater to post-closure liabilities, which will require the
desalination of minewater in excess of 30 megalitres per day. The plant will
continue to run post-mine closure.
Financing Green Growth in a Resource-constrained World 29
The Southern
Agricultural Growth
Corridor of
Tanzania:
Investment Models
for Climate-smart
Agriculture
Executive Summary
Context Background
The Green Growth concept is new in most of Africa, but is gaining Tanzania has enormous agricultural potential, with 44 million hectares of
momentum as regional entities and individual African countries – arable land, good soil and ample water from rainfall, lakes, rivers and
including Tanzania – begin to formulate national policies and underground reservoirs. Sixty-five per cent of arable land is irrigable, and
programmes that link agriculture with issues such as climate change, only about one-quarter of it is currently being used. Maize, rice, beans,
water and rural development. African countries are seeking ways to livestock, tea, coffee, sugar, citrus, vegetables and sunflower flourish
invest in “climate-smart” agriculture as a strategy to address the there. The country has a large domestic market and is ideally located for
potentially negative impacts of climate change (see text box). exports, with access to the Indian Ocean, an international port and
shared borders with eight other African countries.56 With high forecast
global food prices, there is a strong opportunity for economic growth
The Impact of Climate Change on Tanzania’s Economy through agribusiness for the estimated 75-80% of Tanzanians who
The economy of Tanzania is very dependent on its climate. Major make their livelihoods in agriculture.
weather events such as drought lead to a loss of crops and livestock,
However, agriculture is perceived to be a high-risk sector due to weather
reduced hydro-power generation and electricity supply, and reduced
dependence, lack of collateral and historical non-payment of loans, with
industrial production. More frequent droughts and floods have the
roots in the country’s socialist era. Therefore, achieving Tanzania’s
potential to affect millions of livelihoods. The potential loss of forest and
potential is only possible if a number of serious challenges are
ecosystem services, along with a possible 25% decline in cereal yields
overcome:
by 2050, will lead to significant economic costs: by some estimates,
Tanzania may see a loss of 1.5-2% of GDP per year by 2030.55 • The vast majority of Tanzanian land is either village land or has title
problems, with little available for purchase or long-term lease and a
Greening agriculture and agricultural landscapes cannot be achieved
lack of a comprehensive land survey;57 it is difficult to register
solely within the agricultural sector, nor solely through public sector
property – Tanzania ranked 151st out of 183 countries in that
action. To operationalize sustainable agriculture, rural development,
category in the World Bank’s 2011 Doing Business rankings
watershed management, biodiversity conservation, and climate change
adaptation and mitigation in a given landscape requires strategic • Transportation and power infrastructure are poor; storage, logistics
cooperation among stakeholders in geographically explicit assessment, and processing are underdeveloped
planning, investment and monitoring activities. Political commitments to
cross-sectoral collaborative efforts and motivation among the key • Affordable, long-term financing is limited, with many banks asking
stakeholders for long-term action are essential. 15-20% interest due to perceived risks and lack of domestic bank
capacity
The multi-pronged agriculture, development, environmental and climate
investments and activities planned and underway in the Southern • Tanzania’s smallholders farm the bulk of the land currently under
Highlands of Tanzania offer a promising opportunity to implement a production, and have limited acreage, knowledge, skills and
green growth approach. SAGCOT aims to expand investment in access to information and markets; as a result, yields are low, and
agribusiness leading to income growth among smallholders and many smallholders earn in the realm of one dollar a day
employment generation across agribusiness value chains in the
Southern Corridor. With SAGCOT embracing a green growth approach Perhaps the most important barrier is the difficult investment climate in
involving coordination with other development and land- and resource- Tanzania. The country adopted socialism after independence in 1961;
related management strategies and investments, important benefits can only in the mid-1990s did it give up full government control over the
be expected for the region. economy. Policies are now much more conducive to private sector
development, but implementation has been slow and there are
A viable green economy framework for Southern Tanzania will important exceptions in the agriculture sector. For example, an export
encompass climate adaptation and mitigation plans. Financing ban on maize – intended to enhance food security – has taken away
mechanisms can be found in national climate and agriculture lucrative regional markets, flooded domestic markets, depressed prices
programmes, the Green Fund under development, REDD+ and and removed incentives to invest in producing any surplus. Further, the
agricultural carbon investments, philanthropic sources, “green” Cereals and Other Produce Act of 2009 created a new board
agricultural and forest product supply chains, corporate social empowered to trade in cereals such as maize and rice, essentially
responsibility and local community management contributions. Beyond competing with the private sector. This creates uncertainty and makes it
the Southern Highlands region, experience with the approach could difficult for long-term business planning and investment.
