TECHNOLOGY TRANSFER FINANCING TO DEVELOPING COUNTRIES IN

CLIMATE CHANGE, CARBON OFFSET AND ENVIRONMENT

AN OVERVIEW OF FINANCIERS AND INSTRUMENTS

Group 4
Emilia Binti Md Suman
Nazalina Binti Ramzi
Nursyazwani Binti Mohamed
Chong Xin Ying
Muhammad Huzair Bin Hairudin
Nurul Fazura Binti Abd Majib
Mohamed Abdalla Mohamed
 1.0 INTRODUCTION
 Transfer of specifically climate-friendly technology has become one to the hot topics recently
 Governments and multilateral institutions have promoted and financed trade and investments
in this field.
 CDM and JI, are participating in various programmes promoting the use of clean technologies
and renewable energy therefore developing countries are among the main beneficiaries.
 Climate change and the Kyoto Protocol are closely interrelated to wider issues in the financing
of more environmentally friendly business and investment.
 Technology transfer to developing countries can relate in this respect to several different
activities, which are targets for financial transactions.
 2.0 FINANCIERS AND FINANCING INSTRUMENTS
2.1 DEDICATED FACILITIES
Environment Facility (GEF)
 Co-financing from financing institutions and donor become a catalyze the grants.
 Main purpose of the grants: Climate change, biodiversity, international waters, ozone depletion,
land degradation and persistant organic pollutants.
 World Bank, UNDP and UNEP contribute in helping GEF works operations.
 Regional multilateral development banks and IFAD help to prepare and propose projects and
programs for GEF financing.
 GEF can provide :
- “Full-size project” and also provide funds for smaller ones through streamlined procedure or
Small Grant program.
- Execution UNFCC and Kyoto protocol objective also administered by GEF through three voluntary
funds (US$ 120 million).
- Facility also allocated by GEF to provide grants for project preparation managed by the
implementing agencies.
Clean Development Mechanism (CDM)

 International Emissions Trading, Joint Implementation (JI) and Clean Development Mechanism
(CDM) is a Kyoto protocol were created by three financing instruments and market mechanism.

 CDM
- Project related with the instrument for the aim to promote technology transfer created by co-
operation with the developing countries.
- With CDM, developing country will getting investing from developed country and there would
obtain credits for achieved emission reductions (CER).
- From this transaction, the benefits could be obtained by the project that are usually difficult to
be met by local investors in the form of an injection of equity capital for the project.
- The share of the investment that can be supported through CDM varies from sub-sector to
another.
- The CDM market also increasing faster during the year.
2.2. MULTILATERAL FINANCING INSTITUTIONS

WORLD BANK GROUP

INTERNATIONAL
DEVELOPMENT
ASSOCIATIONS(IDA)
(PUBLIC SECTOR WINDOW)

MULTILATERAL
INVESTMENT
GUARANTEE
AGENCY(MIGA)
(GUARANTEE BODY)
International Bank for Reconstruction and
Development (IBRD)/International Development
Association (IDA)

 Interventions and financing arrangement

 Playing with all potential financing partners
 Providing guarantee and risk mitigation financing services
 Active in developing carbon finance mechanism and supporting CDM
mechanism
 International Finance Corporation (IFC)

 Lends to and invests in private sector projects

 Around 80 % were loans, around 10 % in equity investments and the rest in guarantees of its
US$ 6 billion of approved projects (FY06).
 Invested in the private clean energy sector in loans and equity altogether US$ 1.3 billion (FY
1990-2005).
 Investments in the clean energy & carbon offset area as mainstream operation with the regular
financing instruments.
 Help commercialise the business with the help of the development of new instruments.
i. Commercializing Energy Efficiency Programme (CEEF)
ii. The Cleaner Technologies Programme
iii. The Environmental Business Finance Programme (EBFP)
 Regional Development Financing Institutions

European Bank for Reconstruction and Development (EBRD)

 Energy efficiency: has provided direct financing to large projects that can save energy.
 Renewable energy: EBRD actively identifies potential bankable RE projects. Two major projects
which is geothermal & hydro power station rehabilitation.
 Carbon finance: EUR 50 million fund supported by the Netherlands Government can purchase
carbon credits from eligible EBRD projects

European Investment Bank (EIB)

