Maputo, April 2016

Principles of Planning for Investments in Low Emissions

Development

Investment Planning For Green

Growth and Climate Resilient

Development

A high-level introduction to the importance of and

process for developing investment plans for

Green Growth and Climate Resilient

Development .

GG and CR Development Process Overview

• Form a planning committee

• Identify other key stakeholders

• Conduct policy review

• Conduct sector analyses

•Assess implementation potential and risk

• Assess existing project pipeline

• Design M&R strategy

• Select financing strategy

• Periodic review• Course correction

Investment Planning For Green Growth and Climate Resilient Development : Introduction

Initiating Stakeholder Engagement

Scoping Country Context

Prioritizing Sector

Options

Development of Project Concepts

Implementation

Investment Planning For Green Growth and Climate Resilient Development : 1. Scoping Phase

B: Conducting sector analyses

– National GHG Emissions Profiles and Projections

– Resource Mapping and Sector Priorities

– Policy and Regulatory Environment

– Stocktaking of Ongoing/Planned Initiatives

A: Initiating ongoing stakeholder engagement

– Identifying Key Stakeholders

– Setting up a Planning Committee

– Multi-Stakeholder Consultation

– Engaging Private Sector, CSOs, and Indigenous Peoples where appropriate

1. The Scoping Phase

Investment Planning for Green Growth and Climate Resilient: Scoping Phase

Conducting Sector Analyses

Scoping Your Country Context

GHG Emissions Profile and Projection

Policy, Regulatory, and

Institutional Framework

Energy and Sector Resource Mapping

and Strategies

Ongoing and Planned

Programs and Initiatives

Low Emissions Investment Planning (LEIP):Scoping Phase

Section 2: Conducting Sector Analyses

Assessing GHG Emissions and Identify Trends

Consider the entire country emissions

profile

Identify primary emissions sectors

Identify emissions subsectors

Identify point sources of emissions

GHG Emissions Profile and Projection

Policy, Regulatory, and

Institutional Framework

Energy and Sector Resource Mapping

and Strategies

Ongoing and Planned

Programs and Initiatives

Understanding Your Baseline

GHG Emissions Profile and Projection

Policy, Regulatory, and

Institutional Framework

Energy and Sector Resource Mapping

and Strategies

Ongoing and Planned

Programs and Initiatives

Understand current emissions, past trends, future projections (to plan investments to lower emissions, you need to know what level you are lowering from)

Inform design at different phases in the LEIP development process

– Consultation based on common information

– Evidence-based decision making and prioritization

– Baselines for results monitoring

– Draft components of the investment plan

Assessing Implementation Potential and Risks

– GG and CR technology options, including:

• National/sector priorities

• Funding source criteria

– Relevant policy, regulatory, planning frameworks

– Institutional framework and capacity

Investment Planning for Green Growth and Climate Resilient Development: 2. Prioritization Phase

Welcome to Phase 2: The Prioritization Phase

Assessing Implementation

Potential

Investment Planning for Green Growth and Climate Resilient Development: 2.Prioritization Phase

A: Assessing Implementation Potential and Risks

• Existing national priorities• For e.g. Potential GHG reductions and abatement

costs• Other emissions reduction potential (black carbon,

NOX, SOX) and co-benefits (improved air quality)• Funding source criteria

Sectors

Policy • Policy and regulatory framework

• Institutional framework and capacity (technical, financial, human resource)

• Project readiness

Institutional Capacity

Assessing the Policy Environment

How do current policies influence and relate to:

• Trends: Data and analyses related to energy resources, GHG emissions, and mitigation opportunities

• Targets: Relevant development and emissions goals

• Priorities: For investment and capacity building

• Barriers: To investment

• Incentives: For investment and capacity building

• Investment Frameworks: Institutional roles, responsibilities, and capabilities

Investment Planning for Green Growth and Climate Resilient Development: 2. Prioritization Phase

A: Assessing Implementation Potential and Risks

Assessing the Investment Climate

Source: Criteria for Selecting Country and Regional Pilots under the Program for Scaling Up Renewable Energy in Low Income Countries, Climate Investment Funds, March 2010

