Review of green economy and climate finance:

Overview of South Africa’s Key National Initiatives

Economies of Regions Learning Network Meeting

Moses Mabhida Stadium, 6th November 2014

Sharlin Hemraj | Government Technical Advisory Centre: National Treasury | South Africa

Outline of Presentation

• Introduction – Policy Context

• Economic Rationale for Government Intervention – Addressing

market failures

• Policy instruments to support sustainable production and consumption

patterns

– Bridging the financing gap – unlocking climate investments

• Overview of National Environment / Climate Related Programmes

• Key Dedicated Programmes:

– Renewable Energy Independent Power Producers Programme

– Green Fund

– Cities Support Programme

– Other – International Climate Finance and Private Sector Initiatives

• Concluding Remarks

2

Introduction – Policy Context

• South Africa has developed important policy frameworks and strategies

that seek to address climate change and ensure a coordinated,

consistent government policy response. These include:

– National Climate Change Response Policy:

• reduce emissions by 34 per cent by 2020 and 42 per cent by 2025 relative to a

business as usual emissions trajectory.

– National Strategy for Sustainable Development and Action Plan which

identifies 5 strategic priorities:

• Enhancing systems for integrated planning and implementation

• Sustaining our ecosystems and using natural resources efficiently

• Towards a green economy

• Building sustainable communities

• Responding effectively to climate change

3

• Financing National Climate Change Response Policy and long term

funding framework for climate change:

– Mainstream climate change response into the fiscal and budgetary

process and so integrate the climate change response programmes

at national, provincial and local government and at development

finance institutions and state-owned entities.

• Near Term Priority Flagship Programmes for:

– Climate Change Response Public Works

– Water Conservation and Demand Management

– Renewable Energy

– Energy Efficiency and Demand Side Management

– Transport

– Waste Management

– Carbon Capture and Storage

– Adaptation Research

4

National Climate Change Response White Paper:

Finance and Flagship Programmes

Economic Rationale for Government

Intervention

ENVIRONMENTALLY-RELATED MARKET FAILURES:

• Provision of public goods: Non rival and non-excludable in consumption.

• Negative externalities: Occurs when an individuals action has an impact on

others and the costs of these impacts are not reflected in the price of a good or

service. Can result in resource under-pricing and therefore overconsumption.

• Information asymmetry: Occurs when during a transaction, one party has better

information than the other or information is costly to obtain. In new, rapidly

changing markets, such as for green technologies, some participants will lag

behind current information.

• Research, development and technology innovation: may not be possible for

a firm to capture the full benefits of an innovation as the information can be

readily passed on at a minimal cost.

5

Rationale for Environmental / Climate Finance:

Technology-Related Market Failures (Source: World Bank)

• Inventions and discoveries have public good characteristics. Firms under-

invest in research and development because of the fear that their competitors will

benefit.

• Public promotion of new technologies, beyond support for research, can be

justified by consideration of dynamic increasing returns generated by learning-by-

doing, learning-by-using and network externalities. Successful innovation is a

long, arduous process.

– The average period for taking a new energy technology to market – to traverse the

“valley of death” as it is often called – is 20 to 30 years (Lee, Iliev and Preston,

2009). In such an environment, early-movers generate spill-over effects which are of

benefit to society but cannot be privately appropriated.

• In the case of renewable energy, policy risk is unavoidable.

– Technology-based policies can help reduce policy risk by providing support upfront

(e.g., through capital subsidies) rather than over time and/or by embedding support

that is provided over time into legally binding contracts (e.g. through feed-in

tariffs).