 Climate Change Technical Assistance Facility (CCTAF) - EUR 10 million technical assistance arm
is to help preparation of CDM and JI projects
 Multilateral Carbon Credit Fund (MCCF) - aims at developing carbon market in the transition
economies
Inter-American Development Bank (IDB)
 Energy efficiency, renewable energy, sustainable urban transport:
- Process of initiating the Hemispheric Sustainable Energy and Transportation (HSET) Funds facility
- Putting together donor contribution to foster energy service companies (ESCO)
- Private sector power producers
- Use of cleaner fuels
 Climate change:
- Developing and financing of mitigation and adaptation projects
- Providing technical assistance to governments and starting with operational cooperation with
GEF.
- Help mainstreaming these areas into the regular IDB financing framework.
Asian Development Bank (ADB)
 Energy efficiency: preparing country level investment and action plans and project pipeline
for implementation in 2007-2010
 Climate change:
- Provided technical assistance to member governments on CDM.
- Launched with donor assistance the Renewable Energy, Energy Efficiency and Climate Change
(REACH) programme

African Development Bank (AfDB)

 Currently implementing the FINESSE Africa Programme with the assistance from Netherlands
 Aims at mainstreaming renewable energy and energy efficiency with aim of operational
business on investment financing
2.3. OTHER FINANCING INSTITUTIONS

 Export Credit And Credit Guarantee Institutions.

 Enabling financing.
 Part of an bilateral arrangement in several OECD countries.

 National Development Finance Companies.

 Support technology transfer through long-term loans.

 National Development Finance Companies.

 Funding for project in long term.

 Regional Or Local Risk Financing Companies And Funds.

 Financing risk for local investor.
 2.4. DONORS

 The multilateral and bilateral public donors is less to finance renewable energy or energy
efficiency investment projects themselves, but rather channel financial resources through the
multilateral and bilateral public financing institutions..

 Various initiatives supported by the European Union. The most important financing initiative is
plan to set up the Global Energy Efficiency and Renewable Energy Fund (GEEREF). The aims of
the fund to complementing resources and instruments available from the multilateral financing
institutions in order to increase risk sharing options available, and would work in close co-
operation with them.

 Initiative also has taken by bilateral donors in launching pilot-type financing schemes.

 Some voluntary based programs and partnerships exist, which have elements leading to
potential investment follow-up, such as the bilateral EU-China Partnership on Climate Change
and India-EU Initiative on Clean Development and Climate Change.
3. EXPERIENCES

 Case 1: IFC?GEF SME Program

 Focus Private Sector
 Environment Investment
 Retail Level Final Intermediaries
 Provided Low-Interest

 Environment Business Finance Program (EBSP) in 2004

 Proactive market development, technical assistance and risk sharing
 Focus Three Area:
i. Local Market development
ii. Support Financial
iii. Credit Risk
 Case 2 : Finnish Energy and Environment Partnership Programme in Central America in
2005
 Start from local Inventors or Partner
 Energy Sub-Sector are :
 Wind
 Hydro
 Biomass
 Solar
4. ISSUES AND CONCLUSIONS

 Institutions and Instruments

 Been confirmed that financing and promoting of the technology transfer(TT) has been taking
place by the financing institutions such as Multilateral Financing Institutions(MFI)
 Have all the standards required such as, know-how, presence in the market, backing shareholders
with special facilities.
 Their work is already in the process but the biggest problem to face is to mainstream the activity
to standard instruments as to get the private financing community they need good instruments and
approaches.
 Resources
 Even though The MFI’s had offered efficient and competent channel to finance but to
promote technology transfer it is prerequisite for them to enhance in private sector
because they are proven success in terms of models.

 Demand issues
 The successful TT starts at the demand end. However, further development of
regulatory framework is necessary and it costs lots of money
 The local banking still emerging & cannot solve the funding problem.
 Then, the instruments requires financial support from donors n they need the technical
assistant from MFI
 The local authorities would enable environment for risk takers channelling MFI
investment to the carbon directly direction
 Supply issues
 In this TT sector there are only little direct investment by providers or investors
because the return expected are not high enough and they most likely to invest on
commercial terms.
 Often MFI are the only possible potential "clients" when the private sector trying to sell
their technology.
 For example, Finland's Partnership Programme in Central America helped Finland
industry made effort to adapt technology that suits local requirement.
 As successful investments can ensure the maximum efficiency and environmental
benefits.
 Risks
 High political &commercial risks in the developing country often prevents projects
from being materialised.
 Commercial banks-assume there is no political &commercial risks
 However, MFI-assume there is political but not the commercial risks
 IF the commercial risks can be mitigated they can get higher in clean development
business then they can target financial donors that facilitate TT.