29 Haziran 2012 Cuma

Clean Technology Fund (CTF) Investments in Turkey: Comment on Berne Declaration Report


Comments on the Berne Declaration Report “Climate Finance in Turkey: The contribution of the World Bank Clean Technology Fund to Transforming the Turkish Energy Sector”

1. The World Bank would like to thank the Berne Declaration for their interest in climate finance in Turkey and also to thank the authors of the report for the constructive dialogue with World Bank staff in Ankara and Washington DC earlier this year. The CTF/IBRD co-financed Private Sector Renewable Energy and Energy Efficiency Project (the Project) is the first CTF co-financed project globally. Through their governance structure, the Climate Investment Funds (CIF)1 actively seek the views of civil society organizations. Observations and recommendations in the Berne Declaration report will be useful for Project stakeholders and contribute to global experience and learning.

2. The Berne Declaration report’s main stated goal was to determine “whether the World Bank’s low-interest CTF loans were successful in increasing privately operated renewable energy and energy efficiency production, reducing greenhouse gas emissions and ultimately contributing to the transformation of the Turkish energy sector.” This goal corresponds closely to the Project Development Objective2 to “help increase privately owned and operated energy production from indigenous renewable energy sources within the market-based framework of the Turkish Electricity Market Law, enhance energy efficiency, and thereby reduce greenhouse gas emissions.” According to the ongoing assessment of Project performance conducted by the Government, the Borrowers and the World Bank, the Project’s performance to date is satisfactory and the Project is on track to meet its development objective.3 Moreover, Turkey’s CTF Investment Plan as a whole aims to contribute to Turkey’s transformation into a lower carbon economy, although this is not the objective of any single project.

3. The Berne Declaration report’s conclusion that “the CTF Turkey achieved its objectives in the energy efficiency sector and managed to overcome first mover hurdles,” is fully consistent with the World Bank’s assessment of Project performance in energy efficiency. The level of funding for energy efficiency investment (currently over 50% of the CTF loan and over 25% of the accompanying IBRD financing) far exceeds the lower limit of 10% of the IBRD loan set at loan signing. Project monitoring data4 indicates that an emission reduction potential of 684,000 tons CO2 was achieved by end 2010 for energy efficiency investments. This represents a major increase over the 2014 Project target of 219,000 tons CO2 estimated at loan signing.5

4. With respect to the renewable energy investments, 134 MW of new installed capacity financed under the Project was already operating by end 2010, with other facilities under construction. As such, the Project is also on track to meet its 2014 target of 630 MW of installed renewable energy capacity.6 We also confirm the finding in Chapter 3 of the Berne Declaration report that the percentage of the CTF loan utilized to finance hydroelectric power plants (HEPPs) was small (World Bank monitoring shows it to be 17% at end 2010). Therefore, the reference in the Executive Summary to “the relatively large portion of CTF money invested in hydropower” is not consistent with the finding in Chapter 3 and we would accordingly appreciate correction of the reference.

5. CTF investment plans are expected to leverage financing from the private sector, multi-lateral development banks, national governments and bilateral donors with the ratio of 1:8. If achieved, this would result in the total CTF fund of US$ 4.5 billion leveraging investments of around US$ 37 billion. The Berne Declaration report claims that CTF financing has had limited leveraging effect in Turkey. In reality, the opposite is true. Under this Project to date, CTF resources of US$ 100 million have leveraged about US$ 800 million of additional resources from the World Bank (IBRD) and subproject sponsor equity and borrowing. Further, the World Bank is preparing an additional IBRD loan of US$ 500 million that will leverage an additional $150 million in sponsor equity and borrowing, with the objective of significantly scaling up the Project objectives. Thus, when the Project is fully implemented, the US$ 100 million from CTF will have leveraged at least US$ 1.45 billion of additional resources. This far exceeds CTF global targets. Moreover, TKB and TSKB have attracted an additional US$ 1 billion for energy efficiency and renewable energy credit lines from other international financiers, such as AfD, EIB, IDB and KfW.

6. Significant leveraging of CTF resources has also occurred in the commercial banking sector in Turkey. In addition to the CTF/IFC/EBRD co-financed energy efficiency projects already under implementation by four commercial banks, a series of other international and domestic lines of credit have recently been established by a number of Turkish commercial banks, supported in part by agencies such as AfD, EBRD, EIB, and KfW. Preparation has also started on a new IBRD-financed project to support three Turkish commercial banks expand their technical and financial capacity to conduct energy efficiency investments at small and medium enterprises.

