The World Bank has developed new, non-grant or partial-grant financing projects as an alternative approach to the existing grant-financing scheme for possible future Ozone Depleting Substancs (ODS) phaseout projects. The initiatives are in response to the request of the Multilateral Fund Executive Committee (ExCom) that new financial mechanisms should be explored for future project implementation in order to include countries and enterprises which might not otherwise be eligible for assistance. The Thailand Chiller Replacement Program and the Mexican Chiller Concessional Lending Pilot Project will replace Chlorofluorocarbon (CFC)-chillers (building air conditioning systems) with high-efficiency, non-CFC chillers. The Thailand project will be financed by both the MLF and the Global Environment Facility (GEF) on a loan basis while the Mexico project combines Multilateral Fund (MLF) grant funding with counterpart funding from the Mexican government within a newly established revolving fund.
Conversion to new, energy-efficient chillers has the potential to create energy savings as well as to reduce demand for CFCs. However, because the benefits are as yet unproven and the up-front capital cost of investment is significant, incentives were needed to encourage building owners to replace old chillers before the end of chillers' product lives. By providing funds for the new chillers, the program allows building owners to make the transition while benefiting from energy savings. The goal of the projects is thus to use contingent financing by separate global environmental financial mechanisms (or in the case of Mexico by a global financial mechanism and an Article 5 country government) to demonstrate the feasibility of engaging in large-scale chiller replacement while minimizing the impact to chiller owners and the overall economy; and, to reduce CFC-11 and CFC-12 demand (which would arise due to leakage) and carbon emissions (i.e. improve energy efficiency). In addition, the projects will test the efficacy and applicability of the innovative financing approach.
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