provide valuable lessons and models for green economic development
in agricultural regions in Tanzania, Africa and globally. The government recognizes these challenges and has joined a
public-private partnership of local and international players in business,
government and the donor community that is rising to the challenge of
modern agricultural development through an agricultural growth corridor
approach (see Figure 13) that:
Figure
Figure 13: 2.1 Agricultural
The Southern growth
Agricultural Growthcorridor
Corridor ofclusters
Tanzania
Tanga
Dodoma
LA
Kinonko
KE
Morogoro Kibaha
TA
Kilosa Mlandizi
MTERA Dar es Salaam
NG
RESERVOIR
AN
Zombo
YIK
Mkuranga
A
ha
ua
tR
ea Rufiji
Gr Iringa
LAKE RUKWA
ro
beya
Mbeya
be
lom
Ki
unduma
Tunduma
LAKE
E NY
NYA
NYASA
YAS
ASAA
100 i
© AgDevCo
Boxfocus
The initial 3: Cluster development
is Tanzania’s Southern Corridor, which covers about
one-third of the country and runs along the existing infrastructure
backbone from are
‘Clusters’ Dar es Salaamas
defined to northern Malawi
geographic and Zambia. The of interconnected companies, specialised suppliers,
concentrations
initiative has been branded the Southern Agricultural Growth Corridor of
service
Tanzania, providers, and associated institutions. For SAGCOT, this includes suppliers of farm inputs, machinery,
or SAGCOT.
and agriculture support services (extension agents, financial services), commercial farmers (large and small),
The group has taken a step-by-step approach to mobilizing around
processors
SAGCOT, with fourand providers
major phases ofof infrastructure
work such
that build on one as irrigation and rural roads. Clusters also include governmental
another,
gradually bringing
and other buy-in and support
institutions, such asto auniversities,
critical mass: developing
vocationalthetraining providers, and trade associations, which provide
SAGCOT concept note; putting together a detailed investment blueprint;
specialised
building training,
a new institution education,
to help implementinformation,
the blueprint –research,
the SAGCOT and technical support. The proximity of companies and
Centre; and developing
institutions in one a green growth
location, andstrategy.
the repeated exchanges among them, fosters better coordination and trust. It
also drives increased competitiveness. A cluster allows each member to benefit as if it had greater scale. Poor
countries typically lack well-developed clusters; they compete in the world market with cheap labour and natural
resources. To move beyond this stage, and to add value and share benefits with producers, the development of
well-functioning clusters is essential.
The Four Phases of SAGCOT Development Figure 14: Build-up of SAGCOT Commercial Production (2011-2030)
the process of developing both the partnership platform and the Citrus Banana Other Horticulture
investment blueprint.
Source: SAGCOT technical team projections
Phase 2: Investment Blueprint
Finally, the investment blueprint describes in-depth two institutions
The lead partners in Phase 2 included the Tanzanian government, the necessary to make the SAGCOT vision a reality: the SAGCOT
US Agency for International Development (USAID), Yara International, Secretariat and Catalytic Fund. The secretariat would fill a need for
Unilever, Dupont, Monsanto, General Mills, Diageo, SABMiller, Syngenta, information and coordination, enabling investors – both public and
Standard Bank, National Microfinance Bank and AGRA, in addition to private – to find opportunities and target their investments in ways that
the Norwegian Embassy and Norfund. The group formed a formal make whole clusters work better.
