Preserving the Ozone Layer

Transcription

1 The 20th Anniversary of the Montreal Protocol Preserving the Ozone Layer The World Bank and its Partners Leading the Way through Innovation, Technology and Global Partnerships Preserving the Ozone Layer

2 The Bank s Vision and Strategy The experience of the World Bank has shown that dollars alone are simply not enough to achieve program objectives. The Bank s assistance programs therefore have three defining characteristics, or pillars, in client countries: policy development; financial assistance and associated management systems; and institutional strengthening. All three are needed to support or create the required incentives to phase out ozone-depleting substances (ODS) dependency. The Bank brings to the Montreal Protocol (MP) program several comparative advantages to serve as an implementing agency. For example, the Bank has a long history of providing loans to developing countries and a long-established reputation for being able to channel funds effectively to client countries while applying all of the required due diligence, and this has been very comforting to the donor countries. The Bank has the ability to link global issues with local concerns in a manner that can be readily integrated into developing countries development plans. The Bank s vision was and remains to play a leadership role in phasing out both production and consumption of ODS, in partnership with the larger developing countries. The intention remains to do this as quickly and cost-effectively as possible, while simultaneously respecting and addressing the (often local and high-priority) need for alleviating poverty. The Bank s vision includes the notion that the sustained phaseout of ODS will ultimately depend on the countries, not the implementing agencies, and thus priority must be given to ensuring the development of sustainable institutional capacity in client countries. The Bank s vision also acknowledges that there can be no successful or sustainable economy apart from nature. Ozone depletion, albeit important, is not the only visible evidence or feedback from the 2 The 20th Anniversary of the Montreal Protocol

3 ecosystem of malicious damage. There is also climate change owing to global warming, and the insidious buildup and long-range aerial transport of toxic chemicals (to mention but a few). Also, support of a healthy ecosystem is critical to providing potable water as well as preserving marine ecosystems and biodiversity. The Bank s vision is thus holistic, and creates linkages to other global environmental and other agendas poverty reduction and gender equity, to mention just two. The Bank developed and revised procedures with a view to being as responsive as possible to client country needs related to implementation of the MP, and these are still in place almost 20 years later. One example is the Bank s creation of an umbrella grant agreement concept to facilitate timely execution while retaining precision and accountability in project management. World Bank Accomplishments to Date The key measure for the Montreal Protocol is ODP, or ozone depletion potential, which factors in the specific depletion potential of a substance as compared to a reference chemical. As a result of global phaseout efforts, over 95 percent of the ODP tonnes expected to be phased out from projects approved up to the end of 2006 have been phased out almost 375 thousand ODP tonnes. Of this amount, the Bank in partnership with its client countries was responsible for almost 260 thousand ODP tonnes phased out from consumption and production, over 69 percent of the global phaseout to date. The Unique Contributions of the Bank and its Partners Country-driven approach: The Executive Committee decided (Decision 35/57) on the modality of the national phaseout plan. The notion behind this decision is to place the country in the driver s seat. As an example, the China MP program, the largest in the world, is Preserving the Ozone Layer

4 a partnership with the Bank and the pursuant projects are nationally executed (country-driven). This decision was taken after 10 years of advocacy by the Bank, and was triggered by the Bank s submission of the national CFC phaseout plans for Thailand and Malaysia. Phasing out production: The Bank s approach since the early 1990s was to curtail production of CFC-based equipment, as soon as possible (especially in large CFC-consuming countries), and to work with client countries to launch production phaseout programs. Such production phaseout programs by the Bank targeted the largest producing countries (China, India, Argentina, Venezuela, and Russia). Once the production phaseout programs were underway, it signaled the developing countries that relied on CFC imports that they needed to reduce their ongoing demand for CFC faster, to stay ahead of any pending supply restrictions. Otherwise, they could suffer avoidable economic hardship as raw material supplies of CFCs were terminated before the required technology conversions and transitions had occurred. The Bank has been the leader in CFC production phaseout, designing and implementing production phaseout programs in China, India, Argentina, Venezuela, and Russia. Phasing out consumption: Investment projects (manufacturing plant conversions) were also undertaken in large CFC-using factories in the larger consuming countries. It was thought that an early conversion by the larger manufacturers would send very clear signals to the marketplace that CFC use needed to be discontinued in an orderly and well planned manner, with a view to minimizing or avoiding economic disruption. These market leaders would then force the smaller users to follow, especially because the non-cfc equipment they now produced would replace CFC-based equipment formerly supplied to their clients in other smaller developing countries. From 1991 to the end of 2006, the World Bank s cumulative portfolio of investment projects grew to 548, with funding at over US$8.7 million. In all, 509 projects have been completed. The 20th Anniversary of the Montreal Protocol

