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May 18 th 2010

Green Economy Summit – Johannesburg Convention Center – Shift towards green growth Need for innovative support from Development Finance Institutions?. May 18 th 2010. Main Topics. Snapshot on AFD AFD and green economy in SA A response requiring mind frame changes

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May 18 th 2010

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  1. Green Economy Summit – Johannesburg Convention Center –Shift towards green growthNeed for innovative support from Development Finance Institutions? May 18th 2010

  2. Main Topics • Snapshot on AFD • AFD and green economy in SA • A response requiring mind frame changes • Achieving transition to green growth model • As far as DFIs are concerned • Conclusion

  3. Promoting green and socially inclusive growth is a core strategy for AFD, validated by French government • More than 50% of AFD’s activity relates to the promotion of new “Green orders”: € 3 bn + committed in 2009 • Policy making & investment financing • Through a whole range of complementary tools AFD: a snapshot Policy loan Sector program loan Non sovereign Programmatic loan Sovereign Project loan Credit Lines for small sized projects Grant for study or technical assistance Non sovereign Project loan

  4. AFD’s textbook strategy: supporting key players’ movement towards green growth model in SA • Power sector: support to ESKOM wind farm – 100 MW + – € 100M + • Banks: credit facility to promote renewable energy and energy efficiency projects – IDC, ABSA, Nedbank – € 120M • Municipalities: sustainable development program for eThekwini - € 100M • Research & Development: participation in the South African CCS Center – study funding • Public agency: technical assistance to CEF - € 750k • But…

  5. An insufficient response in face of economic mutation challenges • …are all issues addressed? • Would R&D, industrialization and dissemination of green tech be enough? e.g: state of the art technology does not address urban sprawl • What is a “green New Deal” about anyway? •  Shifting towards green economy requires a change of mind frame, a new paradigm • e.g: the solutions (technical, regulatory) may not yet be known (or exist) but the key challenge is to make sure you factor the issue in your economy • Because the bottom line is: a “green New Deal” is about “decoupling finite resource use and environmental impacts with economic growth” and it is not an easy task

  6. What we know for sure • Public policy is pivotal • needed to impulse behavioral changes and to reconcile growth strategies and environmental constraints • Methodology is unclear, no best practices available • e.g factoring environmental externalities in public policy tools • There is no silver bullet to address environmental challenge • Achieving is not getting there, but getting there before the others • It is also a competitiveness issue Achieving transition to green growth model: some certainties, many open questions • What seems open • How to leverage SA’s comparative advantages in the setting up of a Green growth model… • SA is endowed with many assets which should be benefited from: skilled and young human capital, abundant resources, geopolitical situation, etc. • …while building resilience for its economy? • Over reliance on depletable or scarce resources (fossil energy, water…) could jeopardize the sustainability of development trajectory

  7. AFD’s work builds on substantial European experience and recent activities in designing long term public policies factoring environmental externalities, in setting up relevant institutions, etc. • Thus, what AFD contemplates is: • complementarily to its traditional investment financing on preferential terms for public and private entities • To support the necessarily innovative institutional process, in: • accompanying policy makers • building tailor-made operations • helping investigate and establish social engineering, planning methods, public policy tools for the implementation of green New Deal As far as a DFI like AFD is concerned • e.g AFD’s support to Mexico Climate Change Program • Financing of the National Climate Change Plan 2009-2012 (€ 185 M) • Technical cooperation in spatial planning, forestry, methodology (monitoring & evaluation, social engineering, performance indicators for next climate change plan) • e.g vertical funds for geothermal power in Kenya or Indonesia • e.g massive credit lines for SMEs in Central Asia

  8. Conclusion: low carbon growth model requires platforms for institutional innovation • Transition towards a green economy is not an end in itself: in a global economy, competing for resources, competing for jobs localization, it is about being at the forefront of such a shift • In this regard, undoubtedly, SA takes it seriously: • IRP2: energy planning for next 20Y • National strategy on Climate Change due 4th quarter 2010 • COP17 in Johannesburg in 2011 • In face of public policy challenges associated with green growth model implementation, we, as stakeholders, collectively have to imagine new instruments, rooted in SAn context, and provide, along with financial resources, platforms for experience, practices, expertise sharing

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