SAGCOT executive committee to oversee the mobilization process. The
committee was co-chaired by Unilever and the Tanzanian Ministry of Various types of finance are necessary to catalyse larger private
Agriculture, with other members including Yara International, ACT, investment (see Figure 15). The Catalytic Fund aims to complement
AGRA, the Confederation of Tanzanian Industries, the Tanzania existing donor and government finance initiatives, and helps
Sugarcane Growers Association, USAID and the Irish Embassy entrepreneurs design “bankable” agriculture businesses. Finance will be
(Syngenta joined the executive committee later). As with the concept provided as low-cost or interest-free loans to start-ups. The fund will act
note, development of the blueprint was led by Prorustica, AgDevCo and as a temporary arrangement until structures for a patient capital fund are
TAP. in place.
The SAGCOT Investment Blueprint covers the same conceptual ground In addition to the Catalytic Fund, donors can provide patient capital in
as the concept note, in more depth. The blueprint also estimates the the early stages of private sector agricultural ventures. Typically invested
investment required to transform agriculture in the corridor. To do so, it in last-mile infrastructure, patient capital reduces costs and risk for
identifies six clusters deemed representative of the opportunities and commercial farming, attracting larger additional private investment.
challenges facing agriculture there. For each cluster, it estimates the Potentially, US$ 100 in commercial finance could be leveraged from an
type and number of potential farm projects and the rate at which they initial US$ 10 of patient capital.
could be developed. It then calculates the cost of the infrastructure
required to support those projects. To unlock availability from the domestic commercial banks, loan
guarantees and currency risk instruments could be developed. This
Across the six clusters identified, the blueprint estimates a total would help leverage capital from the domestic banking sector into
investment need of over US$ 3.4 billion, including US$ 650 million in agriculture businesses.
backbone infrastructure; US$ 570 million in “last-mile” infrastructure;
US$ 108 million for marketing, storage and processing infrastructure; Currently, debt and equity finance is limited in the local capital markets.
and US$ 2.1 billion in on-farm investment. This level of investment could, Because of perceived and actual risks, working capital is only available
in turn, bring more than 350,000 hectares under production over the at rates of interest from 20-25%, with high collateral requirements
next 20 years, increasing field crop commercial production to 680,000 possibly overtaking 100% of value. Social impact investors such as
tons, rice to 630,000 tons, sugar cane to 4.4 million tons, red meat to Capricorn and Norfund have made investments in the corridor.
3,500 tons and high-value fruits and vegetables to 32,000 tons (see Concerns about the low return and high risk that are inherent to
Figure 14). Exports could reach US$ 0.8 billion, and more than 2 million agricultural primary production are a barrier to larger uptake.
people could directly benefit.
Figure 15: Total Investment by Source over a 20-Year Period Phase 3: The SAGCOT Centre
With critical mass and momentum behind the initiative, the executive
committee began to operationalize, setting up the SAGCOT secretariat.
The purpose of the secretariat is to coordinate investment and action by
$650 a range of players to address a range of bottlenecks at once – thus
kick-starting commercial agricultural development in the corridor. The
secretariat was incorporated in April 2011 under the name SAGCOT
Centre Ltd and officially opened for business in October. The secretariat
acts as a broker and coordinator, which are critical roles in making this
$2,059
$657 type of multistakeholder partnership succeed.
Alongside its great agricultural potential, the SAGCOT region also has
high levels of poverty; contains extensive forests, wildlife and protected
areas; and faces increasing vulnerability to climate change. These
Private investment
conditions create both a mandate and an opportunity to develop
Patient capital SAGCOT as a green growth model for agriculture-led development. To
Public investment do so, the SAGCOT Centre has convened a multistakeholder Green
Reference Group – supported by the non-governmental organization
SOURCE: Saggot Technical team projections
EcoAgriculture Partners – to develop and build consensus on a green
The SAGCOT Investment Blueprint was presented by Tanzanian growth programme and investment framework for the region.