5 Technology-led phaseout programs: Technology-led phaseout programming is the process by which the knowledge of state-of-theart replacement or conversion technology and products are inserted into the decision framework in a timely manner. To this end, and to ensure due diligence, the Bank established the Ozone Operations Resource Group (OORG) to advise on designing and implementing projects to phase out ozone-depleting substances. Whereas the OORG was created to be the Bank s radar screen for new and emerging technology, the Bank made efforts to share the OORG findings with other implementing agencies and the Multilateral Fund (MLF) Secretariat. This was done through annual meetings to which all of the previously mentioned entities were invited. Thus, the OORG, although financed by the Bank, was a resource for all. Stakeholder engagement and participation: Sustainable solutions are created when there is problem recognition, ownership, and commitment to resolution at the multistakeholder level. The Bank works routinely not only with country officials (especially their National Ozone Units [NOUs]) in client countries, but also with the private sector; and, where possible, their associations and other engaged nongovernmental organizations (NGOs). The Bank also works closely with the Executive Committee of the Multilateral Fund and its supporting secretariat. India offers a solid example of the engagement and commitment of the private sector: namely, the partnership with the Indian Chemicals Manufacturing Association to address the CTC sector. Partnering with the Global Environment Facility (GEF): The Multilateral Fund (MLF) does not provide financial support to ozone depletion-related projects in countries with economies in transition (CEITs). However, the GEF, in partnership with the MP, funds (cost Preserving the Ozone Layer 5

6 shares) projects in CEITs. This, for example, has enabled the Russian Federation and nations in Eastern Europe and Central Asia to phase out their use of ozone-destroying chemicals. For example, recognizing the importance of coordinating production and consumption phaseout in the region, the Bank launched the Special Initiative in 1996 to provide compensation for the permanent closure of production capacity in end use applications. The Bank was able to assemble US$27 million for this purpose, drawn from bilateral funds and the transfer of funds from the GEF ODS Consumption Project, with the agreement of the Russian government and GEF. The project design involved performance-based compensation payments of US$24.7 million. Performance-based approach: The Executive Committee sought the assistance of bilateral and implementing agencies to draft guidelines for the preparation, implementation, and management of performance-based, substance-wide, and national phaseout agreements. The Bank, uniquely positioned and experienced, contributed significantly to this exercise. The Bank s China Halon Project was the first project under the MLF to employ, not only a performance-based approach (performance indicators), but also, an innovative market instrument (an auction) to facilitate the phaseout. China introduced production quotas for each Halon producer. The production phaseout in China, Argentina, India, and Venezuela all demonstrate the effectiveness of the performance-based approach. Innovative financing: The Bank developed a number of creative financing arrangements and also mechanisms for accommodating obstacles to innovative financing that could be described as incremental risks. These include methods and mechanisms for accommodating the following: Uncertainty of ODS market price developments, especially CFCs Perceived capital market distortions Lack of concrete project experiences with innovative schemes Lack of reliable information for investment opportunities The full range of transaction costs 6 The 20th Anniversary of the Montreal Protocol

7 The chiller replacement program: The Bank s chiller replacement programs offer many examples of Bank creativity and needed innovation. Early demonstration projects in Mexico, Thailand, and Turkey, and a comprehensive chiller sector study in India confirmed that the internal private incentive to early replacement of CFC-based chillers is simply not sufficient to achieve timely replacement under the constraints of the MP. These activities further confirmed the existence of numerous barriers (technical, financial, and managerial, among others) to the conversion of CFC-based chillers to more energyefficient, non-cfc chillers. Two interesting examples are the chiller replacement demonstration program in Thailand (with joint funding by the MLF and GEF, which is also an example of innovative resource mobilization), and the Mexico chiller program. Revolving funds and concessional lending: For chiller replacement and other programs, it was clear to the Bank that new and additional financing schemes were required. To address this need, the Bank consulted the stakeholder community, including the large international chiller suppliers, and developed funding schemes that could supply the required cofinancing and leveraging. These leveraging-based schemes facilitated concessional lending and, with a small grant from the MLF, have been used to establish revolving funds. Auction programs: The Bank has used market-based or economic instruments to facilitate program implementation. Such instruments increase the cost effectiveness of phaseout projects. For example, in Chile the Bank provided assistance for a grant auction mechanism in which private companies bid on cofinancing grants for conversion to alternative technologies. Grant funds were allocated to companies that undertook conversion to non-cfc technology in refrigeration and foam Preserving the Ozone Layer 7

8 manufacturing. For a winning company, the grant cofinanced part of the conversion cost while the company covered the remainder. The voucher scheme: The voucher scheme addresses difficulties in identifying a large number of beneficiaries, their lack of willingness to participate in the government-run training and other programs, and involvement in procurement decisions. It is thus a mechanism that provides a financial subsidy to the beneficiaries small service shops. Vouchers represent cash payments for part of the cost of service equipment. The difference between the actual cost of the equipment and the value of the vouchers, which is predetermined by the national ozone unit (NOU), must be borne by service shops. Using indigenous knowledge and technologies: The Bank strongly supports the use of indigenous knowledge and indigenous technologies. Multilateral Fund support encourages not only technology transfer from developed to developing countries, but also promotes the development of indigenous technologies. Technologies imported from the European Union or North America often require adaptation to local conditions. Bank projects in China and India developed new non-ods technologies in the halon and process agents sectors. The 20th Anniversary of the Montreal Protocol