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)