Out-Law News | 11 Mar 2021 | 1:19 am | 1 min. read
World Bank issues $86.3 million energy efficiency grant to Vietnam.
The World Bank has given a $11.3m grant to the State Bank of Vietnam on behalf of the Green Climate Fund (GCF) so it can lend companies money to improve energy efficiency.
The total financing from GCF also includes a $75m guarantee, a statement said.
$8.3m will be used by the private sector to identify and execute energy efficiency projects. $3m of the fund and the $75m guarantee will be used to establish a risk-sharing mechanism to provide partial credit guarantees for local banks which might face defaults on loans for energy efficiency projects.
The mechanism is expected to mobilise $250m in commercial financing that will allow companies to borrow on more competitive terms and low collateral requirements.
The grant and guarantees are under the Vietnam scaling up energy efficiency project that was approved in 2019 at a value of $262.3m with its aim to improve energy efficiency in Vietnam’s industrial sector.
John Yeap of Pinsent Masons, the law firm behind Out-Law, said: “Energy efficiency has often been a challenge in developing nations where the focus has traditionally been on ensuring growing demand is met with least-cost affordable generation. Vietnam has however had in place its Vietnam national target programme on energy efficiency since 2006 that recognised the need to reduce energy intensity. Going forward, as part of an overall decarbonisation agenda, not just in Vietnam but generally, a holistic approach covering reduction of fossil fuel generation, demand side management and energy efficiency will need to be mobilised.”
“This World Bank project with a focus on capacity-building as well as strengthening policy and regulatory framework should therefore help to advance energy efficiency in the country through creating a better context for such projects to be commercialised. In addition, the linkage to relevant green finance taxonomy will be important, as the definitions should be aligned so as to enable green financing to match such projects, ” he said.