6

Constitutional Allocation of Environmental

Functions by Sphere of Government Function National Provincial Local

Climate Change and Local Air Quality

Environment × ×

Pollution control × ×

Air pollution ×

Public transport × ×

Municipal public transport ×

Water

Pollution control × ×

Water and sanitation - Water services limited to potable water

supply systems

×

Waste Management

Pollution control × ×

Water and sanitation - Domestic waste-water and sewage

disposal systems

×

Land restoration, rehabilitation and biodiversity and nature conservation

Administration of indigenous forests × ×

Nature conservation, excluding national parks, national

botanical gardens and marine resources

× ×

Soil conservation × ×

Agriculture × ×

Urban and rural development × ×

Disaster management × × ×

7

Policy Instruments to Support Sustainable Development

– Sustainable production and consumption patterns

Regulatory

Instruments

Economic / Market

Based

Instruments

Research

and

education

instruments

Cooperation

instruments

Information

instruments

Norms and

standards

Environmental taxes Research and

development

Technology

transfer

Consumer advice

services

Environmental

liability

Fees and user

charges

Education and

training

Voluntary

agreements

Sustainability

reporting

Environmental

control and

enforcement

Removing

environmentally

harmful subsidies

(perverse incentives)

Environmental

quality targets and

environmental

monitoring

Environmental

financing

Eco labelling

Subsidies

Information centres

Tradable certificates /

permits 8

REGULATIONS MARKET BASED INSTRUMENTS INFORMATION

INSTRUMENTS

Targets Norms and standards Subsidies / Environmental

Finance

Environmentally Related Taxes and

Tax Incentives

Emissions reduction

target: 34 per cent by

2020 and 42 per cent

by 2025 relative to a

business as usual

emissions trajectory.

White Paper on

Renewable Energy

(2001): renewable

energy target of

10 000 GWh by 2013.

Energy efficiency

strategy: National

target to reduce

energy intensity by 12

per cent by 2015

coupled with specific

sector targets.

Biofuels industrial

strategy: mandatory

blending target - 2 per

cent blend into

national road transport

fuel pool.

Integrated Resource

Plan: 3 725 MW

electricity from

renewable sources

Air Quality Management

Act: Industrial Installations

responsible for more than 0.1

per cent of total emissions

for a sector will need to

compile mitigation plans for

approval.

South African National

Building Regulations:

Introduced requirements for

energy usage in buildings in

2011 that is all buildings to

receive at least 50 per cent

of their water heating

requirements from renewable

sources. Also development

of the South African National

Standards 10400-XA Energy

usage in buildings.

Measurement and

Verification of Energy

Savings Standard: SATS

50010

SANS 20101:

Measurement of CO2

Emissions and Fuel

Consumption of Categories

M1 and N1 Vehicles.

Public Transport Programme:

Public Transport Infrastructure and

Systems Grant and rollout of Bus

rapid transit systems in

municipalities

Clean Energy Programme:

Designated National Authority

approval of CDM projects.

Solar Water Heating Programme:

target of 1 000 000 solar water

heater installations by March 2015.

Climate Change and Air Quality

Programme: Climate Change

mitigation, adaptation, and

monitoring and evaluation

Manufacturing Competitiveness

Enhancement Programme: Clean

Technology Upgrading Grant

Energy Efficiency and Demand

Side Management: Energy

Services Company model,

Standard offer and Standard

Product Programme of Eskom

Renewable Energy Independent

Power Producers Programme

(feed in tariff mechanism)

Carbon Capture and Storage

Programme: Led by DoE in

partnership with the South African

National Energy Research Institute.

Green Fund: Low carbon

economy funding window.

Environmental Taxes:

Proposed carbon tax policy: R120/ton

CO2e

Development of carbon market

mechanisms: Publication of the carbon

market offsets paper.

Electricity generation levy of 3,5 c/kWh

General fuel levy on petrol and diesel.

CO2 based emissions tax on new

passenger motor vehicles

Incandescent globe tax of R3 per globe.

Tax incentives:

Energy efficiency savings tax incentive

Energy efficiency-related criteria in the

Industrial Production Policy incentive

scheme.

Tax exemption for income derived from

the disposal of primary CERs generated

from projects under the Clean

Development Mechanism

Accelerated depreciation allowances for

renewable electricity generation and

biofuels production.

Research and Development Tax

Incentives

Vehicle emissions

fuel economy and

CO2 emissions

Labelling scheme

in terms of the

Standards Act 1993.

Enforced by the

National Regulator

for Compulsory

Specifications.

Energy Efficiency

Standards and

Appliance

Labelling

Programme:

SANS 941 for

Energy Efficiency of

Electrical and

Electronic

Equipment.

