Energy efficiency strategy, standards and investment

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Paris alignmentReasoning
Some progressEnergy efficiency is embedded in AFD’s taxonomy across sectors such as energy, industry, agriculture, water and sanitation. New infrastructure is built according to the highest energy efficiency standards. The same principles apply to indirect projects. It is worth highlighting the Programme for Energy Efficiency in Buildings which aims at mainstreaming EEB in all sectors (health, education, social housing and tourism). However, in terms of public transport energy efficiency, gas and hybrid vehicles are still financed, and they are considered as having climate co-benefits provided that emission reductions are achieved and surpass the >5ktCO2/yr threshold due to modal shift (from individual vehicles). The latter is established through feasibility studies at the appraisal stage including, e.g., traffic change analysis and survey with potential users. It is recommended that a maximum absolute emissions intensity threshold is implemented and that the rationale behind it is made available. The latter should decrease over time until phase-out.
Overarching energy efficiency first strategy/principle
Energy efficiency and demand management is one of the three focus areas of the energy strategy.
AFD adopts an “energy-efficiency reflex” in the Group’s projects – across different sectors such as buildings, transport, industry, agriculture – with emphasis of working with the economic actors and local authorities.
Transport energy efficiencyBuilding energy efficiencyFinancial intermediary energy efficiency
Covering urban and rural, inter-urban, maritime, and aviation transport.
 
The AFD uses the Avoid-Shift Improve framework. However, it does still provide financing for gas and hybrid public vehicles.
 
Projects criteria are detailed based on activities but broadly include the need for a shift from a higher-carbon to a lower-carbon mode, and a reduction in net GHG emissions above 5,000 tCO2e/year.
Policy covers construction of new, and modernisation of existing, building, and end-use energy efficiency including cooling systems.
 
Similar with approach to transport, criteria are detailed based on activity. Brownfield or greenfield buildings require a study to improve energy and environmental performance compared to the baseline. This study must consider in its building performance calculations the temperatures projected over a 30-year horizon.
According to AFD staff, the same methodology and criteria on energy efficiency apply for direct and indirect operations.

Explanation

The percentage of energy financing dedicated to energy efficiency fluctuates across the years but on average is below 10%. It is not clear how the ‘energy efficiency-reflex’ principle is operationalised from this perspective.

Source: https://www.afd.fr/en/carte-des-projets/program-energy-efficiency-buildings-peeb

Recommendation:

AFD should establish a maximum emission-intensity level for financing of gas and hybrid public vehicles and make available the rationale behind it. The latter should decrease progressively over time until phase-out is possible (considering the relevant contexts where AFD is active). At a country level, AFD should coordinate this recommendation with the relevant policy-based lending instruments and technical assistance support to the respective countries (through its various facilities) to establish a pathway toward electrification of the public transport system. In case AFD decides to not follow this recommendation, E3G invites AFD to explain its rationale to foster discussion across relevant stakeholders. 

Last Update: November 2022