Technical assistance for implementing Paris goals

Policy level, climate-related technical assistance

In 2016 the IDB launched a “one stop shop” – NDC Invest – to support countries in translating their Nationally Determined Contributions into investment plans and bankable projects. NDC Invest offers a comprehensive package of assistance for programming, policy development and delivery of investments. It encompasses four components: 

1. NDC Programmer helps public and private sector stakeholders to construct investment plans, policies and enabling environments to unleash investments at scale.
2. NDC Pipeline Accelerator is carrying out priority studies and additional activities to ensure technical and financial feasibility for bankable and sustainable projects.
3. NDC Market Booster uses additional non-reimbursable and reimbursable grants for innovative business models, financial instruments and market development services, helping private sector clients overcome market and other non-financial barriers.
4. NDC Finance Mobilizer mobilises funding from internal and external sources together with the private arm of the IDB. 

The platform has supported 331 initiatives across 25 member countries, at both the country and regional level. NDC Invest emphasises the need to engage with ministries of finance and the private sector across initiatives.

NDC Invest facilitates access to international climate finance and technical knowledge by simplifying the associated procedures and providing “bespoke” package support for NDC formulation. Moreover, by emphasising a programmatic approach for NDC implementation, it moves from a project-by-project approach to a comprehensive approach of portfolio and program development. This approach also ensures that internal processes within the IDB align to provide cross-sectoral solutions to respond to country NDC’s objectives and to the Paris Agreement.

The NDC Pipeline Accelerator (one of NDC Invest’s components) Multi-Donor Trust Fund (ACL) supports subnational and national entities throughout the entire project cycle of sustainable investments. The NDC Invest ACL Fund has to date funded 19 projects (ten of which are country-specific) valued at USD 15 million and leveraged USD 687 million in investment loans for member countries. Moreover, in 2019 the platform developed an “ambition framework” to drive ambition in the second round of NDC commitments.  This framework emphasises:

• Resilient and carbon-neutral long-term planning.
• Effective institutional framework[s] with coordination mechanisms among key actors.
• Active inclusion of a wide variety of stakeholders.
• Realistic finance strategies to drive successful implementation.

Fossil fuel subsidy reform

The IDB has estimated that fossil fuel subsidies in Latin America amounted to USD 84 billion per year, or 1.6% of regional GDP, before the price of oil fell in late 2014. It also estimates that for every USD 10 spent on energy subsidies across LAC, only USD 1 reaches the poorest 20% of households.

The IDB has supported various member countries in plans to “streamline” energy subsidies. For example, the Dominican Republic received a USD 500 million loan for that purpose, which helped reduce its fiscal deficit. 

However, in 2018, the Bank was involved in an oil and gas industry development project in Guyana, stating that these options were “cleaner” than traditional use of fossil fuels. It is unclear if the Bank has excluded fossil fuels from its technical assistance or whether it has participated in any further technical assistance projects for the development of fossil fuels.

In order to effectively support countries with planning for and realising their energy transition, the IDB must ensure that any technical assistance for fossil fuels considers the risk of lock-in and stranded assets, as well as the future economic rate of return of the project.[1] The decision making process for providing technical assistance to fossil fuel projects should therefore include an analysis of alternative measures for providing the same service, as part of a clearly evidenced rationale for how the support being provided is compatible with the energy transition in that given context.

Other technical assistance

At the Finance in Common Summit 2023, it was announced that the IDB has been working with ALIDE to support public development banks (PDBs) from LAC in their Paris Agreement alignment. This includes developing a climate-tagging tool to help PDBs identify projects in their portfolios to be aligned with the Paris Agreement.[2] Subsequently, at COP28 the IDB and Germany’s BMWK jointly launched a new facility to support climate action in PDBs and green the wider financial sector in the LAC region, on the basis of an initial EUR 20 million in grant funding pledged by Germany.

At the project level, as part of its commitments under the financial institutions (FI) sectoral note of the Paris Alignment Implementation Approach, the IDB commits to supporting clients through technical assistance to progressively become Paris aligned. This approach intends to be sensitive to the readiness and capacities of partner FIs.

The IDB previously undertook a regional project targeting deep decarbonisation pathways in LAC. This was designed to help policymakers make better informed decisions to shape long-term sustainability – as well as to bring transparency and ownership to the process – in line with the IDB’s climate action plan to promote policy consistency and translate NDCs into investment.

The Deep Decarbonisation Pathways for Latin America and the Caribbean project sought to improve capacity in the region to rely on independent, domestic evaluations to assess countries’ NDCs, emission reduction plans, and climate policies. The project aimed to increase the pool of available models and modelers in the region, through:

1. Training local academic teams and/or think tanks in the development and use of relevant models.
2. Enhancing collaboration between local modelers and policymakers.
3. Informing local policy debates about decarbonisation pathways and NDC planning, through the generation of emissions reduction pathways for the respective countries.
4. Developing a regional community of practice to discuss modelling approaches and assessments of climate policies, share experiences and continue to develop expertise.

The project worked in collaboration with the 2050 Pathways Platform, a multi-stakeholder initiative launched at COP22 to support countries seeking to develop long-term pathways in line with the Paris Agreement.[3]

IDB Invest, the IDB Group’s private sector arm, also offers technical assistance and advisory services that support NDC implementation and broader decarbonisation pathways. The IDB also runs the UK Sustainable Infrastructure Programme (UKSIP), which accelerates infrastructure development (in line with NDC implementation) through an array of instruments. Moreover, the IDB was the first MDB to actively work on supporting 2050 Long-Term Strategy pathway planning.

Recommendation:

N/A  

[1] Including where relevant, accounting for future pertinent influences on international competitiveness.

[2] Once this work is more clearly developed and more information is available, E3G will expand this section accordingly.

[3] Fundamentally, this project sought to strengthen the capacity of local experts to contribute to understanding of pathways to achieve targets that are consistent with the long-term decarbonisation goal of the Paris Agreement. Despite now being closed, the IDB has stated in discussions with E3G that the legacy of the project will hopefully contribute to improving the transparency of international stocktaking on NDCs with more active participation of experts from LAC.