A Systematic Approach for the use of Climate Finance in Sustainable Transport Stacy A. Swann (consultant with GIZ) Transport Day, Paris December 6, 2015 Page 1
Why is Financing Low-Carbon Transport Important? Transportation is responsible for one quarter of energy-related GHG emissions globally and is the fastest growing of all sources Transport GHG Emissions worldwide 7.0 Gt CO 2 eq per year 12.0 Gt CO 2 eq per year 2010 2050 Across the board cuts of 50% needed by 2050 Page 2
There is a Financing Gap for Low-Carbon Transport Significant needed, especially in developing regions Potential Impact: USD $70 Trillion in cumulative savings through 2050. Domestic public sector sources are major source, but insufficient Private sector sources need to be mobilized to complement domestic public sector. ODA minor share of total s in this sector, needs to increase Not expected to grow in line with demand in this sector. International Climate Finance (ICF) has not been the catalyst in this sector, as it has in other sectors. ICF = public climate finance, incl. relevant ODA & specific bi- andl multilateral funds International Climate Finance should be used more systematically to assist scaling-up Sustainable Transport by meeting the needs of communities, potential financiers and other stakeholders Page 3
Sustainable Transport Solutions Sustainable Transport solutions should be selected using Avoid-Shift- Improve approach Manage travel, shift consumers to less carbon-intensive modes, improve environmental performance of fuels and vehicles Results: safer, more affordable passenger and freight transportation. Also more convenient, equitable and resource-efficient Post-2030: greater use of alternative fuels, energy sources will play significant role International experience: Policies matter, governments play a critical role Planning and Investment Frameworks supported by national & local institutions critical Policies and Frameworks link desirable policies and strategies with priority programs Page 4
Recommendations for Systematic Deployment of International Climate Finance International Climate Finance can play a pivotal role in scaling up Sustainable Transport through systematic support in four key areas: Increase relevance of TA and Capacity Building Support good policy development Climate Finance for ST Unlock private using climate finance instruments Build ST pipelines Page 5
Area 1: Support Good Policy Development Investing in low carbon transport requires: Strengthening institutions, improving governance and human capacity within stable political jurisdictions Key Recommendations Increase relevance of TA and Capacity Building Support good policy development Climate Finance for ST Build ST pipelines 1. Strengthen country level transport frameworks Including ST related policies of national & local government 2. Support development of effective technical standards Including fuel emissions and vehicle performance standards Unlock private using climate finance instruments 3. Develop progressive partnerships between public and private sectors Ensure appropriate risk allocation 4. Support capacity enhancement of public policy makers Raise awareness about ST options for policy makers at national, sub-national and municipal level Page 6
Area 2: Build Sustainable Transport Pipelines (1/2) Use ICF to expand & accelerate quality pipelines: Motivate governments to create enabling frameworks, i.e.: Global Fuel Economy Initiative (GFEI) Key Recommendations 1. Co-finance major project preparation facilities Integrate into project prep ST measures 2. Prioritize further development of ST programs (programmatic approach) Increase relevance of TA and Capacity Building Support good policy development Climate Finance for ST Unlock private using climate finance instruments Build ST pipelines 3. Support preparation of first-of-kind ST projects i.e.: nation s first urban rapid transit systems 4. Support education, capacity building and training of public officials responsible for developing ST projects i.e.: through city-networks, urban planning knowledge sharing platforms Page 7
Build Sustainable Transport Pipelines (2/2) Use ICF upstream in the project cycle Project Preparation Eco System Enabling Environment Strategic Planning Project Concept Definition Project Feasibility Project Delivery Planning Project Processing and Approval Supporting legislation and regulation, including for private sector participation Appropriate national and local institutions Sound financing environment Capacity development and consensus building Policy direction Identification, assessment and prioritisation of strategic options Program development systems leading to prioritized list of candidate projects Definition of service needs, outputs and stakeholders for candidate project Review of alternative approaches to meet needs Pre-feasibility study for proposed project (including indicative cost estimates, evaluation and funding analysis) Feasibility study for proposed project Demand, engineering, economic, social, environmental and other technical planning Economic and other evaluations and initial financial modelling Initial institutional and procurement arrangements for project delivery Development of public and private delivery options Formal quantitative analysis (e.g. value-for-money and bench-marking analyses) Market testing and selection of preferred procurement approach Financial, administrative, legal, procurement & risk management arrangements for implementation Agreements and documentation needed for project approval Approval for project implementation Operations Project Implementation Post Implementation Procurement Implementation supervision Project handover Monitoring Evaluation Refinancing Page 8
Area 3: Unlock Private Investment Using CF Instruments Use ICF to address key barriers for Private Sector Key Recommendations 1. Continue to structure ICF in a variety of instruments 2. Equity may be more useful to anchor ST projects, may crowd-in more private capital/debt 3. Use ICF to help facilitate international sources of finance by bearing FX costs Increase relevance of TA and Capacity Building Support good policy development Climate Finance for ST Unlock private using climate finance instruments Build ST pipelines 4. Use ICF to assist and facilitate sub-national access to capital markets, i.e.: credit enhancement, bonds, etc. 5. Improve efficiency & accessibility of international sources of ICF 6. Existing sources of ICF should develop specific focus and criteria to promote Sustainable Transport Page 9
Area 4: Increase Relevance of TA & Capacity Building Technical Assistance is the glue that links: Policies Plans Programs Projects TA key for design of good policies, standards, specifications and to build capacity Funding for upfront costs for TA critical Public education/awareness campaigns also critical to incentivize public perception, behavior Increase relevance of TA and Capacity Building Support good policy development Climate Finance for ST Unlock private using climate finance instruments Build ST pipelines Fostering champions among political leaders, climate funds and civil society would be highly beneficial Page 10
Enhance ST s Eligibility for Climate Finance ICF available to promote ST should correspond roughly to transport s share of overall GHG emissions taking into account carbon benefits and co-benefits not just the marginal abatement cost of GHGs. Create a Transport Window under different ICF mechanisms to ensure that transport is not neglected due to its complex structure. This signals to both policy makers and investors the availability of ICF for this sector. Develop a White List (Positive List) of transport measures that can access ICF, and harmonize criteria for defining low-carbon transport. Adopt eligibility criteria that match the transport sector. Do not evaluate projects merely based on GHG mitigation costs. Include cobenefits as important criterion when deciding on eligibility of transport projects. Page 11
Summary Conclusions Meeting financing needs required to scale-up Sustainable Transport will require funding from both Governments and Private Sector - Policy makers should increase availability of ODA, internat. climate finance Policy makers can & should explicitly promote Sustainable Transport - Policies, enabling environment, legal and regulatory framework matter International Climate Finance should be used systematically to address particular characteristics of transport sector - Across all parts of the project cycle, focus up-stream - Ensure flexibility in instruments, increase availability of equity, help solve FX issue for international sources of finance Leadership from Development Finance Institutions needed to structure and blend financing, and accomplish shifts needed to scale-up Sustainable Transport Page 12
Thank You for Your Attention! Download the Discussion Paper now! http://transport-namas.org/wp-content/ uploads/2015/12/giz-transfer-a- Systematic-Approach-for-the-use-of- Climate-Finance-to-Sustainable- Transport1.pdf More information at: www.transport-namas.org www.transport-namadatabase.org www.slocat.net Page 13