Enforcement,

Monitoring and

Evaluation

Capacity:

Development of

GHG inventories for

energy, land-use

and waste related

emissions and

framework for

reporting by

industry.

9

Bridging the financing gap between carbon intensive and low

carbon, environmentally cleaner technologies

• Environmentally – related taxes / user charges that internalise externalities

and also provides a revenue source.

• Subsidies for the provision of public goods - critical infrastructure in the

energy, transport, water sectors (high upfront capital costs)

• Subsidies to encourage research and development of low carbon,

environmentally cleaner technologies and promoting cleaner production practices

• Tax incentives for R&D and low carbon capital investments

• Environmental financing policies to derisk projects – guarantees,

concessional loans

• Public private partnerships for pilot demonstration plants and facilities

• Accessing carbon market finance – CDM and new market mechanisms

• International funding – Green Climate Fund, other environmentally related

funding accessible through the Global Environment Facility, Strategic Climate

Change Fund, Bilateral and multilateral funding

Multiple Barriers, Multiple Stakeholders, Multiple Instruments!

10

Current Climate Change and Environmentally Related

Programmes Sector Initiative

Energy • Renewable Energy Independent Power Producers Programme

• Integrated national electrification programme

• Energy Efficiency and Demand Side Management Programme - mainly solar

water geysers

• Designated National Authority – Clean Development Mechanism

• Manufacturing Competitiveness Enhancement Programme – grant for upgrading

projects to encourage energy efficiency and cleaner production practices

Transport • Public transport infrastructure and systems grant – Bus Rapid Transit Systems

Environment –

natural resource

management

• Working for Water – clearing alien invasive species

• Working for coasts – Promotes clean-up, rehabilitation and security of coastal

environments and ecosystems

• LandCare – community based programme focusing on conservation and rehabilitation

of soil, water and vegetation

• Working on Fire – focuses on integrated fire management of veld and wildfires

• Green Fund – grant funding to support green economy programmes

Biodiversity • Biodiversity conservation and management (South African National Parks, South

African National Biodiversity Institute and Isimangaliso Wetland Park Authority)

Disaster

management

• Municipal disaster grant

• Provincial disaster grant (Includes allocations from Depts of Transport, Human

Settlements, COGTA)

11

National environmentally-related programmes

Estimates based on Budget 2014 Data (ENE Publication)

PROGRAMME

SUB-PROGRAMME 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

Fisheries 131 013 150 779 167 965 180 191 176 445 184 644 194 430

Marine Resources Management 14 242 15 072 17 382 17 634 18 648 19 164 20 180

Forestry 557 003 677 380 681 995 771 372 803 325 839 688 879 326

Natural Resources Management 137 014 230 318 204 398 247 569 252 568 262 419 273 385

National Disaster

Management Centre 68 694 65 522 113 263 417 296 453 436 452 769 454 089

Disaster Relief Transfers 528 32 147 73 180 246 500 363 580 376 424 396 374

Municipal Disaster Recovery Grant 0 0 0 118 340 37 302 21 805 0

Clean Energy 347 990 450 631 1 037 208 1 348 791 1 823 790 941 266 996 961

Climate change and Designated National

Authority 2 873 3 274 3 602 4 400 7 690 8 089 8 633

Energy Efficiency 339 327 418 839 1 025 376 1 339 423 1 810 348 927 135 981 893

Renewable Energy 5 790 28 518 8 230 4 968 5 752 6 042 6 435

Electrification and

Energy Programme and

Project Management 2 772 123 3 274 483 3 115 950 3 946 159 4 199 212 5 890 333 6 203 097