President Jakaya Kikwete and Paul Polman, Chief Executive Officer, Subsequently, the SAGCOT Centre will implement this strategy by
Unilever, Netherlands, at the World Economic Forum Annual Meeting facilitating and coordinating green investments in close collaboration
2011. The president’s active and visible leadership and deep personal with Tanzanian and international companies, donors, civil society and
commitment have been a key factor in the initial success of the SAGCOT the Government of Tanzania.
partnership process. He personally reached out to a number of bilateral
and multilateral donors and took the first step by committing US$ 1 The next challenge is for regional actors in southern Tanzania to define a
million a year to the SAGCOT Catalytic Fund. strategy that will achieve rural development and wealth generation while
assuring long-term sustainability, healthy ecosystems and resilience to
climate change without increasing net GHG emissions (UNEP 2010).
Many of the building blocks for such a strategy are in place. The
proposed SAGCOT Clusters are located near nature conservation
areas, and activities are already underway within the corridor to promote
conservation agriculture, agroforestry, bio-energy and terrestrial climate
action, including payments for ecosystem services and climate change
mitigation.
There is still a big gap in The use of trees and small plantations in combination with agricultural
crops in landscape mosaics creates opportunities for a resilient range of
attracting private sector income opportunities in the rural areas. Human settlements and
investment in agriculture ... infrastructure are expanding rapidly within the region, whose
development patterns could be shaped to contribute to a regional green
The government will economy.
commit resources to the
[SAGCOT] Catalytic Fund
and we are asking
development partners to
build it into their plans.
Mizengo Pinda
Prime Minister of Tanzania
Building Blocks for SAGCOT’s Green Growth Strategy Green growth for SAGCOT will involve coordinated public and private
investments in farming systems, infrastructure and value chains in seven
Green growth principles must be adapted to local conditions for agricultural development clusters. Aligned investment in ecosystem
smallholder as well as large-scale agriculture. Early examples of green management will ensure that the corridor’s diverse ecological assets are
agricultural investments from the SAGCOT region include: conserved and maintained to support productive agriculture, water
• Training to support agro-ecological intensification by smallholders, supplies and human well-being.
including adoption of a system of rice intensification, which
Considerable investment is also underway to improve natural resource
increases yields while reducing input costs and water use
and environmental management in the Southern Highlands. Ecotourism
• Adoption of conservation agriculture by small- and large-scale farmers is expanding to take advantage of the unique biodiversity in the region.
to build soil organic matter, sequester carbon, increase water use Public and civil society environmental initiatives include national parks
efficiency and improve drought resistance for maize and other crops and game reserves, forest reserves, RAMSAR sites for wetland
management, participatory forest management activities and a wide
• Increased efficiency and yield of smallholder agriculture through
range of NGOs working on environmental projects. Diverse NGOs and
“block farming” schemes that pool land and labour while negotiating
private sector actors are investing in forestry-related activities, small-
favourable input and output prices
scale processing and local bio-energy related projects.
• Warehouse receipt systems and small milling operations that build
rural value chains while boosting smallholder income through value
addition
• Establishment of vertically integrated commercial plantations that
benefit nearby communities by purchasing, processing and
marketing crops
Lessons Learned
SAGCOT’s staged mobilization process offered multiple windows for Mobilizing around SAGCOT has been the work of many hands. Some
partners to join as they became ready. More fundamentally, the stages stakeholders have been central throughout the process; others have
fulfilled a number of critical functions that helped those partners prepare participated with differing degrees of intensity at different times. There
– becoming clear about the vision, comfortable with the approach and has not necessarily been a hard and fast division of labour. This
certain that they could contribute. These functions included: highlights the need for strong partnership facilitation to ensure that
progress is made and milestones are met – as SAGCOT has. In fact, a
• Awareness-raising and positioning: Explaining the agricultural
number of capabilities have been critical in mobilizing around SAGCOT.
