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NEWSLETTER Development

Fund

4

/ 2011

Photo: © 2011 Arne Hoel / World Bank

Nordic

4

Climate-proofing investments in the road sector can reduce future costs NDF’s major co-financing partners, the World Bank, the Asian Development Bank, and the Inter-American Development Bank, identify climate-proofing of infrastructure as a key element of their climate change policies. Road networks (roads, bridges, and drainage) in developing countries are highly vulnerable to the impacts of climate change, the consequences of which go far beyond the mere physical damage to the road network, and can affect a country’s economy. Adaptation measures are fundamental to avoiding threats, damage and accidents caused by the changing climate. Adapta-

tion is about reducing vulnerabilities, and requires dealing with both the longterm effects of climate change and the more shortterm or acute extreme events. In order to develop realistic adaptation strategies, an understanding of the potential impacts of climate change on road networks is needed. Vulnerability mapping is an important adaptation activity that identifies sections or areas along the road network that may be particularly affected by climate change. Thereafter, appropriate climate-proofing measures can be identified. Furthermore, reviewing and revising policies and standards for road infra-

structure and training of relevant staff in climateproofing help to ensure that climate change considerations are mainstreamed in all road development plans. Incorporating climate change considerations into road design can be expensive, but may create considerable cost savings both in the immediate and longer term. More costly initial climateproofing investments may reduce future road maintenance cost as the impacts of climate change events on roads will be reduced due to the fact that the roads have, from the beginning, been designed to withstand such events. NDF currently finances three climate change adap-

tation projects in the road sector. The Adaptation Approaches for the Transport Sector Project in Cambodia and the Integrating Climate Change Adaptation to Transport in Vietnam Project are co-financed with the Asian Development Bank and the Integrating Climate Change Adaptation to Transport in Senegal Project is co-financed with the World Bank. These types of projects are attractive to NDF, since there is considerable scope for upstream involvement with the potential for influencing both sector policy and the design of large investment projects. For more information about NDF’s projects, please visit the NDF website: www.ndf.fi


NDF

Newsletter

4

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2011

Photo: Hannu Eerola

Solar and wind power provide off-grid rural areas with climate-friendly energy services

The majority of Kenya’s electricity generation capacity is based on hydropower. Prolonged droughts have reduced water levels and consequently, affected the power supplies. Kenya is experiencing acute power shortage, and the country has to rely on expensive emergency generation using fossil fuels. The power demands of both population and industry are increasing steadily, and there is an urgent need to increase the capacity and diversify sources of power supply. The World Bank is currently implementing an Electricity Expansion Project in Kenya. The overall objective is to increase the country’s capacity, efficiency and quality of electricity

supply. The project will substantially increase the share of geothermal energy in the energy mix and reinforce and expand transmission and distribution networks. Furthermore, it aims to increase the electricity access rate from the present 20%, and reduce the imbalance between urban, peri-urban and rural areas. NDF will, with a grant of EUR 4 million, finance two sub-components under the Electricity Expansion Project. “NDF will bring a climate change perspective into the World Bank project’s distribution component,” says Hannu Eerola, Country Program Manager at NDF. The first sub-component will assist Kenya Power in

selecting, designing and installing hybrid energy systems in off-grid rural areas. There are several localities, especially in the northern part of Kenya, which rely on isolated diesel power plants. The project will install solar and wind generation plants next to existing diesel generators and the generation from these renewable sources will reduce or displace the use of fossil fuels, thus reducing CO2 emissions. In addition, the reliability of the energy supply in rural centres will increase. The second sub-component will provide basic energy services to rural schools and nearby households through solar charging facilities. Apart from

providing lighting and basic electricity supply to the schools, the solar charging systems can be used by pupils to charge portable LED-lanterns during the day to provide lighting for their homes in the evening. This will reduce the use of kerosene lamps, and subsequently reduce CO2 emissions and improve indoor air quality. The activities financed by NDF are in line with Kenya’s National Climate Change Response Strategy. The strategy identifies the need for strategic programmes to be implemented in the context of climate change, and investments in renewable energy projects are a main priority for the mitigation programme.


