MOBILIZING PRIVATE RESOURCES AND FINANCING INCLUSIVE GREEN GROWTH IN THE REPUBLIC OF MOLDOVA

Andrei ISAC, Independent Expert,

former Head of Environmental Policy Department , Ministry of Environment, Republic of Moldova

G20 DWG Workshop on Inclusive Green Growth, 7 July 2013, Moscow

“MOLDOVA 2020”: 7 SOLUTIONS FOR ECONOMIC GROWTH AND POVERTY REDUCTION National development strategy adopted

in 2012 Aims to accelerate economic growth and,

implicitly, poverty reduction by: Conducting structural changes of the

national economy; Promoting a dynamic growth model

based on local and foreign investments and development of industries exporting goods and services.

Identifies seven priority areas: the “7 solutions for economic growth and poverty reduction”

States that the country will undertake all efforts to ensure the transition towards green economic development

Population: 3.5 million (UN, 2011)Capital: ChisinauArea: 33,800 sq km (13,050 sq miles)Life expectancy: 66 years (men), 73 years (women)Main exports: Foodstuffs, animal and vegetable products, textilesGNI per capita: US $1,810 (World Bank, 2010)

DEVELOPMENT PRIORITIES Aligning the education system to labor market needs in

order to enhance labor productivity and increase employment in the economy.

Increasing public investment in the national and local road infrastructure in order to reduce transportation costs and increase the speed of access.

Reducing financing costs by increasing competition in the financial sector and developing risk management tools.

Improving business climate by streamlining the regulatory framework and applying information technologies in public services for businesses and citizens.

Reducing energy consumption by increasing energy efficiency and using renewable energy sources.

Achieving financial sustainability of the pension system in order to ensure an appropriate rate of wage replacement.

Increasing the quality and efficiency of justice and fighting corruption in order to ensure equity for all citizens.

ENERGY EFFICIENCY OBJECTIVES AND TARGETS

Indicator 2010 2015 2020

Reducing energy intensity by 10%

Reducing electricity losses in transport and distribution networks

up to 13% up to 11%

Reducing natural gas losses in transport and distribution networks

by 20% by 39%

Reducing heating losses in transport and distribution networks

by 2% by 5%

Reducing greenhouse gas emissions (compared to 1990)

by 25%

Diminishing the share of natural gas in the national energy mix

53% 45%

Reducing energy consumption in buildings by 10%

Share of renovated public buildings 10%

MOLDOVAN SUSTAINABLE ENERGY FINANCING FACILITY (MOSEFF) Launched in September 2009 by the European Bank

for Reconstruction and Development (EBRD) in order to support energy efficiency investments of Moldovan enterprises;

EBRD made a total of € 20 million available for on-lending through local partner banks;

MoSEFF includes a grant component for eligible projects, from 5% to 20% of the loan amount, depending on the energy savings and CO2 emission reductions achieved;

Offers a higher share of grant financing for projects employing Best Available Techniques (BAT).

http://www.moseff.org

MOSEFF: TYPICAL INVESTMENTS Energy efficiency

Thermal insulation of walls, roofs and floors, installation of insulated windows, rolling doors or door lockers

Replacement and rehabilitation of boilers (enhanced control, economizers, etc.)

Refurbishment of efficient heat and power distribution systems

Switch from electric heating to fuel based heating Renewable energy 

Biomass combustion in heat only and combined heat and power plants

Biogas generation for the use in heat only and combined heat and power plants

Solar thermal collectors for hot water or steam generation, Solar photovoltaic power plants

Small hydro power plants Wind power plants

80 PROJECTS: EXAMPLES OF RESULTS ACHIEVED BY SECTORS/COMPANIES

Food sector: Telemar LTD: 55% energy savings, a 66% carbon emission reduction;

Agricultural sector: Agromaxer LTD: savings 91% of energy and reducing annual CO2 emission by 1322 tons;

Industrial sector: Macon SA: achieved 43% energy savings and a 40% carbon emission reduction;

Building rehabilitation: Artima SA: achieved 83% energy savings and CO2 emissions reduction of 163 tons per year;

Small enterprises: Startcom LTD: reduce the company’s energy consumption by 90% and CO2 emissions by 31 tons annually;

Energy projects: Vila Verde Hotel: the largest solar thermal system in Moldova with a surface of 200 m2 - reduced its energy consumption by 80% and its CO2 emissions by 133 tons per year.

USE OF REMITTANCES

Important role – some 30% of GDP PARE “1+1” programme –

replicates Mexican experience  Aims to mobilize the human and

financial resources of Moldovan migrants, in Moldova's sustainable economic development, by fostering the establishment and development of small and medium enterprises by migrant workers and recipients

Operates under the rule of "1+1", so every MDL invested from remittances will be complemented with a MDL in the form of grant

Grant financing can amount up to 50% of the investment, but not more than 200 thousand MDL

Not yet clear how could be used to finance “green” projects

Source: http://www.worldbank.org/content/dam/Worldbank/document/eca/Moldova-Economic-Update.pdf

COMPLEMENTARY INVESTMENT SOURCES Public funding

National Ecological Fund – 10 million Euro/year (revenue from environmental taxation)

National Regional Development Fund – 10 million Euro/year National Energy Efficiency Fund – 6.3 million Euro/year

Donor funding European Union Programs - 2011-13 National Indicative

Programme (NIP) - €273.14 million financed under the European Neighbourhood and Partnership Instrument (ENPI)

US Millennium Challenge Account - 2010-2015 Compact $262 million grant

GIZ – German International Cooperation Agency: German support for Investments – 15 million Euro in 2013 (water supply and sanitation; Waste management; Energy efficiency.

MAJOR CHALLENGES TO PRIVATE INVESTMENT

On the demand side:Deficiencies in the framework policies and public administration practices

Need for regulatory reforms (e.g. improved regulations on energy audits, energy efficiency standards and labels, on associations of homeowners), investing in education, supporting R&D

Information dissemination – insufficient access to information and uncertainties regarding the performance of new technologies make firms risk averse with regard to long-term green investments

Subsidized and cross-subsidised prices and tariff structures not related to consumption (i.e. where actual consumption is not metered) impede green investments - pricing in Moldova gradually addressed

Insufficient capacity of borrowers to prepare viable projects

On the supply side: Lack of liquidity or access to adequate funding in the banking

system General creditworthiness requirements of lenders and credit

constraints faced by enterprises and households (e.g. high interest rates, short maturities, focus on short-term returns)

Lack of capacity within local banks to identify and finance green investments

FUTURE OBJECTIVES AND ROLE OF INTERNATIONAL COMMUNITY Continue to support the existence of a mix of financing

instruments (private, public domestic, ODA, etc.) Advise on the further development of financing

instruments Help understand the magnitude of investment flows Help understand specific market and policy barriers

that restrict green, low-carbon financing EaP GREEN programme (EU, OECD, UNECE, UNEP, UNIDO)

Help foster public-private partnerships and advise on how to best match private and public financing

Facilitate the transfer and diffusion of environmentally sound technologies and corresponding know-how

Capacity development and pilot projects Moldova Energy and Biomass Projects (EU and UNDP)

THANK YOU FOR YOUR ATTENTION!