By Sarah Hannan
As member states of the United Nations Climate Change Conference (COP27) reflect upon the climate actions they must take, Sri Lanka, which is burdened by an economic and climate crisis, needs President Ranil Wickremesinghe to look at methods to secure sufficient investments in the coming years to initiate its Climate Prosperity Plan (CPP), which was launched last week.
Presenting the CPP publication to the Republic of Ghana President and Climate Vulnerable Forum (CVF) Chairman Nana Akufo-Addo, Wickremesinghe stated: “In our Climate Prosperity Plan, our renewable energy generation will increase from 35% to 70% by the end of this decade. That is a huge growth prospect both in investment terms and job opportunities.
“The CPP also makes clear the economic benefits of taking these measures. They achieve higher levels of prosperity than business-as-usual, where we simply continue as we are. They achieve higher employment by re-skilling and training for industries of the future.”
In his address at the COP27, Wickremesinghe stressed that developed countries must deliver on their pledge in Glasgow by doubling their funding to compensate developing countries for loss and damage. This would assist vulnerable countries to improve their economy and living standards, as they otherwise lack funding to climate-proof themselves within set timeframes.
Wickremesinghe highlighted some of the initiatives that Sri Lanka had taken to implement the Climate Action Plans set forth by the United Nations Framework Convention on Climate Change (UNFCCC) and the Paris Agreement.
Identifying the lack of capacity building that is vital to implement the proposed plans, Wickremesinghe proposed to establish an International Climate Change University in Sri Lanka, which is also included as a key initiative in the CPP published last week.
It is evident that Wickremesinghe will first look at implementing the International Climate Change University and invite multilateral institutions and organisations to collaborate to establish the same.
Climate Prosperity Plan
Upon reading through the CPP publication, The Sunday Morning learnt that the plan spells out the national investment strategy from the near to long term (current decade to mid-century perspective) for climate-proofing the country.
Wickremesinghe noted: “We want to make Sri Lanka a low-carbon hub in designing and deploying new technologies that are climate-smart. (…) despite the crisis left by the previous Government and high emitters, we can at least take this opportunity for a reset, to do things very differently in the future from how they have been done in the past. I believe the CPP provides a way to do this, to open Sri Lanka for business and investment again, and to do so in a way that achieves rather than hinders our climate goals.”
According to Sri Lanka’s CPP, the Government, in line with the CVF and Vulnerable 20 Group (V20) guidelines, sets three major goals focused on energy, finance, and resilience. To achieve these goals, the CPP lists the following projects to be implemented under each goal:
Goal 1: Unlock domestic energy abundance through renewable, modernised, and sustainable transport
Investment strategy proposed under the CPP
The total resource mobilisation opportunity is $ 26.53 billion through 2030, which is largely composed of international sources. The investment strategy includes a variety of resource mobilisation initiatives, including:
Source for the tables and figures: Climate Prosperity Plan | Sri Lanka 2022
- Sri Lanka offshore wind array: Harness the wind resources in the ocean area between Jaffna and Puttalam, reaching up to 5 GW over an eight-year implementation plan commencing in 2023 that will operate for 35 years, leveraging $ 16 billion.
- Indo-Sri Lanka power marine cable line (Madurai-Anuradhapura): A subsea High Voltage Direct Current (HVDC) interconnector with an initial capacity of 2.5 GW (275 kV) to link the Anuradhapura and Madurai grids by 2025 and to be scaled up to 10+ GW capacity by 2040, ensuring an operational lifespan of 30-40 years.
- Sri Lanka Climate University: By 2035, set up a higher education institution to train 10,000 students a year, reaching 55,000 students trained over the first decade. Commencing in 2023, the programme will aim to leverage $ 20 million over 12 years.
- Debt-for-climate swaps: Ministry of Finance to work on debt-for-climate swaps with the goal of reducing the level of indebtedness as well as freeing up fiscal resources to be spent on green investment. The project investment amounts to $ 10 million, over a timeline from 2023 to 2025.
- Subsidy Account: This project aims to pay for a local currency hedge so that Sri Lanka would be borrowing effectively in local currency but indexed to the dollar, with the goal of reducing the cost of capital and de-risk Sri Lanka from exposure from borrowing in USD. This project requires $ 2 billion over a time span of seven years.
- Sustainable Insurance Facility: During the digitisation of 600 branches of the national bank, integrating MSME insurance via private sector banks and wholesale buyer/seller associations, whilst extending financial protection to key small-scale actors of local industries. The project is set over the timeframe of 2023-2028 with an investment level of $ 7 million over the period.
- Climate Resilient Villages (CRVs) Programme: Enhancing resilience to reduce climate vulnerability and improve the adaptive capacity of local communities and villages, providing stability to agriculture productivity and household incomes. The initial investment amount for the project is set at $ 5 million with a scale-up to $ 500 million by 2025, with the project timeframe ranging from 2023 to 2030.
- Quashing the Bug – Prevention programme against mosquito proliferation: Prevent the proliferation of mosquitoes by deploying mosquito traps across Colombo and community hotspots, with the aim of reducing the mosquito population and preventing the spread of dengue and other vector-borne diseases which are bound to increase with rising temperatures. The programme investment level is $ 2 million over seven years, with the programme planned to be deployed in the timeframe of 2023-2030.
- Incubator for domestic production of food, beverages, and insulation materials: Support the creation of incubators to host community-level farmers, fisherfolks, and food processing enterprises and local businesses producing insulating materials at the community level, to support community-level agriculture and aquaculture, enhancing economic independence and self-sufficiency. The proposed timespan is 2023-2025 with an investment amount of $ 7 million.
Investment strategy proposed under the CPP
The total resource mobilisation opportunity is $ 26.53 billion through 2030, which is largely composed of international sources. The investment strategy includes a variety of resource mobilisation initiatives, including:
- Broad technology partnerships through the promotion of innovative business models and technology transfer with equipment leases, especially for renewable energy and storage.
- Project preparation support from inception to evaluation.
- Bringing down the cost of capital through credit strengthening, long-term financing, and local currency financing (including maximising domestic participation across all investments and subsidy accounts for hedging options).
- Increased multilateral resources from the headroom to crowd in private sector participation.
- Blended finance can be used as catalytic capital from philanthropic or public sources to increase private participation.
- Credit strengthening for domestic banks can enable the financing of adaptation and resilience projects, including partial credit guarantees or insurance and risk sharing, including subordinated debt investment, thus lowering the cost of capital.
- Export credit agencies in developed countries can reinforce the cooperative relationship among financial institutions and government agencies through financial support for resilient infrastructure projects.
- Comprehensive risk financing strategy for pre-arranged and trigger-based financing for business continuity and financial protection.
Source for the tables and figures: Climate Prosperity Plan | Sri Lanka 2022