The Challenge of Low-Carbon Development - World Bank Internet ...

lines. Some of the companies involved emit more than10 million tons of CO 2annually—more than some countries—soefficiency gains could have global significance.Four cement projects replaced old wet process equipmentwith more efficient dry process production lines. Governmentpolicies, together with cost savings, motivated thephase-out of old facilities, and these companies likely hadgood access to credit, so IFC’s additionality is not clear.Two investments in an Eastern European steel companysupported replacement of open-hearth furnaces with modernblast furnaces. In this case, the combination of difficultcredit, low energy prices, and an IFC environmental andsocial action plan makes it plausible to attribute the efficiencygains to IFC’s intervention.In other cases, the basis for allocating investment amountsto energy is unclear. Two investments, totaling $55 million,supported airlines in modernizing their fleets. These investmentswere entirely classified as energy efficiency, althoughthey conferred other benefits, such as safety, comfort, andreliability.In many cases, it is not clear if IFC’s directinvestments have led to improvements inenergy efficiency.and CO 2emissions, so it is impossible to quantify energyor GHG savings. Some of the projects were initiated beforeGHG monitoring was required. But even where required,compliance with monitoring is imperfect.The cleaner production initiativeApproved in January 2007, the three-year, $20 million CleanerProduction Lending Pilot is a proactive initiative to seekand promote energy, water, and materials efficiency opportunitieswithin IFC’s existing clientele. The program focusedon clients with good credit standings and environmental performance,enabling IFC to significantly reduce loan preparationtime and effort. Projects were identified either directlywith clients or via optional donor-funded energy audits.In 2009, the pilot was scaled up to a $125 million, threeyearCleaner Production Lending Facility, covering all realsector investments. To complement the loan funds, a$5 million Global Cleaner Production Facility (GEF-fundedvia the Earth Fund) will cofinance Cleaner Productionaudits. Clients will bear half the audit costs.The $20 million Cleaner Production Lending Pilot was fullycommitted to eight projects, with an average loan size muchsmaller than the IFC norm. Three of the projects employedthe donor-funded energy audits; in other cases, the clientsidentified energy efficiency savings. The projects’ projectedPhoto by Gennadiy Ratushenko, courtesy of theWorld Bank Photo Library.In one case, IFC invested in an American-owned distributionutility in an Eastern European country, with an explicitgoal of reducing technical losses, which stood at 12.6 percent.Five years after the initial investment, the goal had notbeen achieved: technical losses had actually increased to15 percent. Had the company reduced losses to 8 percent(a conservative target), it could have cut CO 2emissions by180 thousand tons per year.Most of these ex post identified energy efficiency projectslack baseline and monitoring data on energy efficiencyreturns to investment were 22–117 percent (with a medianof 36 percent) and are projected to yield 1–19 kilogramsof CO 2per year per dollar invested (or roughly an additional1–19 percent to the return on investment if carbonis valued at $10/ton of CO 2), with carbon returns mostlyproportional to financial ones.Total annual CO 2savings are estimated at 136,613 tons. Buta single company accounted for half those savings. Thus, significantresources are devoted to small loans that yield CO 2savings of just a few thousand tons of CO 2per year. Ex postEnergy Efficiency | 39