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Stavros Dimas Member of the European Commission, responsible for environmentGEEREF – Innovative Financing for Clean Energy UN Climate Change Conference, Bali: Side-event on Global Energy Efficiency and Renewable Energy Fund (GEEREF) Thursday 13 December 2

UN Climate Change Conference, Bali: Side-event on Global Energy Efficiency and Renewable Energy Fund (GEEREF)
Thursday 13 December 2007

Ladies and gentlemen,

Welcome to this side event and thank you for coming.

I would like also to thank our speakers for being with us this afternoon:

– Mr. Urban Rid, Director-General for Climate Protection, Environment and Energy, Renewable Energies, International Cooperation in the German Federal Environment Ministry

– Ms. Gry Larsen, Political Adviser to the Norwegian Minister of Foreign Affairs.

– Mr. Simon Brooks, Vice-President of the European Investment Bank

– Mr. Anders Wijkman, who as you may know is one of the most active and dedicated members of the European Parliament when it comes to climate change and sustainable energy issues.

Ladies and gentlemen,

Today some 1.6 billion people in the poorer countries of the world still have no regular access to reliable energy services. Even if energy is not directly addressed in the Millennium Development Goals, it is clear that providing access to affordable energy is a prerequisite for reducing global poverty.

A huge amount of new electricity generation capacity must be built in the next 20 years as part of this effort. But if this electricity is not to add considerably to global greenhouse gas emissions and further exacerbate climate change, we need to ensure it is produced from low- or zero-carbon sources. This will have an extra cost that the World Bank estimates at €25 billion annually – about a quarter of global annual development aid – between now and 2030.

The European Commission has therefore been looking at ways to mobilise some of the additional public funding and private capital necessary. In this context I am very pleased to be able to present to you today a major pilot initiative that the Commission has set up: the Global Energy Efficiency and Renewable Energy Fund, or GEEREF.

GEEREF is an innovative global risk capital fund that will use limited public money to mobilise private investment in small-scale energy efficiency and renewable energy projects in developing countries and economies in transition. It is both a development tool and a contribution to global efforts to fight climate change. It is concrete proof of Europe’s commitment to transfer clean technologies to developing countries.

Many of you may already have heard about GEEREF since it has been under discussion for quite a while. I am glad to be able to say that GEEREF is now in the final stage of being established and will be operational from the start of 2008.

I will briefly explain why the Commission came up with the idea of engaging public money in a global risk capital fund. I will then give the floor to our German and Norwegian colleagues who have been working with us to take this initiative forward. Vice President Brooks of the European Investment Bank will then update us on how and where GEEREF will work. Finally, Mr. Wijkman will share with us his views on this new type of instrument.

At the World Summit on Sustainable Development in 2002, world leaders agreed that it was urgent – I quote – “to substantially increase the global share of renewable energy sources with the objective of increasing its contribution to total energy supply.”

The European Union and other like-minded countries launched the Johannesburg Renewable Energy Coalition, the JREC, during the summit to help achieve this objective.

The fact is that, despite some progress in deploying renewable energy, its share in the global energy mix has hardly increased.

We know that improving energy efficiency can be far more profitable than building new energy supply infrastructure. However, investment in energy efficiency around the world is not taking advantage of the full potential for improvement that is available.

One major problem is that projects on energy efficiency and renewable energy face significant difficulties in raising commercial funding. The reasons for this are complex. They relate mainly to a lack of risk capital. The need for risk capital in developing countries and transition economies is estimated at over 9 billion euros a year, which is far above current levels.

While public grants have increased in recent years, the overall amount available is clearly insufficient to mobilise the additional funding needed in the energy sector up to 2030.

Leveraging private sector finance is therefore essential. But the long pay-back periods on clean technology are an obstacle to investors. This is even more the case in regions that are considered to be high-risk. Private investment flows to Sub-Saharan Africa, for instance, are very modest.

A second issue is the scale of the projects. Small projects in distant countries can have higher administrative and transaction costs. Consequently international financial institutions tend not to provide equity finance for projects below 10 million euros.

GEEREF is aimed at overcoming these investment barriers.

The Fund will attract private investors by using public money to protect them against the risks I have mentioned. It is an innovative public-private partnership that will neither lend nor grant funds, but will invest them with the aim of making sustainable profits for its investors.

By offering an attractive investment opportunity for the private sector, we aim to be able to mobilise capital on a much larger scale.

GEEREF will invest through regional sub-funds specialising in energy efficiency and renewable energy projects. It will give priority to meeting the needs of the developing countries in sub-Saharan Africa, the Caribbean and the Pacific.

We know that small and medium-sized enterprises and project developers in these parts of the world experience particular difficulties in raising the necessary risk capital. But it will also invest in the countries of the European Neighbourhood, including North Africa and eastern European states that are not members of the European Union, as well as in Latin America and here in Asia.

The European Commission has kick-started GEEREF by committing to inject about 80 million euros between this year and 2010. With additional pledges from the German and Norwegian governments, we are already well above 100 million euros. We expect this to mobilise additional risk capital from the private sector of at least 300 million euros, and possibly up to 1 billion in the longer term.

Ladies and gentlemen,

Meeting the challenges of climate change and of protection the world’s environment for future generations requires innovative financing solutions. GEEREF is one of these.

By establishing this fund, the Commission and other public investors are underlining our shared commitment to accelerate the transfer, development and deployment of environmentally sound technologies. By doing so we will help to bring clean and secure energy supplies to people in poorer regions of the world.

I hope that many more investors will join us. GEEREF is a global fund, and it is open to investors from anywhere.

I would like to take this opportunity to thank the German and Norwegian governments, the European Investment Bank and the European Investment Fund for helping GEEREF get off the ground, and the European Parliament for its strong support.

I will now give the floor to Mr Rid.

Thank you.

Pierre Perrin-Monlouis
Pierre Perrin-Monlouis
Fondateur de Rente et Patrimoine (cabinet de gestion de patrimoine), Pierre Perrin-Monlouis est un analyste et trader pour compte propre. Il vous fait profiter de son expérience en trading grâce à ses analyses financières et décrypte pour vous les actualités des marchés. Son approche globale des marchés combine à la fois l'analyse technique et l'analyse fondamentale sur l'ensemble des marchés : crypto, forex, actions et matières premières.
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