On behalf of the Green Climate Fund, the World Bank has signed a $11.3 million grant to support energy efficiency investments in Vietnam.
The grant has been issued to the State Bank of Vietnam to develop a commercial financing market for industrial energy efficiency investments.
The total financing support from GCF also includes a $75 million guarantee.
The grant and guarantee are executed under the Vietnam Scaling up Energy Efficiency Project which aims to support Vietnam in achieving energy efficiency targets set out in the Green Growth Strategy, as well as emission reduction objectives pledged under the National Determined Contributions.
From the grant, $8.3 million will be used to build capacities for the private sector to identify, appraise and execute energy efficiency projects. It will also provide technical assistance to the Ministry of Industry and Trade and relevant authorities to strengthen policy frameworks and regulations and create an enabling environment to accelerate the energy efficiency market in Vietnam.
The remaining grant funds and the guarantee will be used to establish a risk sharing facility to provide partial credit guarantees to support local banks who may risk potential defaults on loans for energy efficiency projects.
The project is expected to mobilise $250 million of commercial financing.
Vietnam can save up to 11GW of new generation capacity by 2030 if comprehensive demand-side energy efficiency investments are carried out, according to the World Bank’s Low Carbon Study.
The energy efficiency investment need for key industries in Vietnam was estimated at around $3.6 billion.
Carolyn Turk, country director for Vietnam, said: “Scaling up energy efficiency is the single best and lowest cost option to achieve multiple goals at once: meeting energy demand, preventing pollution and reducing greenhouses emission while also increasing industry competitiveness.
“Against the context of limited public financing for energy, the risk-sharing facility is an innovative financial instrument to crowd in private sector investment financing for a greater uptake of industry-wide energy efficiency measures.”