7. The rapid deployment of CTF resources, in and of itself, was not an objective of either Turkey’s CTF Investment Plan or the Project, and the choice of using a “financial intermediation model” for the channeling of CTF resources was not made for reasons of quick disbursement. Rather, Turkey and the World Bank recognized that for Turkey to achieve its long-term targets for renewable energy and energy efficiency, significant private capital would need to be leveraged, and that Turkey’s banking sector would play a crucial role to mobilize such capital. Capacity building to help Turkey’s banking sector conduct clean energy investments was, and continues to be, of paramount importance. TKB and TSKB were selected to participate in the Project because of their key role as development banks in Turkey, and because both banks already had existing capacity and portfolio, albeit limited, in the energy sector. A capacity building effort was undertaken, partially supported by KfW, to help the Borrowers strengthen their technical capacity and broaden their own markets in order to reach sponsors of the investment types targeted by the Project, namely energy efficiency, small HEPP, and other renewable energy investments.

8. Naturally, the speed with which Turkey has implemented the Project brings benefits. In order to achieve long-term market transformation, it is paramount to initiate programs that quickly demonstrate results at scale on the ground while also supporting new technologies that take more time to prepare and implement and are more expensive. The rapid achievement of Project objectives has thus helped increase the pool of funding within Turkey. The Berne Declaration Report appears to be ambiguous or skeptical about channeling CTF funds through private/commercial entities. By contrast, Turkey, the CTF and the World Bank consider the engagement of local financial intermediaries and private sector developers essential for achieving significant scale-up of investments. The multi-lateral board of the CIF has been very keen to see private sector participation in the manner exhibited through Turkey’s CTF-financed projects.

9. Based on monitoring throughout the implementation of the Project, the Borrowers, the Government and the World Bank have recently completed a Project restructuring and are preparing an additional IBRD loan.7 The restructuring and proposed additional loan recognize the maturing of the renewable energy market (particularly for small HEPPs with capacity lower than 10 MW) in the two year period since Project approval and intend to sharpen the focus of future investments under the Project on emerging renewable energy technologies and energy efficiency. For example new investments in HEPPs will no longer be eligible for co-financing from CTF. In addition, the overall envelope of IBRD financing used for commercial renewable technologies (HEPPs and landfill gas) has been capped at 50% of the additional IBRD loan. Both of these changes will increase the resources available for investments in renewable energy other than HEPPs and in energy efficiency.

10. Potential cumulative effects of HEPPs are an important issue, especially as the number of HEPPs in Turkey has been increasing in recent years. Although Turkish regulations currently do not require cumulative impact assessments of HEPPs, the Government, Borrowers and the World Bank have recognized the importance of this issue. For that reason, the recent Project restructuring has introduced changes to enhance the environmental and social evaluation and implementation of subprojects. All future HEPP investments under the restructured Project and the proposed additional loan will be screened to determine whether there is a potential for cumulative impacts and if so, a cumulative impact assessment will be conducted.

11. Cumulative impact assessment is a new area of policy development in Turkey and the World Bank recognizes that support to assist the Government to strengthen Turkey’s policies and practices is also needed. As a first step, in May 2011 the World Bank sponsored a workshop for national ministries, Turkish financial institutions, international financial institutions and civil society organizations on international practice in cumulative impact assessment. The World Bank will continue to assist the Government in this regard through its ongoing technical assistance to the Government on river basin management.

12. Regarding public disclosure of project-related information, the Berne Declaration report is accurate in its statement that, on account of confidentiality requirements under Turkish banking regulations, the two Borrowers under the Project have not been able to disclose detailed information on project implementation. While recognizing that many countries maintain strict confidentiality on banking transactions, the World Bank agrees that it is important that information on individual subprojects is made publicly available during subproject implementation. In this regard, under the restructured Project and proposed additional loan, the Borrowers will require the sponsors of any new investment to provide, and agree to public disclosure of, subproject locations and nature, capacity of investments and the start and completion date of construction.

13. In closing, we would like to thank the Berne Declaration once again for carrying out their research on the Project and providing a useful report. We were pleased to have had the opportunity to host the Berne Declaration team and look forward to future opportunities to do so again.
1 The Climate Investment Funds, of which the Clean Technology Fund (CTF) is one, are multi-stakeholder funds governed by the Trust Fund committee equally represented by recipient and donor countries. The World Bank is trustee and one of the implementing agencies along with five regional development banks. The CIF governance framework includes observers from civil society organizations.2 Refer Project Appraisal Document dated May 1, 2009.3 Refer “Implementation Status and Results Report dated 02/04/11” at http://go.worldbank.org/A1S7RKBOG0
4 Refer “Project Restructuring Paper” dated September 30, 2011 available at http://go.worldbank.org/PZGM4YZNT0. The target data referenced here pertains to the current Project only, and does not include the further scale-up that would be expected under the proposed additional loan.5 Refer Project Appraisal Document dated May 1, 2009.6 Refer “Project Restructuring Paper” dated September 30, 2011 available at http://go.worldbank.org/PZGM4YZNT0. The target data referenced here pertains to the current Project only, and does not include the further scale-up that would be expected under the proposed additional loan.7 Refer “Project Restructuring Paper” dated September 30, 2011 available at http://go.worldbank.org/PZGM4YZNT0.

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