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 groups.

  • 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 Indian financial sector (UNEP, 2008):

  • No specific tool exists permitting an assessment of energy efficiency projects.

  • The option for establishing a guarantee fund was studied but then rejected because of the limited operations of ESCOs in the country.

The amount of private equity investment in ESCOs was relatively low as “the concept of ESCOs is not well accepted by the industry. In fact, there are only a couple of ESCOs, whereas a number of equipment suppliers also propose to monitor energy savings after the installation of their technologies. Only a few of them established performance contracts1 in industry.” (UNEP, 2008)

Outcomes

The following outcome of the 3CEE has been identified in the Indian financial sector (UNEP, 2008): “The project encouraged five banks in drafting dedicated credit lines for energy efficiency; three of them were actually implemented, targeting SMEs. [Overall,] the project succeeded in encouraging domestic financial institutions to better understand and finance EE project.”

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.