Presentaci

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The Inter-American Development Bank PSLO
Meeting October 15, 2008 IDBs commitment to
green energy
Gregor Meerganz von Medeazza Sylvia Larrea Carla
Tully
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Presentation Outline

• IDBs Sustainable Energy and Climate Change
  Initiative
• Biofuels Case Study Itumbiara, Ituiutaba,
  Campina Verde
• IDB Biofuels Sustainability Scorecard

PSLO MeetingOctober 15, 2008
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Presentation Outline

• IDBs Sustainable Energy and Climate Change
  Initiative

PSLO MeetingOctober 15, 2008
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Energy Climate Change Challenges for the LAC
Region

• LAC countries confront a twin dilemma
• - They must boost their energy consumption to
  fuel economic and social development.
• - Energy use has been largely responsible for an
  increase in greenhouse gases emissions
• Approx. 10 of total population (50 million
  people) does not have electricity.
• Energy demand in LAC will increase 75 by 2030.
• Required investments to satisfy such demand will
  be around US 1,600 billion.
• Achieve sustainability of energy supply and
  rational use of energy resources
• Regulatory and institutional frameworks
• Pre-investment funding for project preparation

PSLO MeetingOctober 15, 2008
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Expected Impacts of Climate Change in LAC

• Andean inter-tropical glaciers likely to
  disappear over the next decades
• Changes in precipitation trends
• Continuous decline in natural land cover at
  very high rates
• Risk of significant species extinctions in
  many areas of tropical Latin America
• 50 of agricultural lands likely to be
  subjected to desertification and salinisation in
  some areas, by the 2050s
• Increase in the number of people experiencing
  water stress likely to be between 7 and 77
  million by the 2020s
• The expected increases in sea-level rise
  (SLR), weather and climatic variability and
  extremes are very likely to affect coastal areas

PSLO MeetingOctober 15, 2008
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IDBs response SECCI

• Approved by the IDB Board in March 2007
• A response to LACs request for an expanded
  role in sustainable energy and climate change in
  LAC
• IDB contribution to the new international clean
  energy investment framework
• Bank wide-initiative complementing the Banks
  existing efforts in energy
• Technical Cooperation, programmatic PBL and
  Investment Grant support for IDB project lending
  and policy lending

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IDB Sustainable Energy and Climate Change
Initiative 2008 Activity
PSLO MeetingOctober 15, 2008
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Climate Investment Funds IDBs leadership on
Climate Change in LAC

• New funds for promoting low carbon and climate
  resilient growth and development
• CIF - Two Funds Clean Technology (CTF) and
  Strategic Climate Fund (SCF)
• Purpose to scale-up investments moving from
  project to programs
• Fill immediate financial gap for urgent actions
  until the post-2012 regime financial architecture
  is effective
• Accelerate public and private investments
• Amount US 6.1 Billion
• Timeframe now and for next 5 years

PSLO MeetingOctober 15, 2008
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SECCI Policy-based programs Mexico and Colombia

• Country-specific Stern Report
• Strengthening Environmental Ministries
  responsible for CC policies
• Mainstreaming CC in priority sectors
• Development of CC plans for 15 states (Mexico)

PSLO MeetingOctober 15, 2008
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SECCIs Operational Structure
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SECCIs Biofuel objectives

• Assess the economic viability of biofuels and
  bioenergy development.
• Provide sustainability assessment to mitigate
  potential adverse social and environmental
  impacts.
• Assist Latin America and the Caribbean in
  becoming a leader in climate friendly biofuels
  production by increasing research and expertise
  in second generation biofuels.
• Provide country-level policy assistance in
  support of biofuel development.
• Finance sustainable biofuel and bioenergy
  programs, including feedstock development,
  production facilities, and related infrastructure.

PSLO MeetingOctober 15, 2008
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Promoting Sustainable Biofuels

• The lesson learned is that we have to
  distinguish between the various biofuel options,
  looking very carefully at the different
  feedstocks, agricultural practices and production
  processes to ensure that only the most
  sustainable biofuels are promoted the ones that
  offer climate benefits while protecting
  biodiversity and food security

PSLO MeetingOctober 15, 2008
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Key Trends in Biofuels

• Increasing demand given high price of oil and
  climate change awareness
• Moving target scientific opinion continues to
  evolve
• Highly complex issue with a series of
  trade-offs
• Focus on sustainability standards, but no
  available tools for assessment so far

PSLO MeetingOctober 15, 2008
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IDB Supporting Investment in Sustainable Biofuels

• Biofuels action plans and technical
  cooperation
• Partnership with the Roundtable on Sustainable
  Biofuels
• Biofuels Sustainability Scorecard for assessing
  biofuels projects

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IDBs role in knowledge sharing and regional
cooperation

• Brazil-US MoU IDB partnership to elaborate
  Biofuel Blueprints in Central America and the
  Caribbean
• Meso-American Biofuels working group
• - Sharing best practices and technology transfer
• - Action plans for regional initiatives for
  ethanol and biodiesel
• Upcoming regional stakeholder meetings with the
  RSB focusing on sustainability

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IDB Support

• Blueprints and Action Plans for Biofuels
• suitability for production
• mapping of areas for feedstock development and
  production facilities
• Regulatory and legal issues
• Technical cooperation
• sustainability standards,
• Clean Development Mechanism credits
• new technology utilization

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IDB Private Sector Projects

• Ethanol feedstocks
• - Grain sorghum
• - Municipal waste
• - Pineapple waste
• - Sugar beet
• - Sugarcane
• - Sweet sorghum
• Biodiesel feedstocks
• - Castor bean oil
• - Jatropha
• - Palm oil
• - Recycled kitchen oil
• - Soy
• - Sunflower oil

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Presentation Outline

• IDBs Sustainable Energy and Climate Change
  Initiative
• Biofuels Case Study Itumbiara, Ituiutaba,
  Campina Verde

PSLO MeetingOctober 15, 2008
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Bioenergy Projects Background

• Demand for sugar and ethanol, expected for the
  domestic and export market to grow at an annual
  average rate of 4 and 14, respectively, until
  2020.
• Brazil will have to undertake substantial
  capital investments to increase its sugarcane,
  sugar and ethanol production estimated at US70
  billion.
• This Projects will provide part of such
  investment in the sector.