Integrated National Electrification

Programme 2 763 146 3 264 539 3 106 371 3 913 129 4 165 901 5 854 544 6 164 995

Energy Policy and

Planning 1 607 245 1 541 920 1 545 323 44 989 52 583 50 261 53 635

Electricity, Energy Efficiency and

Environmental Policy 4 104 5 901 5 181 6 535 8 283 8 377 9 040

Biodiversity and

Conservation 62 561 63 329 90 758 101 834 105 872 113 648 120 437

Chemicals and Waste

Management 29 235 35 849 58 534 65 707 72 210 79 222 83 997

Climate Change and

Air Quality 37 548 171 060 56 950 70 871 75 219 79 726 84 597

Air Quality Management 25 788 33 897 28 889 36 541 37 592 39 846 42 549

Climate Change Adaptation 2 891 4 080 2 869 3 883 4 267 4 535 4 771

Climate Change Management 5 566 127 957 5 829 6 298 6 830 7 215 7 576

Climate Change Mitigation 3 303 5 126 6 724 7 644 7 766 8 168 8 651

Climate Change Monitoring and Evaluation 0 0 3 035 7 357 9 283 9 605 10 018

International Climate Change Relations and

Negotiations 0 0 9 604 9 148 9 481 10 357 11 032

12

National environmentally-related programmes

Estimates based on Budget 2014 Data (ENE Publication) (2)

PROGRAMME SUB-PROGRAMME 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

Legal, Authorisations

and Compliance 68 696 73 968 114 452 113 324 122 573 129 017 133 442

Oceans and Coasts 644 256 876 338 524 584 318 176 357 432 424 617 448 254

Environmental

Programmes 1 432 240 1 849 710 2 671 223 2 642 575 3 084 592 3 165 515 3 527 070

Environmental Programmes

Management 0 0 0 4 939 6 154 6 462 6 785

Environmental Protection and

Infrastructure Programme 542 797 742 126 1 136 239 848 896 817 383 880 068 1 178 057

Green Fund 0 0 88 774 250 000 250 000 300 000 215 900

Working for Water and Working on

Fire 889 443 1 107 584 1 446 210 1 506 454 1 965 896 1 931 753 2 076 587

Socio-Economic

Innovation

Partnerships 189 693 233 281 254 789 445 547 462 396 684 939 688 444

Sector Innovation and Green

Economy 17 809 26 146 26 990 31 650 30 621 31 733 31 587

Incentive

Development and

Administration 2 792 994 3 283 549 4 514 551 5 393 134 5 540 281 6 246 470 7 050 814

Manufacturing Incentives 1 336 769 2 100 813 2 954 767 3 357 184 3 649 733 3 802 255 4 026 499

Public Transport 4 170 268 5 206 821 5 495 518 6 015 712 6 491 062 6 793 684 7 461 245

Public Transport Oversight 4 053 128 5 081 247 5 308 298 5 820 656 6 312 857 6 609 229 7 266 409

Rural and Scholar Transport 7 508 0 4 011 13 467 13 118 13 707 14 534

Water Sector

Regulation 125 561 91 153 87 374 101 191 121 514 125 808 142 099 13

High Level Grant Allocations to Municipality (Source: National

Treasury Budget Database) Name of grant („000s) 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Total

Allocation

08/09 - 13/14

Energy Efficiency and Demand Management

Grant

175 000 220 000 280 000 200 000 180 722 1 055 722

Expanded Public Works Programme

Integrated Grant

201 751 621 259 679 583 662 135 610 674 2 775 402

Integrated National Electrification

Programme Grant

587 252 921 409 1 020 105 1 096 612 1 151 443 1 634 772 6 411 593

Integrated City Development Grant 40 000 40 000

Municipal Disaster Grant 32 236 73 183 121 785 227 204

Municipal Disaster Recovery Grant 118 340 118 340

Municipal Drought Relief Grant 53 700 320 357 450 000 824 057

Municipal Infrastructure Grant 6 957 107 8 770 499 9 494 264 11 443 505 13 881 633 14 224 447 64 771 455

Municipal Systems Improvement

Programme

194 798 195 825 207 500 220 210 230 096 240 307 1 288 736

Municipal Water Infrastructure Grant 602 965 602 965

Neighbourhood Development Partnership

Grant

289 000 546 395 1 015 000 750 000 578 132 591 404 3 769 931

Public Transport Infrastructure and Systems

Grant

2 919 831 2 418 177 3 699 462 4 803 347 4 988 103 4 668 676 23 497 596

Public Transport Network Operations Grant 881 305 881 305

Rural Households Infrastructure Grant 106 721 106 721

Rural Roads Assets Management Systems

Grant

8 900 9 800 10 400 35 440 37 295 52 205 154 040

Urban Settlement Development Grant 2 090 975 2 604 552 2 967 005 6 266 998 7 392 206 9 076 906 30 398 642

