June marks World Environment Day. The world’s most precious commodities - water and energy – are getting scarcer every day. EBRD leading experts explain the Bank’s response to the climate change implications for energy and water use.

Josué Tanaka is the Corporate Director responsible for the strategic and corporate planning function of the EBRD and for leading the EBRD’s Energy Efficiency and Climate Change activities.

The EBRD launched the Sustainable Energy Initiative (SEI) at its Annual Meeting in May 2006 to address the inefficient use of energy in the countries of central and eastern Europe and the Commonwealth of Independent States.

SEI responds to the specific needs of the energy transition in the EBRD countries of operations, as well as to the call of the G8 at the 2005 Gleneagles Summit for the international financial institutions to scale-up climate change mitigation investment. Mr Tanaka explains the challenge of investing in sustainable energy.

Mr Tanaka explains the challenge of investing in sustainable energy.

- What circumstances led to the establishment of SEI and what is the Initiative's focus?

The Initiative was driven by the needs of EBRD countries of operations. The energy intensity of the EBRD region is among the highest in the world.

Accordingly, SEI responds to the specific needs of the energy transition in the EBRD countries of operations, as well as to the call of the G8 at the 2005 Gleneagles Summit for the international financial institutions to scale-up climate change mitigation investment. The SEI is the EBRD’s specific contribution to the fight on climate change, with a particular focus on energy efficiency.

It addresses the inefficient use of energy in the industrial, power and municipal infrastructure sectors. SEI also seeks to develop renewable energy sources in the EBRD countries of operations.

- What has the Sustainable Energy Initiative achieved in two years of existence?

From its launch in 2006 to the end of May 2008 EBRD financing under the SEI has reached €2 billion. Investments have been made through over 100 projects across 15 countries and across all SEI activity areas.

The Initiative has taken a business driven approach focusing on specific projects. For example we provide an analysis through an energy audit to a local company that allows them to understand potential energy savings and benefits to the business. This is how we convince our clients to invest in energy efficiency.

But we also work to mainstream the issue of energy efficiency throughout the EBRD. This explains why the work we do on sustainable energy is the work of the whole Bank and not only of a small unit within the Bank.

- What is the level of cooperation with other multilateral development banks?

The EBRD works closely with many other parties because the energy efficiency and climate change challenge is huge. Cooperation is important also because different institutions bring different knowledge and different abilities. We have had an ongoing active dialogue with multilateral development banks (MDB) on energy efficiency and climate change since the launch of the SEI. On 1 July 2008, the EBRD will host the fourth SEI forum at which a report will be discussed on the response of MDBs, including the EBRD, to the climate change agenda. This report will be presented to the next G8 Summit in Japan on 7 – 9 July 2008.

- What is the outlook for the EBRD's sustainable energy activity?

A lot has been done over the past two years. The Bank is clearly perceived as an active and pragmatic organisation focused on achieving concrete energy savings and carbon reduction results, mostly based on private sector projects. The SEI is increasingly integrated within the activities of sector and country teams providing a strong base to further the development of the SEI going forward. Driven by the demand from our clients, by an evolving climate change aganda and by increasing experience, the SEI is addressing new and complex areas including, for example, climate change adaptation and energy efficiency in the housing sector.

Jean-Patrick Marquet is the EBRD Director of Municipal and Environmental Infrastructure Team. Since 1991 the EBRD has invested over €1.3 billion in the water and waste-water sector from south east Europe to Central Asia. Mr Marquet explains the implications of climate change for water use in the EBRD region.

- How is climate change affecting the EBRD region and what is the Bank’ response?

The world’s climate is warming up and water will become even scarcer in regions such as south-east Europe, the Caucasus and Central Asia. All measures that are being implemented to conserve water are critical for these regions. Conservation of water is a major component of the EBRD projects from Russia to Tajikistan. The Bank invests in water infrastructure, including water conservation measures such as leakage reduction and water metering. To date the EBRD has financed 78 projects totalling €1.3 billion. The main objective of the EBRD investments is to improve the people’s livelihood and achieve widespread environmental improvements. Investment in the water and waste-water sector accounts for around 60 per cent of the EBRD’s Municipal and Environmental Infrastructure Team.

The full scope and impact of EBRD activities in the development of the water and waste-water sectors across the transition region is the special theme of the forthcoming Sustainability Report. Whether improving water supply in Tajikistan or cleaning up waste water in Russia -- sustainability is at the core of the EBRD’s operations.

- What are the main issues in the water and waste-water sector in the EBRD region?

Access to safe, clean water and effective sanitation remains a serious challenge in our countries of operations, where aging infrastructure is frequently inadequate and has often been neglected. A closer look in the region reveals huge variations in coverage, from almost universal supply in large towns and cities in central and Eastern Europe, the Western Balkans and Russia to very patchy provision in many rural areas, especially in the Caucasus and Central Asia. In many cases water infrastructure is dilapidated, with municipalities lacking the technical skills and finance for repairs and upgrades. Here the EBRD steps in with expertise and loans to improve services. We work together with municipalities to achieve a 24 hours a day water service for the people in our countries of operations and to improve waste-water services which have long been neglected in the transition region.

These are very expensive investments and costs can hurt the customers. It is thanks to the generous support of the EBRD donors that poorer municipalities and people in the region can afford improved services at reasonable costs. The EBRD region has limited resources to pay for investments in infrastructure and donor support is crucial to meet challenges in the water and waste-water sector.

By Marjola Xhunga
Contact: Energy Efficiency and Climate Change Team