Two recent joint missions from three development finance institutions helped Thailand identify low carbon projects that could be eligible for Clean Technology Fund financing.
Two recent joint missions from three development finance institutions helped Thailand identify low carbon projects that could be eligible for Clean Technology Fund financing.
The CTF missions were the first of many steps needed for Thailand to tap into the CTF, a multilateral fund which helps developing countries transform their industries to produce less carbon emissions. The missions consisted of renewable energy, transport, and climate change experts from the World Bank, the International Finance Corp. (IFC), and the Asian Development Bank (ADB).
The first mission in July introduced the CTF and its benefits to senior Thai policy-makers as well as a select group of private sector representatives. Further meetings and correspondence since have enabled the CTF delegates to assist the Office of the National Economic and Social Development Board (NESDB) in drawing up the CTF Investment Plan for the Kingdom of Thailand.
The plan outlines the carbon emission reduction or mitigation program, for which CTF support is being sought.
During the second mission in August, the delegates helped the Thai government narrow down the number of projects in the Investment Plan to four from the 14 previously identified.
Once finalized, the CTF Investment Plan will be presented to the Thai cabinet for endorsement, and then to the CTF Trust Fund Committee for approval in October.
“These two missions have helped identify an investment program for Thailand to utilize inexpensive financing for projects that could help turn the Thai economy into a green economy,” said Jitendra Shah, an environmental expert from the World Bank office in Bangkok, who led both missions.
“We think that Thailand could be eligible for up to $300 million in CTF financing.”
Set up in 2008, CTF aims to accelerate the deployment of low-carbon technologies in the energy and the transport sectors, the major contributors to greenhouse gas emissions in developing countries.
It provides a very low-interest long-term financing for activities that will (i) reduce carbon emissions by the power sector; (ii) encourage energy savings in the transport sector by shifting to more efficient forms of transport; and (iii) promote efficient use of energy in buildings, industries and agriculture.
CTF Supports National Agenda on Climate Change, Renewable Energy
Thailand, the world’s 24th largest emitter of greenhouse gases, has set several targets related to carbon emissions.
Highly dependent on imported energy, Thailand has also been pursuing renewable energy as a means to improve energy security.
The Tenth National Economic and Social Development Plan aims to reduce by 2011 five percent of the emission per capita produced in 2003. The Ministry of Energy's 15-year renewable energy development plan sets the share of renewable energy consumption nationwide to 20 percent by 2022, from less than 1 percent now. The Bangkok Metropolitan Administration’s five-year action plan also seeks to reduce the capital’s carbon emission by 15 percent by 2012.
“The CTF objective does support Thailand’s development goals as outlined by the Tenth Plan, the Ministry of Energy’s plan, as well as Bangkok’s plan to fight global warming,” said the NESDB director for Agriculture, Natural Resources, and Environment Planning Office, Chuwit Mitrchob. “If approved, the CTF Investment Plan will help the government drive all our effort to transform Thailand into a low-carbon society.”
CTF Could Fill Financing Gaps in Renewable Energy Industry
Despite the broad government support for renewable energy, this industry has been facing a significant challenge with project financing.
At a July workshop organized during the first CTF mission, some project developers complained about the lack of awareness and “perceived risks,” which they said have deterred Thai banks from lending even for obviously feasible renewable energy projects. And if they lend at all, the cost of borrowing tends to be high.
The CTF is particularly useful in this regard, said Rohit Khanna, a World Bank Senior Operations Officer from Washington, DC, who has participated in the July mission.
In Turkey, for example, CTF concessional financing of $100 million, combined with $500 million in a World Bank loan, has helped to establish a credit line for local banks to increase lending to wind, solar, small hydro and geothermal power projects, by improving the rates of return on such projects.
“The main objective is to make these projects financially viable,” Khanna said. “In doing this, we’re essentially developing the private sector and creating a business modality that allows local banks to become more comfortable lending to renewable energy and energy efficiency projects.”
To date, three CTF Investment Plans have been endorsed with CTF co-financing of more than $1 billion. Several other countries, such as Ukraine, Morocco, the Philippines, and South Africa, are currently preparing their Investment Plans for review by the CTF Trust Fund Committee later this year.
In addition, a regional program for scaling up concentrated solar power in the Middle East and North Africa is also under development.