Water Services Operating Subsidy Grant 975 192 862 641 653 137 542 345 562 434 420 945 4 016 694

Total 14 023 055 16 759 749 20 228 489 26 600 276 29 756 660 33 572 174

14

Considerations for domestic climate change

funding

• A significant portion of domestic climate funding is already channelled towards

the provision of public goods and infrastructure in the transport and energy

sectors.

• Current priorities include public transport, energy efficiency and renewable

energy that are already aligned with the NCCRP.

• There is a need to consider

– the ghg mitigation potential and adaptation aspects of relevant programmes;

– Overall performance and impact of these programmes from a climate

change, broader environment and development perspective;

– Potential to scale up these programmes;

– Assessment of the additional funding / finance needs; and

– identify suitable financial incentive mechanisms and potential sources of

funding.

15

KEY CLIMATE RELATED INITIATIVES

16

Renewable Energy Independent Power

Producers Programme

• Objective: contribute towards security of electricity supply,

diversification of the energy mix, emissions reduction and access to

energy.

• In line with the Integrated Resource Plan of 2010, the original

procurement document provided for procurement of 3725MW generation

capacity in five different rounds. In 2013, the Minister of Energy

determined that a further 3200MW of renewables generation capacity

was to be procured.

• A feed in tariff incentive scheme was proposed. A competitive bidding

approach to the mechanism was implemented via three bidding windows.

• Financial support for the programme comprises:

– Cost recovery mechanism through the electricity tariff: IPP levy

– Government ‘policy‟ guarantee to the extent that the buyer defaults

– Foreign investment – debt and equity

– Complementary clean energy programme of the Department of Energy

17

Total Estimated Project Cost for All

Windows

Technology Number of Preferred

Bids Net Capacity (MW)

Total Project Cost

(ZAR Millions)

Biomass 1.0 16.5 1 062 CSP 5.0 400.0 33 798

Landfill gas 1.0 18.0 288

Onshore wind 22.0 1 983.5 41 177

Solar

photovoltaic 33.0 1 483.7 43 308

Small hydro 2.0 14.3 631

Total 64.0 3 915.9 120 263

18

Source: Renewable Energy Independent Power producers team (March 2014)

Preferred Bidders – Foreign Investment (ZAR

millions)

19

Source: Renewable Energy Independent Power producers team (March 2014)

Total

Funding Foreign

Portion % of Total

Debt R 26 791 R 6 718 25.1%

Equity R 17 621 R 8 884 50.4%

Total R 44 412 R 15 602

Procurement Process

20

Source: Renewable Energy Independent Power producers team (March 2014)

REIPPP – High Level Conclusions

• Successful Implementation of the Programme due to

– Sound enabling policy environment, legislative framework and

political will

– cost recovery mechanism via the electricity tariff (off-budget

mechanism), policy guarantee, foreign investment (debt and equity).

Crowded in private sector investment.

– long term 20 year power purchase agreements agreed

– a well run, credible procurement process – effective collaboration

between the National Treasury Public Private Partnership Unit and

the Department of Energy.

• Potential to expand the programme to support additional renewables

capacity and to develop a dedicated renewable energy fund for small

scale renewable electricity generation.

• Expansion of programme to include good quality cogeneration.

21

Green Fund

• The Green Fund is implemented as a strategic programme on the budget

of the Department of Environmental Affairs.

• The Fund seeks to:

– Promote innovative high impact green programmes and projects

– Strengthen institutional and technical capacity to mainstream green and

climate issues into the economy

– Reinforce climate change response through green interventions

– Build an evidence base for the expansion of the green economy

– Attract additional resources to support South Africa’s green economy

development

• Green fund allocated USD 80 m (USD 30m in 2012/13 and USD 50m in

2013/14), additional USD 25 mil allocated to the fund in Budget 2014

• The Development Bank of South Africa is the implementing agency

of the fund and operates and reports on the objectives of the fund to the

Management Committee.

