This report focuses on investigating the SLCP mitigation technologies offering the highest mitigation potential of the three major SLCPs: black carbon, hydrofluorocarbons (HFCs), and methane, and...
The study shows that all modern brick kiln technologies yield positive returns due to efficiency and productivity gains. Yet because the private sector is informal in nature and often does not meet the required social and environmental standards, it is not attractive to Financial Institutions (FIs). Therefore, access to finance by commercial financiers has been limited due to the lack of accountancy and credibility of the informal brick sector. Moreover, there is also a lack of motivation in the brick sector to adopt modern efficient technologies because fuel costs are cheap and existing regulation is weakly enforced.
In the transport sector, soot-free vehicles such as public buses, trucks and freight possess huge potential for improving the air quality in many regions. However, availability of low-sulphur fuel, which is required to ensure optimum emission reduction from soot-free vehicles, is a key bottleneck in developing countries. Refinery upgrades require huge investment, which are only within the financial capacity of a very few national level commercial banks. On the contrary, commercial banks can extend credits to the vehicle operators/owners for adopting soot-free diesel vehicles in countries where vehicle emission control programme exists. Commercial banks interest in financing in soot-free fleets will depend on the fleet operator’s business model and their ownership structure (e.g. public/private).
The cookstove sector also has large potential to reduce BC through the adoption of clean cooking practises. Customer willingness to adopt and their ability to pay for cleaner cooking options is a key issue (i.e. choice between basic ‘efficient’ stove and ‘clean’ cookstove). Yet, there is lack of adoption of ‘clean’ cook stove compared to wide-spread use of regular ‘efficient stoves’. The clean cookstove options (e.g. stove with cleaner fuel such as LPG, biogas; electric and solar cooker; forced-draft improved biomass stove) appear to be more expensive than basic efficient cookstoves. As such, the pricing disparity needs to be addressed by giving additional incentives to the end-users.
To mitigate the contribution of HFCs to near-term global warming, HFC-free or HFCs with low global war-ming potential (GWP) cooling technologies can and should be promoted. Mainly refrigeration and air-conditioning have large potential for using HFC-free and low-GWP HFCs refrigerants. The Montreal Protocol has been funding the replacement of CFCs and HCFCs through its Multilateral Fund (MLF). The introduction of HFC-free or low GWP- HFC cooling options would therefore help the market to leapfrog to the most advanced environmentally friendly cooling solutions. The study reveals that with an investment of USD 1-3 billion, some 700 projects can be upgraded into alternative low-GWP cooling technologies. Although certain low-GWP/HFC-free refrigerant equipped cooling systems are commercially available, worldwide these technologies are still in demonstration phase in developing countries.
The waste, oil & gas and agriculture sectors possess large potential for significant reductions in both methane and BC. In the waste sector, methane and BC mitigation technologies for landfills and solid waste management are relatively mature but the waste sector is dominated by the public utilities and lacks a proper private-public partnership framework for creating a space for private sector participation in potential waste management projects. This is particularly the case in developing countries. The private sector shows non-willingness to contract with local government to provide waste management services due to their concern over the government’s credibility in meeting their payment obligations and the absence of proper policies that allow safe collection, disposal and use of waste.
In oil and gas sector, the operators are mainly state-owned, and methane reductions are possible by the prevention of pipeline leakage and the recovery of methane from coal mining. These measures can provide improved gas recoverability, leading to additional revenues for the operator. However, in places where the operator is only responsible for delivery service and not held accountable for leakage, there is no financial incentive for the operator to reduce pipeline leakage. As a result, cost-effective opportunities for methane recovery vary by country and depend upon on the concentration of emission source, the condition of the infrastructure and the local price of natural gas, etc.
In the agricultural sector, large-scale manure management projects require high capital expenditure and the energy market tariff rate in the developing countries is not enough to cover project costs. Besides there is a lack of financial incentives for farmers to implement mitigation practices through manure management, and rice management practices, which usually incur additional costs. For instance, the facilities required for the composting of rice straw and efficient irrigation and drainage systems for managing flooding and draining demand a considerable capital expenditure with little to no short-term payback to farmers. In the agriculture sector, country-level policies that price the negative impact from methane emission and grant programmes that support first phase research in laboratory studies would be a first step towards the mitigation of methane. In general, in terms of bankable projects, waste, oil & gas, agriculture sectors appear to be less appealing for the commercial banks at the moment.
In general, barriers for private sector investment across the SLCP mitigation sectors are not only financial, they are also largely due to other socio-economic, policy and regulatory factors. Low return on investment and maturity of the SLCP mitigation technologies also affects the bankability of SLCP mitigation focused interventions for the private sector. To address the full range of barriers, coordinated action by a broader range of stakeholders is required.
In addition to sectorial and regulatory barriers, awareness of sectors with SLCP mitigation potential is low. This means that banks often lack the ability to assess the potential of SLCP financing due to information gaps and the lack of credit exposure in the SLCP sectors. The study identified potential collaboration strategies to demonstrate to commercial financiers the SLCP financing potential for certain sectors, such as, awareness raising about the different market and technology, an investigation about potential business models and financing mechanisms, a study of supply and demand scenarios, and linkages with potential funding sources, etc.