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Turkey, Egypt and Mexico Eye Low Carbon Future

  • New Clean Technology Fund (CTF) provides financing to scale-up the deployment and transfer of low-carbon technologies
  • A CTF project in Turkey will focus on wind, solar, hydro, geothermal power and industrial energy efficiency
  • Turkey aims to use the CTF to help banks and industry create a market for energy efficiency investments

May 29, 2009—Imagine a future where energy from the sun and the wind powers megacities like Istanbul, Cairo and Mexico City—where efficient and clean mass transit systems move people where they want to go quickly.

Turkey, Egypt and Mexico want to go beyond imagining.

The three countries plan major investments in the next several years in renewable energy, energy efficiency and mass transit to reduce air pollution and meet development goals as their populations grow.

They will be among the first to tap a new $5.2 billion Clean Technology Fund managed by the World Bank, administered through the World Bank Group and other multilateral development banks. The governments of Australia, France, Germany, Japan, Spain, Sweden, United Kingdom, and United States have made pledges or contributions to the fund.

The fund is an interim measure to provide concessional (low-interest) financing to scale up low carbon technologies pending negotiations on a new global climate change agreement.

Turkey, Egypt and Mexico will blend Clean Technology Fund financing—$250 million for Turkey, $300 million for Egypt and $500 million for Mexico—with World Bank Group and regional development bank funding, private and other financing for maximum impact.

Turkey’s greenhouse gas emissions are
growing rapidly, and the energy sector is
the major contributor.

Their plans mesh with the fund’s goal of accelerating the commercialization of advanced energy and transport technologies, says Kathy Sierra, vice president of sustainable development at the World Bank.

“Smart investments in energy and transport can also protect the environment and ensure that climate change is much less of a threat,” she says.

In this story, we focus on Turkey, the first country to use the Clean Technology Fund to help meet renewable energy and energy efficiency goals. Stories on Egypt and Mexico will follow in the coming weeks.

CTF will help Turkey address three critical development challenges, says Ulrich Zachau, World Bank Country Director for Turkey.

“These challenges include enhancing energy security by improving energy efficiency as well as meeting overall energy generation capacity needs; supporting a clean energy transition by focusing on clean energy and reducing greenhouse gas emissions; and increasing private sector involvement in the development and financing of clean energy investments,” he says.

Turkey: Climate Change and Clean Energy are Key Priorities

Turkey’s greenhouse gas emissions are growing rapidly, and the energy sector is the major contributor, says Özgür Pehlivan, Deputy Director General, Undersecretariat of Treasury, Republic of Turkey.

“At the same time, energy needs are large and growing,” he says.

The government is therefore focusing on clean energy development, such as from domestic renewable resources such as wind, hydro, biomass and solar, and is also concentrating on improving energy efficiency, primarily in industry and buildings.

“And the Clean Technology Fund will play an important role in helping materialize this vision,” Pehlivan adds.

A project, approved by the World Bank Board of Directors on May 28, will combine $100 million in Clean Technology Fund resources with a World Bank (IBRD) loan of $500 million. The remaining $150 million under the Clean Technology Fund will be used in two future projects.

The project will focus on wind, solar, hydro, geothermal power and industrial energy efficiency.

If successful and scaled up further, it will mean the government can avoid developing large deposits of poor quality lignite coal to the extent it would otherwise have to, says World Bank project lead Sameer Shukla.

Target Is 20,000 Megawatts of Wind Power by 2020

Turkey wants to expand renewable energy, particularly wind power, to help reduce CO2 emissions and ensure security of the energy supply.

Turkey wants to expand renewable energy,
particularly wind power, to help reduce CO2
emissions and ensure security of the energy

Right now, fewer than 20 wind farms (including one financed by the World Bank) produce about 452 megawatts of electricity a year. The project will help the government expand wind energy toward its target of 20,000 MW by 2020—an amount that would meet almost half of Turkey’s present energy needs.

If potential wind capacity were fully exploited, production could be close to 96 terawatthours (TWh) a year, according to the Bank. That’s more than two of the largest wind power producers—United States and Spain—generated in 2008.

In addition, Turkey’s CTF investment plan would develop smart-grid solutions aimed at helping better integrate renewable resources into the transmission grid.

A Lot of Scope Seen for Improving Energy Efficiency

Turkey is also launching an energy efficiency program covering industries, small and medium enterprises (SMEs), municipal facilities, as well as buildings. The investment plan is being supported by the World Bank, IFC and the European Bank for Reconstruction and Development (EBRD), along with CTF resources.

IFC plans to build on its existing portfolio of renewable energy, energy efficiency and cleaner production investments in Turkey. “The CTF will provide further incentives for private investment in cleaner technologies and is closely aligned with our strategy for Turkey’s energy sector,” says Shahbaz Mavaddat, director of IFC’s Southern Europe and Central Asia department.

Turkey’s GHG emissions are growing at a rate that is among the fastest in the world. The energy sector accounts for the majority (77 percent) of emissions in the country—a result of growing demand for electricity and gas and strong dependence on fossil fuels for electricity generation.

Industry consumes about 32 percent of total energy, and that share is projected to grow. Segments of Turkish industry are considered energy intensive when compared to other OECD countries, but have significant potential for improved efficiency, according to estimates.

The government has enacted legislative and regulatory changes promoting energy efficiency, and several initiatives are currently ongoing in the areas of efficient lighting, industrial energy efficiency and reducing consumption in public offices and facilities.

Despite the potential, energy efficiency investments, as in many other countries, face significant barriers, such as lack of awareness, perceived risks, and high transaction costs.

CTF Will Help Surmount Barriers

Turkey aims to use the CTF to help banks and industry surmount these barriers, increase lending for clean energy, and create a market for energy efficiency investments.

It is expected that, with the support of CTF, energy efficiency investments will accelerate over time as a result of introducing new financing business models designed specifically to overcome risky aspects of energy efficiency projects and to reduce transaction costs.

The project aims at using local banks to intermediate the funds to the private sector – a model expected to enable “spreading the experience beyond the project’s boundaries,” says Shukla.

He says the low-interest Clean Technology Fund financing is critical in making newer renewable energy technologies and energy efficiency investments attractive to investors. CTF will provide much-needed support to the banks’ initiatives in pursuing these efforts, he adds.

This article has been revised to reflect the following correction:

Correction: June 2, 2009
A paragraph mentioning confining global warming between 2 degrees C and 2.4 degrees C was taken out of the story.

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