growth corridor concept and positioning it on national and global
In analysing the roles of the many stakeholders involved, seven emerge:
leadership agendas of business, government and the development
community 1. Conceptualization: Developing the agricultural growth corridor
approach and articulating it in ways that resonate with stakeholders
• Building a shared vision: Inspiring and bringing a wide range of
with diverse backgrounds and perspectives
stakeholders to the table around large-scale agricultural
development that offers major benefits to smallholders, enhanced 2. Promotion: Sharing the agricultural growth corridor approach and
food security and export potential the SAGCOT Initiative, answering questions and encouraging others
to join – directly as well as indirectly, by positioning it on relevant
• Foreshadowing the need for “business unusual”: Making it clear that
leadership agendas
those interested in SAGCOT would need to think and act in new
ways to make it happen – for example, thinking long term and 3. Administration: Organizing executive committee meetings, receiving
reducing risk through coordination and collaboration rather than and administering seed funding for the mobilization process and
complete confidentiality and control procuring services (e.g. research, consultancies)
• Making the vision concrete: Defining specifics about the 4. Partnership Facilitation: Working behind the scenes to facilitate
opportunities and needs through research and modelling, which dialogue, relationship-building, trust and alignment among the
enabled prospective partners to see themselves participating in players
what had previously been a theoretical vision
5. Seed Funding: Deploying relatively small amounts of money on a
• Building implementation capacity: Creating a new, independent flexible and timely basis to fuel the mobilization process
organization to take on the intermediation required to make
6. Implementation Funding: Committing, if not yet disbursing, money
SAGCOT work – ensuring information flows, recruiting investors and
for the SAGCOT Centre and Catalytic Fund to build implementation
partners and enabling them to target their efforts to fill gaps and
capacity and provide a “stamp of approval” that attracts others
make whole clusters work better
7. Investment in the Corridor: Making investments in the corridor – for
The result was that many different stakeholders feel like owners and example, in a fertilizer terminal or irrigation programme – could
leaders in the initiative, and have offered their support. technically be considered part of the implementation phase;
nevertheless, early examples of partners who are “walking the talk”
play a critical role in reassuring and mobilizing others
Outlook
SAGCOT is now “live”. Investors are beginning to evaluate opportunities If the SAGCOT vision becomes a reality, it will bring 350,000 hectares 61
Southern Agricultural Growth Corridor of Tanzania
and run trials; donors are committing money to strengthen local farmers’ under production, create 420,000 jobs, generate annual farming
groups; and NGOs are helping to implement the partnership. The revenues of US$ 1.2 billion, contribute to food security and lift more than
government is putting serious backing behind the Rufiji Basin 2 million people out of poverty by 2030.
Development Authority, its designated focal point for SAGCOT, and
deciding which policy or infrastructure bottlenecks to tackle first. But the potential is even greater. The agricultural corridor approach
lends itself to issue overlay, for example, and a focus on green growth is
Employment
345,000 employment
opportunities generated for
farmers and in supply chain
By 2030, SAGCOT aims to have developed electricity and water supplies, will be upgraded.
agriculture and improved rural life in the southern There will be a well-developed agro-industrial base,
corridor. There will be a critical mass of efficient, and processing of commoditites to add value to
modern small-, medium- and large-scale farms and local production.
