NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

The lack of energy access is a drag on human development around the world, and it will take an increase in funding as well as the public and private sectors working together to solve this problem. That was one of the conclusions at the workshop, “Fairness and Transparency in Climate Funding: Taking into account the Needs of the Poorest Populations” on May 11 in Bangkok, Thailand.

The workshop was organized by Nexus-Carbon for Development, and co-hosted by blue moon fund and EEP Mekong. New Ventures, a global alliance of grassroots organizations that improve access to clean technologies to poor people in emerging countries and provide business development services to other environmental SMEs, was the workshop’s technical partner. (New Ventures is a NextBillion co-managing partner).

Funding is a crucial part of solving this problem. The International Energy Agency (IEA) estimates that investment needs to rise to USD 48 billion per year (five times the 2009 rate) to acheive to Energy for All.

Kamilla Karhunmaa of the Finland Futures Research Centre summarized the developed countries’ climate finance pledges to help developing countries, particularly the poorest and most vulnerable, mitigate their greenhouse gas emissions so they can better adapt and cope with climate change. A summary of the pledges is on the World Resources Institute’s website.

While the quantum of additional funds pledged is very significant, Russell deLucia of S3IDF said much more needs to be done. There are more than 1.4 billion people – one in five – who do not have access to modern electricity. Without coordinated actions and specific policies, that number will likely not fall in the coming decades.

In Asia, the lack of energy access is particularly acute in India, Pakistan, Nepal, Indonesia and Myanmar. The reliance on biomass for cooking is severe in other countries of the ASEAN region.

Several topics were covered during the workshop’s panel discussions and breakout sessions. Here are a few:

• How impact investors could follow such donor funds to scale up social enterprises that may get spun off from such Overseas Development Assistance (ODA) and donor-funded initiatives, was one topic focus. Fabio Malanchini of Impact Finance talked about how the microfinance industry grew on the back of development financial institutions and high risk finance.

• It also was suggested that ODA eliminate some upfront costs, such as on survey and feasibility analysis, and early project development. Several models were studied, including ones used by S³IDF, IDE, SNV, GERES, to help understand how donor funds can initially create capacities and scale programs initially.

• As of June 2011, only 15 CDM projects – or 0.2 percent – have been constructed around energy access, according to IEA and Energy for All. Organizations that have used carbon finance to fund clean energy access projects include South Pole, a project developer, and Fair Climate Fund. The current pricing of carbon remains a challenge as does numerous procedural issues.The workshop highlighted some of the key multilateral development bank (MDB) initiatives that have worked in the past. Among them are IDCOL, set up and assisted by MDBs such as German KfW Bankengruppe and the Asian Development Bank (ADB) in Bangladesh, and Japan Fund for Poverty Reduction, which provides grants for poverty reduction that adds value to projects financed by ADB. The project for effective utilization of bio-mass in the greater Mekong area was also discussed.

• The need for intermediaries was stressed time and again. One model that was presented was Nexus’s model for incubation: identifying, preparing and scaling models in the clean energy access area.

One issue discussed in detail was how transparency accounting could be used to measure. The discussion was led by Jasmine Hyman of the Yale Green Market Lab. Among the ideas discussed were:

• Specific criteria to measure the pro-poor value of CDM and voluntary carbon projects

• “Certification” of these social credits

• Price support of these social credits by having an institutional buyer of last resort

• The evaluation mechanisms discussed were largely project based. But it was noted that with the rising interest in impact investing, enterprise level measures such as those of IRIS, and fund level measures such as those of GIIRS, would become important.