Financing Climate Protection

The European Investment Bank (EIB) has been an advocate in the field of environmental protection, often dedicating its lending to projects in that field. An active participant at the Conferences of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCC), the EIB will partake in the 23rd round of the conference, held from November 6-17 at the World Conference Center in Bonn, the headquarters of the Climate Change Secretariat.

Convened under the presidency of Fiji, the conference is an international opportunity for governments to assess progress in implementing the convention and, more broadly, dealing with climate change. It is also an important occasion for international financial institutions to present their efforts in support of climate action worldwide.

Business Today speaks with Jesper Persson, the head of Trust Funds and Blending at the EIB, to shed some light on the EIB’s technical assistance to climate action related projects ahead of the COP23.

The EIB has been actively present during past Conferences of the Parties (COPs); what is the bank’s role in climate action?

The EIB is the largest multilateral provider of climate finance worldwide and commits a high percentage of its lending portfolio to climaterelated projects. In 2016, the bank provided over €19.5 billion to help mitigate climate change and adapt to its impact.

The EIB climate finance included providing crucial financing and sharing technical experience and environmental expertise for projects both, across Europe and around the world; in Africa, Asia, Latin America and in Europe’s eastern neighbors. The objective of the bank’s operations in the Neighbourhood countries, where we operate under the European Union’s External Lending Mandate 2014-2020, is to support the economic growth of the region and improve their economic resilience by investing in the socioeconomic infrastructure and supporting private sector development. Climate action is a key priority for the European Union’s long term lending institution. In 2016, the bank provided finance of €1.6 billion in the region, of which 27% went to climate action projects.

Do you think the Mediterranean region needs climate-action projects?

Climate change is already severely impacting the region. The Intergovernmental Panel on Climate Change’s 2014 report predicts that this is likely to worsen—most of the MENA region is expected to become hotter and drier. Increasing temperatures and reduced or more erratic precipitation will increase evapotranspiration and the occurrence of droughts, an effect that is already materializing in the western part of North Africa.

There is a high probability that by 2025, 80 to 100 million people will be exposed to water shortages as climate change puts more pressure on already over exploited surface and groundwater resources. Other climate related hazards, such as prolonged heat waves, will affect well being and health conditions, particularly in densely populated urban areas. The region is also expected to be hit by more severe and frequent extreme events, including intense precipitation and flooding, with potentially serious impacts in terms of economic losses and human fatalities.

The effects of water scarcity and other hazards on food security will also result in lower economic indicators and human welfare. Increasing resilience to climate change by investing in adaptation and strengthening adaptive capacities at all levels is therefore a key priority, both for the Mediterranean countries’ governments and for their international partners. Mediterranean countries can also contribute to reducing greenhouse gas emissions, both in the region and in neighboring areas. By harnessing their significant and largely untapped renewable energy sources, like solar energy, Mediterranean countries can increase the use of renewables both locally and in adjacent regions. This will have positive economic returns, particularly if it goes hand in hand with strengthened integration of national and regional energy markets, energy subsidy reforms and increased efforts in energy efficiency.

The EIB financed many projects in the renewable energy sector, including the Gulf of Suez wind farm in Egypt, Ouarzazate solar energy complex in Morocco and Tafila wind farm in Jordan.

Do you do project generation through technical assistance?

The bank has been a leading international finance institution in the EU’s Southern Partners for more than 30 years. Our technical advisory and financial support for Mediterranean Partner countries has been intensified through the use of the Facility for Euro Mediterranean Investment and Partnership Trust Fund as a key instrument within the region. Successful cooperation between the EIB and partner countries in the MENA region is based on well established relationships with host governments, the bank’s due diligence and safe-guarding procedures.

In the field of climate change, the EIB is managing CAMENA, a climate action envelope managed by the EIB within the FEMIP Trust Fund. In addition, the EIB has recently received the first pledge to the Luxembourg EIB Climate Finance Platform. a trust fund aiming to mobilize and support invest- ment by the private sector in international climate finance, focusing on climate change mitigation and adaptation. The first pledge to the LCFP was made by Luxembourg and amounts to €30 million.

