Three Country Energy Efficiency Project
Policy measure

In 2001, the UN Environment Programme (UNEP) set up a World Bank-Energy Sector Management Assistance Programme (ESMAP) technical assistance project on “Developing Financial Intermediation Mechanisms for Energy Efficiency Projects in Brazil, China, and India” (also known as the Three Country Energy Efficiency Project/3CEE) (UN Energy, 2009).


The project was funded by the United Nations Foundation, supervised by UNEP/DTIE and UNEP Collaborating Centre of Energy and Environment (UCCEE), (now known as UNEP Risoe Centre) and implemented by the World Bank for the in-country activities, and by UCCEE for the cross-country activities (UNEP, 2008).


The aim of the 3CEE was “to overcome barriers to financing energy efficiency projects, and to identify financial mechanisms adapted to each country’s conditions” (UNEP, 2008). The project’s specific objectives were (UNEP, 2008):

  • “To achieve major increases in energy efficiency investments by the domestic financial sectors in Brazil, China and India through developing energy efficiency investment project packaging capacity, both in existing institutions and through new entities.

  • To stimulate an increased capability and willingness of local financial institutions in Brazil, China and India to extend loans to commercial borrowers wishing to make energy efficiency investments in the commercial and industrial sectors of their economies.”

Implementation

According to UNEP (2008), the 3CEE sought to achieve the above goals with the following measures:

  • Establishment and operation of core country croups

  • Development of a commercial banking window for energy efficiency

  • Development of and support for ESCOs

  • Studies and development of options for guarantee facilities

  • Studies and development of options for equity investments

  • Cross-country exchanges on banking windows, ESCOs, equity financing and guarantee funds

Challenges

The following challenges have been identified for the Chinese financial sector (UNEP, 2008):

  • External reasons (Severe Acute Respiratory Syndrome affecting some key staff; change of personnel in the core group secretariat)

  • Strategic reasons (project volume was estimated as being too small by banks to justify the required involvement).

  • The bank personnel involved in the project did not have the capacity for decision-making and did not succeed in convincing their management in taking up energy efficiency financing.

The amount of private equity investment in the ESCOs was relatively low due to (UNEP, 2008):
  • A low capacity of ESCOs to elaborate business plans.
  • A shortage of finance available in the sector.
  • The limited scale of energy efficiency projects.
  • The difficulty of some banks to provide equity.
  • The lack of knowledge of the financial sector regarding the existence of ESCOs.
Outcomes

The following outcomes of the 3CEE have been identified in China (UNEP, 2008):

  • The financial sector: “A pilot project was launched to convince banks to adopt energy efficiency financing schemes and to demonstrate a project appraisal methodology. However, when proposed with 12 projects identified by the core group, banks did not finance any.”

  • The ESCO industry: “by 2006, a total of 23 ESCOs were granted guarantees on loans in the frame of the World Bank/GEF project, covering 52 projects, for an amount of approximately US$20 million.”

  • “Some progress towards the adoption of specific mechanisms for EE seems to be secured through the two World Bank/GEF projects on on-lending facility and guarantee fund for ESCOs.”

References

UN Energy, 2009. Policies and Measures to realize Industrial Energy Efficiency and mitigate Climate Change. Vienna. Available at: www.unido.org/fileadmin/user_media/Publications/Pub_free/UNEnergy2009Policies.PDF.


UNEP (United Nations Environmental Programme), 2008.  Terminal Evaluation of Project on “Developing Financial Intermediation Mechanisms for Energy Efficiency Projects in Brazil, China and India”. Nairobi. Available at: www.unep.org/eou/Portals/52/Reports/Energy_Efficiency_in_Brazil-China-India.pdf.