1. The existence of, or a willingness to, adopt supportive regulatory structures and institutions.

2. A regulatory environment that promotes business.

3. Sector-wide energy development strategies that are open to integrating renewable energy.

4. Good governance within the sector.

Investment Planning for Green Growth and Climate Resilient Development: 2. Prioritization Phase

A: Assessing Implementation Potential and Risks

Towards An Enabling

Environment for GG & CR

Development Investment

• Country Risk - Macroeconomic and Political risks related to the country - Resource: The World Bank’s Doing Business Report

• Regulatory Risk - Change in policies or regulations that support low emissions development, such as the removal of a feed-in tariff

• Technology Risk - Risk tracks technological maturity; higher risks for new technologies, lower risks for established technologies

Investment Planning for Green Growth and Climate Resilient Development: 2. Prioritization Phase

A: Assessing Implementation Potential and Risks

Assessing Risks

Country Level

Project Level

CTF Example: Country Level Risk – Chili CTF Investment Plan

Investment Planning for Green Growth and Climate Resilient Development: 2. Prioritization Phase

A: Assessing Implementation Potential and Risks

Implementation Risk - Delays in construction and project build-out

Currency Risk - Appreciation or depreciation of local currency

Sponsor Financial Risk - Balance Sheet Strength and Sponsor Credit-Worthiness

Market Risk – Pricing

Safeguard Risk - Social and environmental impacts

Investment Planning for Green Growth and Climate Resilient Development: 2. Prioritization Phase

A: Assessing Implementation Potential and Risks

Assessing Risks

Country Level

Project Level

Investment Planning for Green Growth and Climate Resilient Development: 2. Prioritization Phase

Case Study Exercise: Kenya

Geothermal Risks:1. Insufficient technical

data2. Human resource

constraints3. High capital costs

Match the risk identified to an appropriate preparation option for Kenya’s Investment Plan. ( Use Clickers)

A: Assessing Implementation Potential and Risks

Options:A. Incentives for private sector

investmentB. Encourage local manufacturingC. Undertake feasibility studiesD. Training of human resourcesE. Strategic grid extension

Welcome to Phase 3: Develop Project Concepts

– Assess existing and planned programs and projects

– Develop an M&R strategy

– Define financing strategy

• Select finance instruments

• Identify sources of financing

Investment Planning for Green Growth and Climate Resilient Development:3. Project Concept Development

A: Develop Project Concepts

Developing Project Concepts in Context

Link to the objectives and scope of the country-level program set by the Government

• Priorities for achieving low emissions development goals

• Existing institutional arrangements

• Existing financing mechanisms

Build on existing programs, plans, and pipelines

• Can fill critical programmatic gaps

• Can serve as a catalytic force for planned investments

Investment Planning for Green Growth and Climate Resilient Development:3. Project Concept Development

A: Develop Project Concepts

Investment Planning for Green Growth and Climate Resilient Development:3. Project Concept Development

A: Develop Project Concepts

Common Climate Finance Instruments: Debt and Equity

Common Climate Financing Products and Arrangements

– Grants

– Guarantees

– Public Private Partnerships (PPPs)

– Results-based finance

– Equity

Debt Instruments

– Loans

• Commercial loans

• Concessional loans

– Subordinated debt

– Bonds

Rationale for Financing Instruments

• Concessional finance and Grants - Useful for projects that would not otherwise have been taken up by the private sector or the public sector

• Guarantees - Useful for encouraging private sector investment in projects

• Public Private Partnerships (PPPs) - Useful financing structures for infrastructure investments

• Equity - Useful for large infrastructure projects and renewable energy service providers

• Results-based financing - useful for projects designed to reduce or avoid greenhouse gas emissions; usually supplements other financing

Investment Planning for Green Growth and Climate Resilient Development:3. Project Concept Development

A. Develop Project Concepts

Incorporating Environmental and Social Considerations

• Environmental

– Environmental impacts

– Biodiversity

• Social

– Project-affected People

– Gender mainstreaming

All stakeholders: Identify and suggest relevant indicators.

Investment Planning for Green Growth and Climate Resilient Development:3. Project Concept Development

A: Develop Project Concepts

Welcome to Phase 4. Implementation Phase

• Periodic Reviews and Course Corrections

• Monitoring and Reporting

Investment Planning for Green Growth and Climate Resilient Development:4. Implementation

A. Periodic Reviews and Course Corrections