One of the big issues debated at COP 15 revolves around the funding the mitigation and adaptation of Climate Change.
Governments are debating who should contribute to this Fund (main concept is that polluting countries should pay more to assist the developing world not pollute as they grow–that some technology transfer needs to happen).
Starting from the Kyoto Protocol where Parties developed the Clean Development Mechanism to assign carbon credits that developed countries could purchase by clean tech projects in emerging markets, there has been lots of movement to find ways to provide liquidity. These range from private sector creating carbon trading markets to Multilateral Banking offering “accounts receivables” type financing against these credits, but there is still clearly a huge funding gap.
In July 2008, the World Bank Board of Executive Directors created the Climate Investment Funds (CIF) and by September 2008 donor pledged over $6.1 billion. These funds will be managed by the World Bank and the Regional Development Banks, i.e African Development Bank, European Development Bank and the Inter-American Development Bank. The initial study report from the World Bank, which focuses on the first objective, finds that the cost between 2010 and 2050 of adapting to an approximately 2°C warmer world by 2050 is in the range of $75 billion to $100 billion a year.
Yesterday a Multilateral Development Bank workshop was held over at the National Opera House to discuss these various funds and inputs for moving forward. Denmark announced that they will input an additional $240M over and above what they have given. In particular at the end of the day, a discussion around the Clean Technology Fund with clearer guidelines and parameters of spending was discussed. The key focus of the Clean Technology Fund is scaling projects around power, energy efficiency and transport.
4 main projects in the various regions including a concentrated solar power plant in Africa were discussed. Many frank input was given as to what works and does not work.One delegate was curious why Africa with water issues was chosen for a solar thermal project that requires massive amounts of water.Meanwhile, other projects they discussed had made attempts to involve small and medium enterprises, enabling co-generation instead of just centralised power systems and one even set up a :foundation” of local community players to enable and empower the community around the projects.
The overall theme however was very old school and idea was to adopt centralized large scale government projects for power generation. Yet throughout the day, there was a vision to ensure the impoverished and marginalized people benefitted as well. This to me is a hard balance to make especially if it comes from traditional bankers.
Whilst I agree that there is a real need for scaling large projects to produce huge amounts of electricity to replace the current carbon intensive ones, I also feel the fact that there is equally a place for co-generation in a distributed model. I was happy to hear the bank does support grassroots movements such as that of the 2004 Nobel Peace Price Laureate, Prof Wangari Maatahi of the Green Belt Movement, I would like to see the Bank do more not just for grassrooots deforestation efforts, but also to support distributed models of rural electrification such as the Grameen Shakti project. Grameen Shakti through the local women installs about 10,000 solar homes a month and have installed 250,000 to date–these are the kind of projects that could scale faster in the emerging world without the need to build huge power plants and distribution lines. It also puts the power and money back into the people who need it most. Besides this project employs and empowers women in the process too.
I also suggested that they look at co-generation in areas such as telecommunication where it makes good business sense to move away from diesel. There are currently 22 million tonnes of carbon from mobile telephony running on diesel, and countries like India use more than 2 billion litres of diesel today. At the same time with zero carbon solutions like VNL and ApnaNet, and very low costs of maintenance and implementation, there are clear opportunities for a low hanging fruit project in the emerging markets which can really scale and benefit the people directly. It is expected over the next 10 years that another 30 Million tonnes will be added to meet the growing needs of telecommunications alone (India has 15 million new users, China has 10 million new users)—there is an opportunity to use the pent up demand for communications and their need to charge mobile phones to explore funding and scaling rural electrification (after all 1.6 billion people today do not have access to electricity).Since from the operater’s perspective, 30-70% of their operating expenditure is energy, they often get return of investment within 6months to a year-this should sound like music to a banker’s ears===great opportunity to fund the greening of the ICT sector (includes energy efficiency of data centres but looking beyond energy efficiency has greater potential). Having funding available from the World Bank and having carbon credits allocated to their efforts, will definitely help mobilise the whole industry to come on board. Right now, we only have few pioneers such as Safarikom, Telefonica, Google, etc.and we need to sweeten the deal for more to follow (helps them also break from the equipment financing lockin they are facing from their vendors not allowing them to change).
So Clean Tech Funds, outside the VC and angel funding exists. Of course these process are more complicated but it nevertheless exists for both private sector and governments. Although for now, Bank financing still appears traditional for project financing or accounts receivable financing i.e ways to minimize their own risk but the staffers look very committed to do their part for Climate Change Mitigation, development, gender empowerment, poverty reduction and so there is hope. In any case, the banks attemptto ensure liquidity especially through the Clean Technology Fund is commendable. It still does appear that the kind of projects the Geeks Without Frontiers is envisaging–bridging the digital divide sustainably and empower the poor out of the poverty line, may still fall outside the purview of VCs, angels, Foundation, microfinance, and Banks etc. We are still thus committed to raising Unity Capital to fill this grassroots financing gap and do hope to find “enlightened” MDBs that are ready to collaborate.