22

Overview of the Fund (Source: DBSA 2014)

23

Green

Fund

Portfolio split

Project

development

(75%)

Capacity building

(20%)

Research and

policy

development

(5%)

Instruments

Financial support

Technical

assistance

Access to technical

experts

Sources of

funding

Fiscal budget

Public & Private

sources

Technical

assistance

Green Cities and

Towns

Low Carbon

Economy

Environmental &

Natural Resource

Management

Funding

windows

ACCESS : Spatial distribution and thematic (cross-sectoral) distributions

SAFEGUARDS & STANDARDS: Environmental, social, fiduciary, policy integration

MONITORING & EVALUATON FRAMEWORKS: 3 levels (fund, portfolio, project), incl. independent

reviews

STRATEGIC INSIGHTS: MANCOM, Government Advisory Panel, sector roundtables and other

RESOURCE MOBILISATION: Mobilise & leverage private & int’l green finance

Cri

tical

fram

ew

ork

s

Green Fund: Request for Proposals Process (Source: DBSA

2014)

24

Date RFP

Process

Area Submitted Approved

to date

Value

2012 1st RFP Project finance

(R&D)

616 22 R 591 m

2013 2nd RFP Research and

Policy

Development

155 16 R 36 m

Initial Market Response (DBSA: 2014)

25

Positive Funding Demand: Mostly testing & scale-up of start-up projects in the following sectors:

Renewable Energy, Energy Efficiency, Waste Management, Biodiversity Benefiting Businesses, Sustainable Agriculture and Land Use Management Models.

Overall, RFPs amount to funding requests of approximately R12 billion

Picture of SA green economy landscape emerging?

Potential of the Fund and Next Steps

26

• Green Fund

– offers leveraging and partnering opportunity for investment by the

private sector and other finance institutions.

– Provides essential learning opportunities to enable the fund to

interface with emerging global funds such as the Green Climate

Fund.

• The fund is still at an early stage of implementation. Green fund

currently provides grant funding with an element of cofinancing. The

potential for the fund to provide loan financing and other financial

instruments needs to be explored further.

• A review of the fund is underway for the first phase to further inform

lessons learnt.

SANBI National Implementing Entity for the Global

Adaptation Fund

• Two projects have been approved by the Adaptation Fund Board:

– Building resilience in the Greater Umgeni Catchment

– Small grant facility for enabling local level responses to climate change

• The overall objective of the Umgeni project is to reduce climate vulnerability

and increase the resilience and adaptive capacity in rural and peri-urban

settlements and small-scale farmers in productive landscapes in the

uMgungundlovu District that are threatened by climate variability and change,

through an integrated adaptation approach.

• The project will focus on four areas, as follow:

– Peri-urban informal settlements within the Msunduzi Local Municipality;

– Ward 8 of Swayimani within the uMshwathi Local Municipality;

– Ward 8 of Vulindlela within the Msunduzi Local Municipality; and

– Ward 5 of Nhlazuka within the Richmond Local Municipality.

27

Four key components of the proposal

• Component 1: Early warning systems (USD 1,305,750)

– Early warning and response systems improve preparedness and adaptive

capacity of local communities and small-scale farmers drawing on and

integrating scientific and local knowledge.

• Component 2: Climate-proof settlements (USD 3,393,375)

– A combination of ecological and engineering solutions reduces vulnerability

of rural and peri-urban communities to existing and anticipated impacts of

climate variability and change.

• Component 3: Climate resilient agriculture (USD 1,490,500)

– Small-scale farmers have improved resilience and reduced vulnerability to

existing and anticipated impacts of climate variability and change.

• Component 4: Lessons learnt (USD 439,500)

– Dissemination of adaptation lessons learnt and policy recommendations

facilitates upscaling and replication

28

Project Summary (Source: SANBI)

29

International and Private Climate Financing

Mechanisms

• Other climate finance initiatives can also be identified.

– Industrial Development Corporation Energy Efficiency Fund

– Climate Finance work of the National Business Initiative including

an energy efficiency facility

• Currently, the development of these instruments by both the private

and public sector is largely fragmented.