ranches
38 producing
Financing Green Growth in acommodities at competitive
Resource-constrained World
prices for local and international markets. The rural economy will be based on an open,
The Southern Agriculture Growth Corridor of Tanzania: Investment Models for Climate-smart Agriculture
Water Initiative Partners and South Africa Yvo de Boer, KPMG International extending state funding for solar (and other renewable) projects
29
Offered through the Gujarat Electricity Regulatory Commission
Water Partners Network Luis Farias, Cemex (GERC)
Christiana Figueres, United Nations Framework 30
Prequalification can eliminate inexperienced bidders and reduce
ABSA Convention on Climate Change the potential receipt of uneconomical or “suicide” bids
Anglo American Rajasthan Solar Park, September 2011
31
Hal Harvey, ClimateWorks 32
These parks will be developed by the Rajasthan Solar Park
Asian Development Bank Naina Lal Kidwai, HSBC India Development Company. The Rajasthan transmission company has
Cargill Caio Koch-Weser, Deutsche Bank prepared a US$ 600 million grid connection programme for the
CH2M HILL Jennifer Morgan, World Resources Institute
two sites, which will be partly financed by the Asian Development
Bank
China (Provincial Government of Shanxi) Razan Al Mubarak, United Arab Emirates 33
PwC and ClimateWorks 2011 analysis
Cisco Systems Environment Agency 34
ADB presentation in Mumbai, November 2011, and World
DBSA Jayendra Naidoo, J&J Group
Economic Forum, Critical Mass Report, 2011. Discussions with
domestic financiers in Mumbai and Jodhpur in 2011 suggested
Diageo Liba Wenig Rubenstein, New Corporation that the ability of state owned banks to extend financing is reaching
Ecolab Limited capacity as a result of existing power sector exposure limits and
Eskom Nicholas Stern, The Grantham Research
internal concerns over the sectors long-term viability
35
Base estimate supplied from the World Economic Forum’s 2011
General Electric Institute Critical Mass Report and the high estimate based on November
German Agency for International Cooperation Pavan Sukhdev, GIST Advisory UK Pvt Ltd 2011 PwC estimates of total investment required to meet the
(GIZ) Katharina Tomoff, Deutsche Post DHL MNRE’s projections for installed capacity
36
World Economic Forum, Critical Mass Initiative, 2011
Global Green Growth Institute Kandeh Yumkella, United Nations Industrial 37
World Economic Forum, Critical Mass Initiative, 2011
Halcrow Group Development Organization 38
Risks covered by OPIC’s political insurance product include: loss
Heineken International to tangible assets, investment value and earnings that result from
political perils such as expropriation, breach of contract, regulatory
Hindustan Construction Company
End Notes changes, political violence or inconvertibility
India (State Government of Karnataka) 39
International lenders require borrowers to hedge against FX risk
1
Source: Economist Intelligence Unit, Gearing Up for Growth: Five
Inter-American Development Bank Imperatives for Success in Emerging Markets, Accenture Institute
given that solar project revenues are denominated in Rupee (while
their loans are in hard currencies)
International Federation of Agricultural for High Performance, March 2011 40
FX markets in India don’t have much capacity beyond 5 years,
Producers
2
http://www.oecd.org/document/12/0,3343,
whereas loan tenors are typically 15 years
en_2649_33959_45467980_1_1_1_1,00.html
International Finance Corporation 3
http://oecdinsights.org/2011/11/21/social-cohesion-making-it-
41
1GW and over
42
Popular version available at http://www.vision2030.go.ke/index.
