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The IDB and Renewable Energy
Since 2000 the IDB has financed more than US$2.1 billion in renewable energy projects in LAC, including hydropower, wind power, and geothermal, in addition to improved energy efficiency in power transmission. Financing has been extended to both the public and private sectors. Since 2005, the Inter-American Investment Corporation, an IDB Group member, has financed more than 10 renewable energy projects, including hydro, biofuels, and landfill methane. The Bank’s Multilateral Investment Fund has provided funding for renewable energy and invested in four clean-energy venture capital funds.
- IDB support for energy efficiency
- The IDB and forest management projects
- GEF activity in IDB for Climate Change Mitigation
- IDB launches process to limit climate impact of its projects
- IDB partners in wind power
- Drawing lessons from IDB’s support to the region
IDB support for energy efficiency
IDB public sector operations are supporting energy efficiency projects in Peru, Chile, Barbados, the Bahamas, Chile, the Dominican Republic, Jamaica, Mexico, and Peru, with investments over US$100 million. The Bank’s private sector operations are financing significant energy efficiency investments in heavy industry and agribusiness. The Bank’s private sector department has partnered with UNDP and the Global Environment Facility (GEF) to create guarantee mechanisms for developing and stimulating energy efficiency investments in commercial buildings in Brazil.
The IDB and forest management projects
The IDB has channeled technical assistance to several forest management projects and initiatives, including: the assessment of climate change impacts and ecosystems services in Iwokrama, a forest reserve in Guyana; the creation and development of economic incentives for Reduced Emissions from Deforestation and Forest Degradation REDD; mainstreaming biodiversity conservation through avoided/ reduced deforestation in the Andean-Amazon piedmont of Colombia; a Maya biosphere reserve environmental services program in Guatemala; and sustainable forestry in protected areas in Guyana.
GEF activity in IDB for Climate Change Mitigation
Having obtained status as a GEF Execution Agency since 2004, the IDB has increased the amount of grant resources going to LAC for enhancing capacity to maintain and generate global environmental goods. The current IDBGEF portfolio/pipeline amounts to US$106 million in high-quality projects, some of which are acknowledged as best practice and recognized for their innovative design. Climate Change Mitigation projects correspond to 29 percent of the total portfolio, primarily supporting energy efficiency and renewable energy investments, technology transfer and enabling policy and regulatory frameworks throughout the region. This US$25 million portfolio leverages more than US$100 million from IDB loans and other related sources.
IDB launches process to limit climate impact of its projects
The Inter-American Development Bank has begun an unprecedented process to limit the greenhouse gas emissions of projects it finances by issuing a set of guidelines for coal-fired power plants. The new guidelines are the first in a series that will set clear limits and apply consistent standards and criteria to allowable climate impacts of IDB-financed projects. Project areas include manufacturing, agriculture, oil and gas industries.
The Bank chose to adopt specific emission thresholds—instead of a more general parameter— in order to provide clarity and offer transparent criteria to governments and investors who seek IDB financing. These thresholds are likely to be raised as new technology becomes available that enables all kinds of power plants to operate with lower climate impacts.
IDB partners in wind power
With wind power’s expansion in LAC and around the world, the Brazilian company Tecnologia e Sistemas Avancados Ltda (TECSIS) was seeing orders increase for its custom turbine blades. The company needed to expand its production capacity, but the resources it had available were already earmarked for short- and medium-term obligations. The company approached the IDB for help in refinancing these obligations, which totaled some US$75 million. In 2008, the Bank extended a US$120 million non-sovereign guarantee loan to TECSIS for the refinancing and to cover a portion of the company’s 2009 working capital requirements.
The operation helped to pave the way for future Bank-financed wind power projects. The loan structuring process included an IDB-financed market study on the global wind power sector, industry trends, and the company’s competitiveness in the sector. Additional data was produced by an evaluation of the environmental and social impacts associated with the company’s current operations and facilities.
Drawing lessons from ID B’s support to the region
- Base policy decisions on scientific knowledge, including adequate baseline data and periodic GHG inventories and vulnerability assessments. Analytical tools to assess opportunities must be integrated to be effective.
- Consolidate institutional frameworks for climate action: mainstream climate mitigation and adaptation decision-making in sectoral policies, and engage finance ministries and support from executive branches.
- Turn strategic objectives into actual programs by providing adequate funding and assistance to government agencies and incentives to public and private actors.
- Adopt regulatory frameworks that promote public and private investment for climate change adaptation and GHG emissions mitigation.
- Provide financing for public and private sector projects that demonstrate the potential of a given technology, resource, or financial instrument, thus encouraging improvements in regulations and laws.
- Improve development and transfer of renewable energy and energy efficiency technologies and adapt them to local conditions.
- Develop new approaches to financing, including national appropriate mitigation actions, resulting in sustainable development plans and strategies.
- Make available new mitigation instruments for sectors with significant emission reductions potential, such as land use change/deforestation and energy efficiency across the economy.
- Support LAC’s participation in carbon markets by widening support for public and private entities that incorporate carbon finance and pilot relevant approaches in the context of a long-term climate change framework.
- Support dialogue and outreach activities to better respond to the priorities of IDB member countries and stakeholders.
