BREATHE BETTER BOND INITIATIVE October 16, 2019
“THE AVERAGE RESIDENT OF DELHI WILL LIVE ABOUT 10 FEWER YEARS BECAUSE OF HIGH POLLUTION” Source: Introducing the Air Quality Life Index, Energy Policy Institute at the University of Chicago 1
THE URBAN AIR POLLUTION PROBLEM Cities are at the nexus of climate change and air pollution 97% of urban populations in low- and middle-income countries are exposed to unsafe air quality, resulting in about 7 million premature deaths per year Cities are responsible for 70% of CO2 emissions globally 2 2
AIR POLLUTION CAUSES PREMATURE DEATHS AND ECONOMIC LOSS • Air pollution results in significant welfare loss and premature deaths each year • Lower-middle income countries face higher premature deaths (1.8 million in 2016) from air pollution than upper-middle or high income countries Welfare Damages, in billion US$ and (percentage of GNI) by Pollutant Ambient air pollution and Unsafe water and unsafe Lead exposure Total household air pollution sanitation High income 1,691 (3.52%) 159 (0.33%) 303 (0.63%) 2,153 (4.48%) Upper-middle income 1,691 (8.37%) 89 (0.44%) 118 (0.59%) 1,898 (9.40%) Lower-middle income 367 (6.38%) 143 (2.49%) 28 (0.49%) 538 (9.39%) Low income 18 (4.83%) 12 (3.30%) 0.74 (0.20%) 31 (8.33%) Total 3,767 (5.06%) 404 (0.54%) 451 (0.61%) 4,622 (6.21%) Source: Lancet, 2018 3 3
SELECT CITY EXAMPLES PM2.5 and PM10 Reduction in Selected Cities Significant reductions in pollution levels are achievable. 4 4
GOAL, BARRIERS, AND SOLUTIONS Support cities to launch projects that reduce short-lived climate Goal pollutants and greenhouse gas emissions. Address barriers that have prevented cities from taking pollution Approach mitigation measures Knowledge Legal Financial Data Barriers Inability to structure Competing demand Lack of data to Lack of SLCP- and issue bonds reducing, bankable for capital quantify pollution projects problem Technical Support competitive Technical Technical assistance for financing for air assistance for assistance to Solutions emissions pollution-reducing project identification structure bond inventory and projects and preparation issuances projections 5 5
BBB STRUCTURE The BBB Initiative Technical Phase I: Technical Assistance Grant Assistance Grant Funding Sources Finance Pollution assessments, (Donors, national bond structuring, project governments) selection Municipal Government or PPP Bond Proceeds Phase II: Institutional Investors Repayment Capital Bond Issuance Results Interest and Based Principal Payments Projects Pollution-Reducing Projects Projects Results Based Phase III: Payments Funding Results Results Based Based (Donors, national Payments Payments governments) 6 6
CITY SELECTION RESULTS 1.2 Delhi 1.0 Air Pollution + GHG Coefficient Bengaluru Ahmedabad 0.8 Jakarta 0.6 0.4 Johannesburg Mexico City Lagos Santiago 0.2 Lima Bogota 0.0 0.0 0.2 0.4 0.6 0.8 1.0 1.2 Conducive Environment Coefficient • Location on graph reflects severity of air pollution problem and actionability • Size of each city’s circle scaled to population 7
MOST CITIES CANNOT ACCURATELY MEASURE POLLUTION Million People per Ground Level Monitoring Station by Country Income Level and by Region 60 18 54.3 15.9 16 50 14 40 12 10 30 8 6 20 4.7 4 10 1.9 1.5 5.6 1.4 2 0.4 0.4 1.5 0.3 0 0 ECA NA EAP MNA LAC SA SSA LI LMI UMI HI • The problem is most severe in low income Sub-Saharan African countries 8
TECHNICAL ASSISTANCE COMPONENTS • GHG/air pollution emissions inventory (current and projected) • Identifying types and sources and integrating into pollution models • Project identification and preparation • From stakeholder capacity building to feasibility studies and project tender • Bond structuring • Monitoring, reporting and verification • Capacity building at project level to evaluate impact 9
PROJECT TYPES 10
SIMULATION CITY CASE STUDY IFC used a pollution model to assess the impact of three projects implemented in a hypothetical South Asian city. • Using recent investments as a In USD millions benchmark, IFC estimated the capital required to achieve specific Starting Mitigation Actions Debt Equity Total changes in the energy mix Year • The pollution model then assessed Electricity Generation – the impact on GHG emissions and Project to install a 2021 101 34 135 several types of pollutants 200MW Solar Plant. • Conclusion. A $130 million BBB Transport – Replace issue coupled with $387 million of 300 diesel buses with 2021 155 52 207 project debt would result 250 electric trolleys. reductions of 3.4 million tons of CO2 and almost 2 million tons of Waste – Construction PM2.5 over 8 years. of a waste to energy plant that can process 2021 131 44 175 420,000 tons of municipal solid waste. Total 387 130 517 11
BBB IMPLEMENTATION PATHWAY Phase I: Technical Assistance Phase II: Issuing the Phase III: Measuring (6 months – 2 years) BBB Results and Incentives Implementation of projects Project selection and bond design and choice of performance metric Ongoing impact Issuance of the assessment oversight BBB with proceeds and project monitoring to be used for & SLCP-reducing Results Based projects Payment Establishing relationship with city and understanding SLCP problem and potential solutions 12
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