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Bioenergy Projects Project Location
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Bioenergy Projects Description and Structure

• Construction, operation and management of (i)
  3 greenfields sugar and ethanol mills located in
  the States of Goiás and Minas Gerais with a total
  cane crushing capacity of 8.1 million tons per
  year (ii) a 168 MW biomass-based co-generation
  plant and (iii) the development of sugarcane
  plantations.
• Full commercial and legal due diligence, hiring
  consultants for
• Local and international legal review
• Technical/engineering review
• Agricultural review
• Insurance review
• Market review
• Financial and economic review
• Environment review

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Bioenergy Projects Description and Structure

• Project challenges. Risk identification and
  proposed mitigants.
• Environmental considerations.
• Financing structure
• Total Project costs US1 billion.
• Long-term debt IDB A-Loan for US260M and B-Loan
  for US350M
• Tenor 13 and 15 years

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Bioenergy Projects Benefits

• Improve the competitiveness of the sugar and
  ethanol industry in Brazil by having a low-cost
  vertically-integrated facility as well as
  satisfying part of the growing domestic and
  international demand for ethanol
• Create significant impact on the regional
  economy, by contributing to the creation of
  business and technological clustering.
• Generate direct and indirect jobs (during
  construction and operation) while increasing the
  qualifications and level of training of the
  employees hired in the plants.
• Increase the contribution of bioenergy in the
  national energy matrix (i.e., with 56 MW of
  biomass renewable energy).

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Bioenergy Projects Monitoring

• Monitoring during the life of the transaction
  with annual or semiannual reports
• Technical review
• Agricultural review
• Environmental and Social review
• Insurance review

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Presentation Outline

• IDBs Sustainable Energy and Climate Change
  Initiative
• Biofuels Case Study Itumbiara, Ituiutaba,
  Campina Verde
• IDB Biofuels Sustainability Scorecard

PSLO MeetingOctober 15, 2008
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SECCI/SCF Scorecard Process

• High demand in biofuels
• Needed a way to screen for the best projects
• Sought internal and external feedback from
  academics, environmental NGOs, financial
  institutions, investors, and biofuels project
  developers in the US, EU, and in LAC
• Launched the Scorecard on 9th of September at
  4th Annual Western Hemisphere Energy Security and
  Cooperation Forum, hosted at IDB.
• A 6-month broad public consultation period has
  begun with the posting of the Scorecard on the
  website

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Scorecard Scope

• IDB knowledge product developed for use by
  financial institutions, investors/developers, and
  IDB at all stages of project lifecycle
• Government entities, NGOs, and other members of
  biofuels community also expected to benefit from
  Scorecard
• Thinking tool for how to address environmental
  and social sustainability issues
• Does not provide a single score
• Fosters communication with clients about specific
  sustainability issues related to biofuels
• Not a replacement for environmental and social
  due diligence
• Addresses complex issues in an organized and
  visual way
• Color map allows user to assess sustainability of
  project, including key trade-offs

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Scorecard Use

• Colors used to designate rating from excellent
  to unsatisfactory
• If red (unsatisfactory), project should not be
  pursued
• Promote discussions about sustainability issues
  at an early stage
• Framework for providing clients with guidance
  on sustainability throughout project lifecycle
• Already used to improve the sustainability of
  various biofuel projects
• Anticipate potential obstacles (future
  regulations, import restrictions, community
  response, etc.)
• Complimentary to environmental and social due
  diligence process

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Biofuels Sustainability Scorecard
www.iadb.org/scorecard/contactscarlat_at_iadb.or
gebeall_at_iadb.org gregorm_at_iadb.org
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Examples of Use

• A biofuels project in Uruguay already benefited
  from the Scorecard the IDB team raised concerns
  to the client about a potential food vs fuel
  issue. IDB and the client are working together
  to identify methodologies for evaluating the
  issue and ensuring the sustainability of the
  project
• Another project in Costa Rica also used the
  Scorecard guidelines the client was counseled to
  cultivate grain sorghum in rotation with rice on
  fallow land where rice is currently cultivated
  only 6 months per year, instead of displacing
  year-round production of rice on irrigated
  productive land
• Another example of use is with a Fund client
  that will provide loans to biofuels producers in
  LAC they will use the Scorecard in assessing
  projects for their own sub-lending

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Next steps

• Regional stakeholder meetings with Roundtable
  on Sustainable Biofuels
• Presentation to World Bank and MDB working
  group on biofuels
• Working with EXR on presentation of Scorecard
  in other venues
• Revise Scorecard based on results of broader
  public consultation, IDB experience with
  Scorecard, and continued evolution of scientific
  information and perspectives

PSLO MeetingOctober 15, 2008