A Green Reboot For Emerging Markets


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A GREEN REBOOT FOR EMERGING MARKETS
KEY SECTORS FOR POST-COVID SUSTAINABLE GROWTH

ABOUT IFC
IFC — a sister organization of the World Bank and member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2020, we invested $22 billion in private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity.
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TABLE OF CONTENTS

6
EXECUTIVE SUMMARY
7 Findings
10
INTRODUCTION
12 Why build back green? 15 How to rebuild green

24
TEN KEY SECTORS

24 SECTOR 1 Decarbonize the grid with renewable energy
30 SECTOR 2 Scale up distributed generation and storage
35 SECTOR 3 Retrofit buildings for energy efficiency
40 SECTOR 4 Invest in low-carbon municipal waste and water
45 SECTOR 5 Expand green urban transport

50 S ECTOR 6 Create nature-based urban infrastructure
55 S ECTOR 7 Decarbonize heavy industry with carbon capture, utilization, and storage and green hydrogen
60 S ECTOR 8 Scale climate-smart agriculture
66 S ECTOR 9 Reinvent textile and apparel value chains
71 S ECTOR 10 Incentivize low-carbon airlines and shipping

76
CONCLUSION

77
ANNEX
77 Definitions 78 Methodology

AUTHORS
“Ctrl-Alt-Delete: A Green Reboot for Emerging Markets” was prepared by the IFC Climate Business Department headed by Alzbeta Klein, Director, under the overall responsibility of Hans Peter Lankes, Vice President for Economics and Private Sector Development. The core team and authors are Marcene Mitchell, Irina Likhachova, and Elizabeth Minchew. Caitriona Palmer provided additional writing and editorial review. IFC colleagues who provided expertise and inputs throughout the preparation of the paper include Guido Agostinelli, Shari Friedman, Kartik Gopal, Ruth Hupart, Jim Michelsen, Peter Mockel, Ommid Saberi, Ahmad Slaibi, Charlene Sullivan, Ian Twinn, Sean Whittaker, and Nina Zegger.
ACKNOWLEDGMENTS
The paper received insightful comments from many peer reviewers and colleagues within the World Bank Group, as well as from external organizations. The authors are grateful to all peer reviewers for their contributions. These include: Simon Evans (Carbon Brief ), Steve Hammer (World Bank), Joel Jaeger (World Resources Institute), Maxine Jordan (International Energy Agency), Alison Pridmore (International Energy Agency), Vikram Widge (Climate Policy Initiative), and IFC colleagues Tunc Alanyak, Farid Azouri, Yasser Charafi, Maria Lopez Conde, Diane Davoine, Michelle Farrell, Bill Gallery, Neil Gregory, Prashant Kapoor, Tom Kerr, Rosy Khanna, Alice Laidlaw, Jeremy Levin, Laila Nordine, Autif Sayyed, and Smita Thomas. The analysis of the investment potential, job creation, and greenhouse-gas (GHG) emissions reduction across eight sectors in the 21 emerging markets was conducted by Guidehouse Insights. The authors are grateful to Elizabeth Lewis, Elena Gex, and Monica De Leon who managed communications and the dissemination of the paper and to Irina Sarchenko who managed creative design and layout services provided by Design Army.

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ABBREVIATIONS AND ACRONYMS

BRT

bus rapid transport

C&I

commercial & industrial

CAGR

compound annual growth rate

CCUS

carbon capture, utilization, and storage

CO2e

carbon dioxide equivalent

COVID-19 or COVID 2019 novel coronavirus

CSA

climate-smart agriculture

DFI

development finance institution

DG

distributed generation

EDGE

Enhancing Design for Greater Efficiency

ESCO

energy service company

EU

European Union

EV

electric vehicle

FI

financial institution

FY

fiscal year

GDP

gross domestic product

GHG

greenhouse-gas

GW

gigawatt

IEA IFI ITS km LCOE LEILAC MW NDC NGO O&M PPP PV SAF SMEs SOE T&D UHV

International Energy Association international financial institution intelligent transportation systems kilometer levelized cost of energy low emissions intensity lime and cement megawatt Nationally Determined Contribution nongovernmental organization operations and maintenance public-private partnership photovoltaic sustainable aviation fuels small and medium enterprises state-owned enterprise transmission and distribution ultra-high voltage

A GREEN REBOOT FOR EMERGING MARKETS

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FOREWORD

BY HANS PETER LANKES Vice President for Economics and Private Sector Development, IFC

The human health and economic costs of the COVID-19 pandemic continue to be tragically high. But the crisis has also provided an unprecedented opportunity to change course and to rebuild a global economy that is more resilient in the face of future shocks such as climate change.
Why? Even with the pandemic raging, it is imperative that we do not let up on ambitions for a safer, low-carbon future. But what’s more, it is possible to strengthen the economic recovery from COVID-19 while at the same time building greener economies. Green industries have the potential to create millions of jobs not just in the long term, but today. Rebuilding with a strategic focus on climate-smart approaches will help companies make the inevitable low-carbon transition.
That is why I am honored to present “Ctrl-Alt-Delete: A Green Reboot for Emerging Markets” that identifies 10 sectors that can support job-rich and sustainable growth across 21 emergingmarket economies. These sectors are grouped around green infrastructure, green cities, and supporting the transformation of carbon-intensive industries to green operations.
The report identifies the economic benefits, investment opportunities, and commercial readiness of each sector and examines how best to unlock these opportunities. For the most part, investment could be scaled rapidly as part of the recovery, but will require varying degrees of cooperation or coordination between the public and private sectors.