Government of Jordan happen/
php/front/library
McKinsey & Company
4
The Boston Consulting Group, The Global Infrastructure 43
Executive Summary available at http://www.environment.go.ke/
Challenge, July 2010, www.bcg.nl/documents/file53882.pdf
Government of Mexico 5
Water Resources Group, Charting Our Water Future, 2009
wp- content/documents/complete%20nccrs%20executive%20
brief.pdf
Government of Mongolia 6
International Energy Agency (2010), Energy Technology 44
~503killograms of oil equivalent, GTZ Kenya’s wind market 2009
Mosaic Perspectives. 45
Reeep, 2011
7
The 2°C limit was adopted by the IPCC Third Assessment Report
Nalco Company (2001). See http://www.ipcc.org
46
LCPDP, 2011 cited in SREP, 2011
47
World Bank, June 2011
National Planning Commission 8
See the independent Berkeley Earth Surface Temperature Study 48
Based on an existing peak load of 1,191MW in 2011, using SREP,
NEPAD Business Foundation undertaken since “Climate-Gate”, http://berkeleyearth.org/
2011 data
9
http://www.worldbank.or.th/WBSITE/EXTERNAL/COUNTRIES/
Nestlé EASTASIAPACIFICEXT/THAILANDEXTN/0,,contentMDK:2306744
49
http://allafrica.com/stories/201110111037.html
50
On 2009 levels, Kenya Economic Outlook, 2011
Novozymes 3~pagePK:141137~piPK:141127~theSitePK:333296,00.html 51
Kenya Economic Outlook, 2011
PepsiCo
10
http://topics.nytimes.com/top/reference/timestopics/subjects/f/ 52
To identify potential “intervention points” where collaborative
floods/2010_pakistan_floods/index.html
Rio Tinto Group 11
http://www.bbc.co.uk/news/world-latin-america-11625475
initiatives could unlock private capital for green growth in Kenya,
the World Economic Forum convenes a range of 30+ stakeholders
SABMiller 12
This trend is illustrated by topics chosen for investigation during
from the public and private sectors to focus on two classes of
SANLAM 2012 by the World Economic Forum Global Agenda Council on
renewable energy deployment – small-scale distributed renewable
Insurance
SASOL 13
http://www.bloomberg.com/news/2011-01-11/low-carbon-
power and large-scale (utility) renewable power – and one thematic
issue – the role of capital markets in driving/channelling renewable
Swiss Agency for Development and energy-investment-hit-a-record-243-billion-in-2010-bnef-says.html
investment
Cooperation (SDC) See www.ren21.net/REN21Activities/Publications/
14
53
This work complements Kenya’s existing processes to combat
GlobalStatusReport/tabid/5434/Default.aspx
South Africa Department of Water Affairs 15
http://www.bloomberg.com/news/2011-11-25/fossil-fuels-
climate change, including the NCCRS Action Plan, supported by
the Climate and Development Knowledge Network, DFID and
Standard Chartered Bank beaten-by-renewables-for-first-time-as-climate-talks-founder.html
other donors in Kenya. It is carried forward in cooperation with the
Syngenta http://unfccc.int/secretariat/momentum_for_change/items/6214.php
16
UK Capital Markets Climate Initiative and the US Low Emissions
17
From 2000 until 2011, India’s average quarterly GDP growth was
The Coca-Cola Company 7.45% and is expected to be 9% through to 2031-2032 based on
Development Program by Vivid Economics, working on the
Finance sub-component, and the Energy Centre of Netherlands
The Coca-Cola Company Africa the Integrated Energy Policy plan for India, quoted in the National
(ECN), working on the NAMA sub-component of the Climate Action
The Dow Chemical Company Planning Commission’s Low Carbon Strategies for Inclusive
Plan
Growth, May 2011
Unilever 18
IEA, 2007 data
54
Compound annual growth rate (CAGR) is a business- and
investing-specific term for the smoothed annualized gain of an
US Agency for International Development 19
When biomass and waste incineration are excluded
investment over a given time period
Veolia Water 20
Oil imports constituted 75% of consumption in 2011, Coal 55
The Economics of Climate Change in the United Republic of
imports are expected to rise to 30% of consumption by 2017,
Water Research Commission KPMG, 2011, The Rising Sun
Tanzania
56
Kenya, Uganda, Rwanda, Burundi, Congo, Zambia, Malawi and
WWF - World Wide Fund for Nature 21
KPMG estimates that, by 2021-2022, solar power could displace
Mozambique
30% of imported coal requirements (71 million tons), KPMG, 2011, 57
USAID AgCLIR, page 10; SAGCOT Concept Note, page 13
The Rising Sun
22
This commitment to inclusive low-carbon growth is expected to
be reaffirmed and become a central pillar of India’s 12th Five-Year
Plan in April 2012
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