NDF

Newsletter

4

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2011

NDF supports the Energy and Environment Partnership (EEP) Program in the Mekong region countries Cambodia, Lao PDR, Thailand and Vietnam. The Program is initiated by the Ministry for Foreign Affairs of Finland and the total financing is EUR 7.9 million for a period of three years (2010-2012). NDF’s share of the funding is EUR 3 million. Three Calls for Proposals have been organised to date and almost all available funds have now been allocated. The demand for this type of preparatory and seed funding is obvious. For the first call for proposals launched in late 2009, a total of 162 project ideas were presented. The first call resulted in pre-selection of 13 projects for further development. The second call for proposals was organised in mid-2010. This time, 105 project ideas were presented, of which 14 project ideas were pre-selected. The third call was open from January 16 until March 11, 2011. Again, 105 project applications were received and 21 project ideas were approved for further development. The pre-selected project ideas present a wide range of energy efficiency and clean energy applications and technology. Vietnam contributed the most proposals of any single country. With growing awareness of the program, involvement of Nordic organisations has increased and the majority of approved projects include a Nordic partner. To date 12 contracts have been signed and five projects are under implementation. A mid-term review of the EEP Mekong Program is currently underway.

Photo: Mathieu Young

Strong demand for funds under the EEP Mekong

NDF supports study on climate change insurance instruments NDF has approved a EUR 500,000 grant to support a two-year World Bank study on the development of climate insurance instruments for specific types of climate risks in East Africa. The study will be carried out by a team of international and local experts. The aim is to build on and take forward ongoing work on identifying climate risks in the region as well as to scope possible insurance investments. Currently, there is limited availability of

climate insurance instruments in Sub-Saharan Africa. The introduction of different insurance tools will help reduce the vulnerability of individual farmers, small and medium sized enterprises and government entities to extreme climate events. Floods, droughts, and storms are a significant concern for Africa’s development. The costs of investing in climate insurance to reduce or transfer risks can pay off many times over in

losses and damage avoided. Without insurance mechanisms, resources earmarked for other development activities may have to be diverted to disaster response activities. “These hidden costs can undermine development and economic progress in the region, and therefore, investments in risk transfer solutions such as climate insurance make good sense,” says Aage Jørgensen, Country Program Manager at NDF.


NDF

Newsletter

4

/

2011

Nordic Climate Facility - third call to be launched

At the end of October 2011, a third call for proposals will be launched under the Nordic Climate Facility (NCF). NCF helps to promote and increase the visibility of innovative Nordic solutions to climaterelated problems in lowincome countries. NCF has received great response within the Nordic countries. The number of proposals increased from the first call (138) to the second call (176). So did also the number of proposals by country, where Finland and Norway stood for the largest increase. The first and second calls had two themes each: one for adaptation and one for mitigation. Under the first call, the two themes were water resources and energy efficiency. Under the second call, the themes were urban adaptation to climate change and renewable energy. The third

call has only one theme: Innovative low-cost climate solutions with focus on local business development. The new theme encourages business development and business opportunities which provide goods and services that will help reduce carbon emissions and facilitate climate change adaptation. It is expected that the projects will have a strong positive development impact in addition to expected

climate change benefits. The theme for the third call has been broadened in terms of sector scope. This implies that the call has extended the invitation to applicants with project ideas from sectors that could not have a call of their own, for example those addressing disrupted ecosystems, cultural losses and threats to health and food security. “This provides an opportunity for NDF to get increased

Number of proposals by country

insight into climate solutions offered beyond those sectors already targeted during the preceding calls,” says Martina Jägerhorn, Country Program Manager at NDF. The third call for proposals has been granted EUR 6 million, bringing the total financing of NCF up to EUR 18 million. The implementation of the 14 winning proposals of the first call started towards the end of 2010. Several of the projects have reached important milestones such as conducting workshops, awareness-raising campaigns and installing or shipping goods. Under the second call, contracts with 12 applicants with the highest scores are presently under negotiation. For more information about NCF, please visit www.ndf.fi and www.nefco.org.

GRANT FINANCING FOR CLIMATE CHANGE PROJECTS IN LOW-INCOME COUNTRIES The Nordic Development Fund (NDF) provides grant financing for climate change interventions in low-income developing countries. NDF is the joint development finance institution of the Nordic countries—Denmark, Finland, Iceland, Norway and Sweden—and finances projects in cooperation with other development institutions.

Nordic Development Fund NORDIC DEVELOPMENT FUND, P.O. Box 185, FIN-00171 Helsinki, Finland (Visiting address: Fabianinkatu 34), Tel: +358 10 618 002, Fax: +358 9 622 1491, E-mail: info.ndf@ndf.fi, www.ndf.fi NDF Newsletter presents NDF's operations. The newsletter is published as needed. Layout Kubik, print Libris Oy.


NDF Newsletter 4/2011