• Further work is envisaged with the DEA to understand and review

existing flows of public finance (domestic and international) and

private sector finance to climate change initiatives in terms of the

Monitoring and Evaluation Framework.

• This could support proper coordination and complementarity of

efforts, evaluation of the effectiveness and impacts of these initiatives

and consideration of reforms to existing initiatives (upscaling)

30

Institutional Strengthening and Capacity Building:

Cities Support Programme

• The role for local government in responding to climate change is

recognised however, the human resources and institutional frameworks

to enable this response is quite weak.

• The Cities Support Programme has been developed by the National

Treasury in collaboration with other government departments aimed at

providing strategic support to local government.

• 4 key components of the programme:

– Core city governance integrated strategic, participatory planning and

financing;

– Human settlements support (access to land and services);

– Public transport support (mobility and urban efficiency) and – Climate resilience and sustainability support (resilient

infrastructure and systems)

31

Cities Support Programme (2)

• For the Climate resilience component, the programme seeks to

– Assist cities to scale up their climate adaptation and mitigation interventions

especially to leverage available global funds and to access global

experience and expertise in climate change mitigation and adaptation

interventions

– Will focus on mainstreaming climate resilience issues across major

infrastructure sectors managed at city level such as water and sanitation,

electricity distribution, solid waste management, storm water drainage and

public transport.

– Collaborative effort between the National Treasury and the Department of

Environmental Affairs.

• A project preparation facility will also be introduced supported by the DBSA to

help cities design catalytic projects.

32

Cities Support Programme (3)

• Integrated Cities Development Grant

– Provides financial incentive for metropolitan municipalities to integrate

and focus their use of all available infrastructure investment and

regulatory instruments to achieve more compact and efficient spatial

form.

– Cities required to submit built environment performance plans

to qualify for the grant

– All projects funded by sector specific infrastructure grants including

urban settlements development grant, public transport infrastructure,

neighbourhood development partnership grant, and the integrated

national electrification programme grant must form part of a

metropolitan municipality environment performance plan.

– Aims to improve the effectiveness and efficiency of local

government spending

– Additional R356 million funding allocated over the 2014 MTEF period.

33

Concluding remarks

• A significant portion of domestic climate funding is already channelled towards

the provision of public goods and infrastructure in the transport and energy

sectors. This is already aligned with important priorities under the climate

change response policy.

• Given the cross cutting nature of climate change impacts across different sectors,

consideration should be given to building on existing dedicated financing

mechanisms and institutions, ensure that climate aspects are considered in

key programmes and explore the potential to leverage additional, innovative

financial resources to enhance the effectiveness of these instruments.

• Appropriate regulatory and economic incentive instruments complemented by

international and domestic financial support has an important role to play in

facilitating the transition to a low carbon society and unlocking essential low

carbon investments. This would help to further incentivise and crowd in private

investment and finance.

34

Concluding remarks (2)

• Multiple financing instruments may be needed for large scale climate

initiatives that face multiple barriers. A programmatic rather than project

based approach would help to catalyse these investments and

implement interventions at scale with greater impact.

• Implementing programmes would require institutional strengthening and

capacity building. Greater collaboration between the Ministries of

Finance, Environment and sector departments is needed on the

financing aspects.

35

T

THANK YOU.

36

Key design considerations for environmental

financing mechanisms

• Expenditures should be targeted to meet environmental priorities and

promote projects with large environmental benefits relative to their costs.

• Environmental Funds should :

– play a catalytic role in financing, offering no more support for projects than

is necessary and adapt to changing economic conditions.

– be used in conjunction with, and reinforce, other environmental policy

instruments, such as regulations or economic instruments.

– develop an overall financing strategy, follow clear and explicit operating

procedures for evaluating and selecting projects, and adopt effective

monitoring and evaluation practices.

– not compete with emerging financial markets but should leverage

financing from private sector enterprises and financial institutions for

environmental investments.

– ensure transparency and should be accountable to government,

parliaments and public for their actions.

Source: OECD, 1995a

37