The pandemic may have created lots of uncertainty, but one thing remains clear: the climate requires action. COVID-19 may have slowed our daily lives and the global economy, but it has not slowed the pace of climate change. And as Mark Carney, the former governor of the Bank of England recently said, we cannot self-isolate from climate.
That is why we should widen our focus and shift from the narrow initial rescue to factoring the climate into the recovery, even as the world continues to be in the throes of the pandemic. We should not rebuild from this virus-borne economic crisis only to face a climate-borne economic crisis down the road.
“It is possible to strengthen the economic recovery from COVID-19 while at the same time building greener economies.”
I encourage IFC’s client companies, governments, development finance institutions and civil society partners to use “Ctrl-AltDelete” as a road map for what a successful green recovery could look like. Let’s embrace this once-in-a-lifetime opportunity to put the world on a more equitable, prosperous, and cleaner path.

A GREEN REBOOT FOR EMERGING MARKETS

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EXECUTIVE SUMMARY

The economic fallout associated with the COVID-19 pandemic has triggered the worst global recession in nearly a century. In response, governments around the world have carried out unprecedented fiscal interventions to provide emergency assistance to citizens and to try to stabilize their economies.
The damage caused by the pandemic serves as a warning, as it highlights the potential economic and social impact of the mounting climate change crisis. Like COVID-19, climate change is likely to cause dramatic disruption to demand, supply and financial markets. In addition, the pandemic has exposed stark inequalities among countries and within communities, including access to health care.
As countries shift from short-term pandemic relief measures towards long-term economic recovery, governments face important decisions about the type of economies they want to rebuild and how to allocate limited resources effectively. This paper suggests one approach to that rebuilding effort: prioritizing decarbonization and low-carbon pathways across emerging markets. This option offers an effective way to forge more sustainable, resilient, and equitable economies.

21• EMERGING MARKETS
INCLUDED IN THE ANALYSIS:
EUROPE
Russia, Serbia, Turkey, Ukraine
EAST ASIA AND THE PACIFIC
China, Indonesia, Philippines, Vietnam
SOUTH ASIA
Bangladesh, India
LATIN AMERICA AND THE CARIBBEAN
Argentina, Brazil, Colombia, Mexico
MIDDLE EAST AND NORTH AFRICA
Egypt, Jordan, Morocco
SUB-SAHARAN AFRICA
Côte d'Ivoire, Kenya, Nigeria, South Africa

*These 21 countries were selected as a representative sample of IFC’s client countries.

As countries shift from short-term pandemic relief measures towards long-term economic recovery, governments face important decisions about the type of economies they want to rebuild and how to allocate limited resources effectively.

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FINDINGS

In partnership with Guidehouse Insights, a market research and advisory firm, IFC sought to quantify the potential investment opportunities, job creation, and greenhouse-gas (GHG) emissions reduction associated with green recovery measures across 21 major emerging-market economies. These countries represent 62 percent of the world’s population and 48 percent of global emissions. The analysis across these markets shows that focusing on green investments in select sectors between 2020 and 2030 could generate:
$10.2 trillion in investment opportunities
213.4 million cumulative new direct jobs
4 billion tons CO2e reduction in GHG emissions

INVESTMENT OPPORTUNITIES, JOB CREATION, AND GHG EMISSIONS REDUCTION BETWEEN 2020 AND 2030 IN 21 EMERGING MARKETS ACROSS KEY SECTORS FOR A GREEN RECOVERY

GREEN RECOVERY ACROSS KEY SECTORS

EUROPE
(RUSSIA, SERBIA, TURKEY, UKRAINE)

 EAST ASIA AND THE PACIFIC
(CHINA, INDONESIA, PHILIPPINES, VIETNAM)

 SOUTH ASIA
(BANGLADESH, INDIA)

 LATIN

 MIDDLE

AMERICA

EAST AND

AND THE

NORTH

CARIBBEAN AFRICA

(ARGENTINA, BRAZIL, COLOMBIA, MEXICO)

(E GY PT, J OR DAN , MOROCCO)

SUBSAHARAN AFRICA
(CÔTE D’IVOIRE, KENYA, NIGERIA, SOUTH AFRICA)