Can you elaborate more on CAMENA?

The purpose of CAMENA is to help Mediterranean Partner Countries to fight climate change by providing grants targeted at specific climate initiatives, that includes identifying, catalyzing and preparing climate action investment projects, which could subsequently benefit from EIB financing; funding actions to improve the enabling environment in relation to climate investments among public and private institutions within the Mediterranean Partner Countries Grant support; and technical assistance. The CAMENA envelope was created on the initiative and with the support of the UK Department for International Development (DFID), which contributed GBP 15 million for a four-year period (2015-2018).

Why is technical assistance important?

Technical assistance is important because it prepares and complements other EIB’s function of lending. It supports climate risk and vulnerability assessments, feasibility studies, environmental and social impact assessment studies and targeted capacity-building activities.

Where does it operate? What are the priority sectors?

CAMENA projects in Algeria, Egypt, Gaza/West Bank, Israel, Jordan, Lebanon, Morocco and Tunisia are eligible for support. Cross-border or regional projects are also welcome. It covers a wide range of sectors, renewable energy, energy efficiency, sustainable transport, solid waste, sustain- able urban development, forestry and land use, adaptation activities in all sectors.

How does it work?

Public authorities and other project promoters can submit a proposal for a CAMENA project within the remit of the FEMIP Trust Fund. The EIB’s management committee approves FEMIP Trust Fund operations, including those to be financed from the CAMENA envelope prior to their submission to the FEMIP Trust Fund Assembly of Donors for a financing decision. Operations are developed by the EIB, using either in-house expertise or external consultants.

Tell us about the operations you have financed.

So far, CAMENA has provided grant support for five operations with a total value of around €1.8 million; among these operations is the Alexandria West Wastewater Treatment Plant (WWTP) Extension and Upgrade in Egypt. Its main objective of this operation is to prepare a technical, economic, financial, environmental and social feasibility study for upgrading and extending the Alexandria West WWTP to serve the needs of the plant’s catchment areas up to the year 2050.

The overall goal of the project of which this contract will be a part is to contribute toward an efficient and sustainable water resources management in Egypt as well as to the Egyptian climate protection efforts. The project will contribute to the environmental sound disposal and utilization of effluent and sludge, as well as energetically optimized and environmentally sound sludge treatment.

On a regional scale, this project will support the depollution of Lake Maryut and the Mediterranean Sea and provide an additional source of water, thus improving the economic situation for fishery, agriculture and forestry and tourism in the area. Also, this project will improve the health and environmental situation of people living in Alexandria.

Can you elaborate on the Alexandria operation?

The proposed technical assistance consists of the elaboration of a feasibility study for the capacity and type of treatment extension of the Alexandria WWTP. More specifically, the technical, economic, financial, social and environmental feasibility of the following measures will need to be determined: Rehabilitation of the existing plant facilities where required; increase of the design capacity of the WWTP; upgrade of the current primary waste- water treatment to secondary wastewater treatment; upgrade of the current sludge dewatering treatment to sludge digestion with energy generation. This will include advice on social and governance issues which need to be addressed to ensure its sustainability. It will also advise on the climate change adaptation and mitigation aspects of the investment while ensuring the investments are
resilient.

The planned extension of the WWTP with sludge digesters and the subsequent generation of electricity from the bio-gas should reduce the emission of greenhouse gases by producing electricity necessary for the operation of the WWTP. This will reduce the net energy consumption of the upgraded WWTP and reduce the impact on climate change. The reuse of treated wastewater can provide an additional source of water to a water scarce country, e.g. for agriculture or forestry (commercially or as protection against the Saharan dust), and thus mitigate the impact climate change has on the area.

Who will benefit from the operation and who is the promoter?

The promoter is the Ministry of Housing, Utilities and Urban Communities. The assignment is managed by the project management unit within the ministry, supported by the Construction Authority for Water and Wastewater, in cooperation with the Alexandria Sanitary Drainage Company. ASDC is the final beneficiary of the project.