Scaling up Energy Efficiency Financing

Hope Lobkowicz
International Advisor
GLOBE Alliance

Here at COP17, some experts have said that the single most important outcome that can emerge from Durban is an agreement on the design of the Green Climate Fund – the new long-term mechanism for dispersing billions of dollars of climate finance for clean technology, adaptation, and capacity-building.

I’m interested in seeing a fair and equitable design for the fund. I’m also interested in watching how agreement on the fund can help bolster climate finance for energy efficient building projects – which so far occupy only a slim piece of international finance – yet offer the largest mitigation potential.

At a UNFCCC side-event on financing energy efficiency, panelists from the Global Environment Facility (the GEF), World Bank Group, and the Asian Development Bank presented a briefing note that summarized the results of an independent evaluation of these institutions’ investments in energy efficiency. Unsurprisingly, the evaluation acknowledged that:

• Investments in energy efficiency are highly cost-effective
• Fossil fuel subsidies are hampering investment
• Current obstacles and perceived barriers can be overcome – and the financial sector can in fact be persuaded to invest further in energy efficiency

To underpin these findings, the World Bank Group’s analysis offered some insightful statistics: Every $1 of GEF support for energy efficiency catalyzes a reduction of about 2.2 tons of CO2. The same investment in renewables catalyzes a reduction of 0.4 tons. Some energy efficiency investments, such as lighting, offer paybacks in a matter of weeks. Meanwhile, fossil fuel subsidies, which hinder efficiency investments by artificially lowering the cost of energy, remain larger than public spending on health in many countries.

This event made me realize that major international financial institutions do understand the environmental and economic benefits of energy efficiency. As President Obama recently said in his announcement of another $4 billion to improve commercial buildings and industrial facilities in the U.S.., “It is a trifecta.” So what’s standing in the way of global large-scale investment?

The panelists offered some suggestions. First, we need more data to help reduce the perceived risk. Second, we need capacity-building and technical assistance. Third, we need instruments such as loan guarantees from international institutions (and national governments) to catalyze investment in countries that are perceived as risky – especially the many in the developing world with poor credit ratings.

There are many drivers and varied approaches for financing green and efficient buildings. I am hopeful that the Green Climate Fund, which will oversee resources on the scale of $100 billion per year come 2020, can help with some of the above in order to leverage climate finance and spur even more investment in this “win-win-win” solution.

For more on how green buildings also improve lives, check out the COP17 legacy project spearheaded by the Green Building Council of South Africa.

What’s Holding Us Back From the Global Efficiency Opportunity?

Hope Lobkowicz
Manager, Policy
U.S. Green Building Council

What if you were told that the United Nations, scientists, and economists had already identified the biggest opportunity for greenhouse gas emission reductions? That the key strategies for pursuing that opportunity were also the least costly to society?

And finally—what if these greenhouse gas emission reduction strategies worked in tandem with successful economic development of emerging economies, and to the long-term resiliency of communities?

Are you on the edge of your seat yet? Maybe you know where we’re going with this. The opportunity that the U.N., the Intergovernmental Panel on Climate Change (IPCC), the International Energy Agency (IEA), the World Economic Forum, and countless other climate and economic experts are talking about is none other than the world's building stock.

Experts have identified the building sector as having the single greatest potential for greenhouse gas emission reductions worldwide, with efficiency holding the key to slash emissions from homes and office buildings by nearly 30% by 2020, at no net cost. They have also determined that this strategy can be highly profitable, with economic benefits for whole societies.

Despite this golden nugget of knowledge we have about the impact of the building sector, the international community has a long way to go before we begin to capture the opportunity before us. That’s why USGBC, together with over 40 other environmental organizations, businesses, and green building councils around the world are calling for Global Leadership in Our Built Environment (GLOBE). The recently launched GLOBE Alliance is a group of like-minded organizations from 18 countries that will advocate for policies, technologies, and financial instruments for sustainable buildings and transportation infrastructure.

An immediate attention to buildings and infrastructure is particularly important in the developing world, for both the planet and for the economies of growing nations. The IPCC estimates building-related greenhouse gas emissions will nearly double by the year 2030 under a high-growth development scenario, with this increase concentrated largely in poor regions of the world. But while the U.S. and other industrialized states must work with poor countries to develop strategies for sustainable new construction, we must at the same time lead the way in retrofitting our own energy-sucking, water-gobbling, money-burning existing building stock. The financial benefits of doing so aren’t chump change – the efficiency gurus at McKinsey & Company estimate that the U.S. could save $1.2 trillion in the next decade by investing in building efficiency measures.

The question of how we pair economic growth with sustainability—both here at home and around the world—is intricately tied to the concept of the ‘green economy.’ This conversation is already underway at the U.N. Commission on Sustainable Development (UNCSD), which will be discussing buildings and sustainable production and consumption at its next meeting this May, and again in Rio de Janeiro in 2012 (known as the Earth Summit or Rio +20). In the meantime, Congress and the Obama Administration can do their part to make headway on energy efficiency policies here in Washington, and assist other countries in doing the same. A combination of U.S. leadership and international political will can go a long way in unlocking the energy savings, economic savings, and emission savings that buildings present.

Related:

• From Cancún Compromises to Concrete Action: We Don't Need a Binding Deal to Act Now on Efficiency
  (Huffington Post)
• The 'Green Economy' and Earth Summit 2012: Why fast-growing mega-cities with challenges of poverty and hunger may hold the key to a sustainable future
  (Natural Resources Defense Council)
• Green Building as a Mitigation and Adaptation Strategy: Who Made the Case At COP 16 in Cancun, Mexico?
  (USGBC)