EBRD President Mirow sets out why dark economic prospects must not prevent measures to tackle climate change

For the past two weeks Poland has been the unlikely and at the same time most appropriate centre of the international environmental movement. Unlikely, because the country is still heavily dependent on coal in its industrial production and power generation. Appropriate, because it is exactly this dependence which demonstrates the need for new, innovative solutions – for the benefit of the country’s economy and environment.

Complementing the UN Climate Change Conference in the western Polish city of Poznań (December 1-12), finance ministers and representatives of international financial institutions such as the EBRD, European Investment Bank (EIB) and World Bank gathered in Warsaw at the beginning of the week for a two-day summit to discuss ways to achieve the significant reduction in CO2 emissions of the Kyoto protocol or the even more far-reaching EU targets.

President Mirow set out the EBRD’s priorities and activities and explained why the Bank sees energy efficiency as the key to all efforts within the context of climate change: despite progress the average energy intensity in the EBRD region per unit of GDP is still about three times that of the EU-15. And studies by the International Energy Agency show that energy efficiency accounts for over 50 per cent of the required future carbon reduction.

Especially at a time of financial distress this is welcome news. Long before considering, let alone commissioning, traditionally very expensive investments in new energy generating capacities, most countries would benefit massively from using their existing potential much more efficiently and productively.

What is more, “Within the current economic downturn, a number of energy efficiency measures, such as building rehabilitation, are labour intensive but not capital intensive which make them realistic components of a ‘green recovery’,” as President Mirow said in his speech.

So the economic downturn may provide an opportunity in disguise for many countries and companies to literally clean up their act. The global recession is expected to lower emissions. The drive to get the economy going (and growing) again can only succeed by enhancing competitiveness and for this energy efficiency is nowadays established as a key component – at enterprise as well as at state level.

The EBRD has always been at the forefront of this push for energy efficiency and under its Sustainable Energy Initiative aims at more than doubling its investments in this area over the period 2006 to 2008. By the end of November 2008, EBRD investments under this initiative had reached €2.5 billion for over 140 projects in 21 countries, already 65 per cent over the original target for three years.

And more is to be expected shortly: the day after the President’s return from Poland, the EBRD's Board of Directors approved an energy efficiency framework for Kazakhstan under which US$ 75 million will be provided to local banks for on-lending to private clients for energy efficiency investments. Similar frameworks have already been introduced highly successfully in other countries of operations. In the Slovak Republic, for instance, a second framework is already under discussion.

It is a good example of how the EBRD can help to achieve several important goals with one instrument. Seven at one stroke, as the valiant little tailor manages to pull off in the famous Grimm's fairy tale, may (yet?) be aiming too high, but even so the number of achievements is significant. The EBRD loans will 1) provide local banks with finance, who will then 2) on-lend to private clients, thus easing 3) access to finance and the money will 4) be invested into energy efficiency measures, which are 5) usually purchased from local suppliers.

In addition, the EBRD facilitated the joint development of a Green Investment Scheme by Ireland and Poland to trigger a substantial increase in investments in sustainable energy projects in Poland, mainly in small and medium-sized enterprises. These investments will be financed in part by the EBRD and the European Investment Bank.

This week’s activities alone demonstrate clearly that the current economic gloom must not lead to a reversal of the climate and environmental goals the international community has set itself. These goals are not a luxury, but at least as much a necessity for the future of the world as steps to overcome the financial crisis. As President Mirow made clear in his address in Warsaw, here at the EBRD we are aiming to contribute to both.

By Axel Reiserer, EBRD Press Officer