TOTAL

INVESTMENT OPPORTUNITY

0.6 $
TRILLION

5.1 $
TRILLION

2.8 $
TRILLION

1.3 $
TRILLION

0.2 $
TRILLION

0.3 $
TRILLION

$10.2
TRILLION

NEW DIRECT JOBS

16.8
MILLION

98.8
MILLION

53.2
MILLION

27.1
MILLION

4.2MILLION

13.3
MILLION

213.4
MILLION

A GREEN REBOOT FOR EMERGING MARKETS

GHG EMISSIONS REDUCTION (CO2e)

324.7
MILLION TONS

2,010.7
MILLION TONS

861.6
MILLION TONS

351.5
MILLION TONS

111.7
MILLION TONS

153.8
MILLION TONS

4.0BILLION TONS

(Source: Guidehouse Insights) 7

10 KEY SECTORS
GREEN EXISTING AND FUTURE ENERGY INFRASTRUCTURE • SECTOR 1: Decarbonize the grid with
renewable energy • SECTOR 2: Scale up distributed generation and storage
BUILD CLIMATE-SMART CITIES • SECTOR 3: Retrofit buildings for energy efficiency • SECTOR 4: Invest in low-carbon municipal
waste and water • SECTOR 5: Expand green urban transport • SECTOR 6: Create nature-based urban infrastructure
SPEED THE TRANSITION TO GREEN • SECTOR 7: Decarbonize heavy industry with carbon
capture, utilization, and storage and green hydrogen • SECTOR 8: Scale climate-smart agriculture • SECTOR 9: Reinvent textile and apparel value chains • SECTOR 10: Incentivize low-carbon airlines
and shipping
A GREEN REBOOT FOR EMERGING MARKETS

This paper focuses on 10 sectors across 21 emerging markets that can be prioritized in post-COVID green recovery efforts. These sectors are grouped around greening existing and future energy infrastructure, building climate-smart cities, and helping speed the transition of key industries to green production practices. Concerted actions by public and private players across these areas can deliver economic recovery in the short and medium term and can deliver long-term sustainable and low-carbon growth.
• The energy sector drives all other sectors. Decarbonizing the energy sector, while ensuring universal access to energy, is critical to achieving the long-term goals of sustainable and clean growth. Post-COVID recovery efforts need to prioritize expansion of grid-scale and distributed generation renewable energy. Investing in battery storage solutions will support this goal. Thanks to drastic declines in technology costs, these sectors are on a strong market growth trajectory and can generate jobs and economic recovery benefits in the immediate term.
• Around the world, cities bore the brunt of human suffering, business closures, job losses, and reduction in revenues for municipal services caused by the pandemic. Prioritizing climate-smart infrastructure investments can help cities generate jobs quickly and leverage strapped public funding with significant private sector investment, while addressing other vital issues such as pollution, congestion, flooding, extreme heat and energy access.
• Sectors such as construction materials, chemicals, and agriculture are among the most carbon-intensive industries. It is possible to support the recovery of these industries and ensure that they follow greener pathways. Future investments in carbon-intensive industries should consider best industry practices, new business models, and technology advancements to significantly reduce emissions and bolster industry sustainability.

The 10 sectors profiled in this paper already employ millions of people and have potential to employ millions more, driven by their strong market growth trajectory. Eight of these sectors are mature for private sector investment and can generate projects with short development and construction times. Two sectors— Sector 6: using nature in urban infrastructure and Sector 7: carbon capture, utilization, and storage (CCUS) and green hydrogen— are in earlier stages of commercialization but represent strong potential for investment in the medium and long term and hold significant climate benefits.
In addition to the investment, job generation, and emissions reduction potential, there are significant other economic benefits associated with focusing on green economic recovery that are yet to be quantified. Focusing on the transition to low-carbon economies now, when the global carbon budget is projected to be exhausted within 10 to 15 years, can help offset significant adaptation and mitigation costs of future climate-borne disasters. Failure to meet global climate commitments in the next decade, according to Moody’s Analytics, may result in losses of $69 trillion.
A green rebuild is the best insurance policy to protect today’s substantial investment in economic recovery by helping to avoid or reduce climate-borne financial and economic crises in the years to come. Even before the pandemic, there was a growing realization among financial regulators that climate sustainability is central to the long-term financial viability of companies and financial systems. Without action on climate change, the world is likely to face severe financial impacts such as borrower default, credit risk, unemployment, constraints on liquidity, and stress on insurers.
8

As countries prepare to channel trillions of dollars to jump-start their economies, governments have an opportunity to use these funds to create low-carbon economies. Private sector investment alone will not enable a green recovery at the growth, scale, and speed that is required without significant and robust government action. A coalition of public and private actors is required, one where government action can create the necessary regulatory and institutional framework to foster innovation and investment.
The world is at a historic crossroads. The choices made today to respond to the pandemic and its aftermath will shape the world for generations to come. The COVID crisis has created a momentous opportunity to build a more sustainable and equitable world that is able to absorb the shocks of extreme weather events and forge a prosperous future based on a green foundation.

The post-COVID recovery presents a historic opportunity to decarbonize economies.

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A Green Reboot For Emerging Markets