IDB supports the Latin America and the Caribbean in responding to Climate Change with the help from International Finance
The IDB is supporting the Latin America and the Caribbean Region in its response to Climate Change with help from International Finance: The Climate Investment Funds.
The IDB’s participation in the Climate Investment Funds (CIF) adds a powerful and flexible instrument to the Bank’s efforts to help Latin America and the Caribbean adapt to climate change threats and mitigate greenhouse gas (GHG) emissions.
As one of six CIF implementing agencies, the IDB administers a total of US$757.22 million in CIF grants and concessional loans. These resources are helping to finance 10 investment plans, and 25 projects and programs in both the public and private sectors in areas such as renewable energy, energy efficiency, sustainable forestry, low-emissions transport, and national and regional planning, as well as knowledge management and capacity building activities.
The IDB’s work with the CIF builds upon an extensive program of climate change initiatives carried out with the Bank’s own resources. It also draws on the Bank’s more than 50 years of experience in the countries of the region as well as its intimate knowledge of the region’s social and political realities. Much of the Bank’s experience has been in sectors of particular relevance to climate change, such as water resources management, sustainable energy and transport, and disaster risk management.
Results where it counts
IDB-administered CIF projects are producing concrete results that not only address future climate change challenges but also bring immediate benefits in terms of development.
In Mexico, for example, the first 1,315 of an eventual 27,600 energy-efficient “Ecocasas” (low-carbon emission houses) are being built in the cities of Monterrey, Pachuca, and Tula. The new houses will reduce GHG emissions; increase the comfort of residents, and lower electricity bills with features such as roof and wall insulation, reflective paint, and efficient windows. These funds have also served for the scaling up of Renewable Energies in Mexico. Since these were new technologies in the country, and not demonstrated entirely, banks had set high risk premiums for their credits, representing a heavy barrier for developers.
These funds have provided access to credit, mitigating perceived risks, and therefore there has been an increase in the flow of private funds supporting these projects. These funds have supported a 164 MW wind farm in Oaxaca, and the first solar photovoltaic plant in La Paz, Baja California, with a total investment of 100 million dollars, generating 30 MW. It has also recently funded another photovoltaic plant in the state of Durango, with a capacity of 16 MW.
Support for the most vulnerable
The IDB carries out operations with resources from CIF’s Clean Technology Fund (CTF) and the three programs within the Strategic Climate Fund (SCF), as follows:
Clean Technology Fund:17 operations for sustainable transport, energy efficiency and renewable energy production in Chile, Colombia, and Mexico totaling US$553.08 million.
Forest Invesment Program: Three operations to promote sustainable forestry and reduce deforestation in Brazil, Mexico and Peru totaling US$77.95 million.
Pilot Program for Climate Resilience: Five operations to integrate climate risk and resilience into development planning and implementation in Bolivia, Jamaica and the Caribbean region totaling US$92.35 million.
Scaling-Up Renewable Energy Program in Low Income Countries: Four operations for Honduras totaling US$33.84 to create an enabling environment for scaling-up grid-connected, renewable energy, and for providing off-grid energy services in rural areas.
The IDB utilizes CIF grants to finance both public and private sector projects, particularly in small or low-income countries. In the Caribbean, for example, a CIF grant will help Jamaica design a strategy for reducing the economic and social effects of severe weather events and other climate change impacts. In Honduras, a grant will lay the groundwork for a regulatory and institutional framework to increase renewable energy production and reduce the country’s reliance on imported fossil fuels.
Grants also support technical cooperation provided in conjunction with concessional loans. In Colombia, for example, a national development bank will use a CTF technical cooperation grant to design and implement a concessional credit line to enable local financial institutions to provide businesses with funding for energy efficiency investments.Concessional loansare extended to middle-income countries to finance public and private sector projects and initiatives to help borrowers develop the capacity to carry out investments in a given sector. Examples are large-scale CIF-financed investments in Chile, Colombia, and Mexico in energy efficiency and renewable energy production. Loans include credit lines through financial intermediaries to provide financing for borrowers to draw upon as needed as well as direct loans to developers. CIF resources also support insurance products to reduce risks inherent in the activities being financed and guaranteesthat ensure that the obligations of a borrower are fulfilled in the event of non-performance or default.
The IDB implements CIF-funded projects and programs in partnership with governments, bilateral or multilateral cooperation agencies, private sector and civil society organizations, and the other multilateral development banks (MDBs) that act as CIF implementing agencies, namely the World Bank and the International Finance Corporation.
For example, in several private sector projects, the IDB and the International Finance Corporation (IFC) are collaborating in project implementation as well as contributing additional financing. Such is the case with wind power generation projects in Mexico and with a large-scale photo voltaic program in Chile, in which both the IDB and the IFC are participating as CIF implementing agencies while attracting additional financing from commercial banks and development finance institutions.
CIF-funded climate change operations also provide new opportunities for collaboration among the IDB’s different operational areas. For example, several departments (Institutional Capacity & Finance; Infrastructure and Environment; Structured Corporate Finance, and the Multilateral Investment Fund) are collaborating in different activities to spur energy efficiency in Colombia.
Monitoring and evaluation
CIF requirements for monitoring and reporting are critical for tracking project performance, ensuring accountability, and determining the ability to produce results. The IDB reports in accordance with the CIF results framework and also applies its own monitoring and evaluation procedures for CIF-financed projects.
In addition, a number of IDB-implemented projects include impact evaluations in their objectives, such as the Ecocasa program in Mexico and Colombia’s energy efficiency in the services sector project. In Chile, a concentrated solar power project includes technical cooperation that will generate information on lessons learned, GHG emission reductions achieved, and benefits provided to the local economy.
The IDB’s Office of Evaluation and Oversight is participating with the independent evaluation offices of the other MDBs in an independent evaluation of results of CIF operations, which is scheduled for completion in 2014.
The IDB’s partnership with CIF has already produced lessons learned which will provide a foundation for preparing and implementing new investments in coming years. For one, CIF-funded projects are demonstrating the value of South-South cooperation. For example, the Bank´s work on renewable energy in Chile builds on its previous experience in Mexico.
Another key lesson learned is the value of partnerships in carrying out operations that by their very nature involve different sectors and coordination among public and private sector groups, including community members. The IDB is uniquely able to create such partnerships through its extensive contacts built up over many years of working in the region with different stakeholders. A particularly valuable IDB asset is its network of country offices, where national and international specialists work with their national counterparts.
Finally, the IDB’s CIF-funded projects demonstrate the critical need for country ownership. This commitment on the part of the country and its institutions is achieved through the formulation of CIF investment plans, in which high-level national officials join with their IDB counterparts to decide on priority investments. Additional country ownership is achieved by input provided by national stakeholder groups during the preparation and implementation of Investment Plans.