Bangladesh has been granted US$256.5m from the global Green Climate Fund (GCF) to promote private sector investment through large scale adoption of energy-efficient technologies in the textile and garment sectors.
The announcement was made by the Infrastructure Development Company Ltd (IDCOL), the Direct Access Entity (DAE) of the GCF, today (18 November).
IDCOL said it received approval of its first funding proposal at a board meeting of the GCF last week and noted this is the first concessional GCF credit line for Bangladesh, as well as the first private sector financing of GCF in the country. So far, it is also the largest approved funding proposal for any DAE of GCF, accredited globally.
Presently, the industrial sector in Bangladesh accounts for 47.8% of commercial energy consumption. Among this textile and RMG accounts for approximately 38% of the total energy consumption in the industrial sector.
The Energy Efficiency and Conservation Master Plan 2015 states that manufacturing industries in Bangladesh are not efficient in energy use because of continuous usage of old/mal-maintained machines and poor energy management. Major challenges in adoption of energy-efficient technologies are inadequate financial incentives and lack of technical expertise.
The objective of the approved programme is to provide concessional loans from GCF to finance energy-saving technology and equipment for Bangladesh’s textile and RMG sectors in order to make it more affordable and accessible. Under the programme, IDCOL will a $250m concessional loan for a tenor of 20 years with a grace period of five years for financing energy-efficient equipment.
In addition, IDCOL will also receive $6.5m as technical assistance grant.
Of the loan, $100m will be utilised to finance textile sector energy efficiency projects, while $150m will be distributed to four local financial institutions for financing energy efficiency projects in the RMG sector. The total programme size will be $423.50m including co-financing from IDCOL, local financiers and the project sponsors.
“This programme is a remarkable success for IDCOL in terms of accessing climate change fund to pave the path for our country to achieve its Sustainable Development Goals (SDGs), especially SDG 7 affordable, reliable, sustainable and modern energy for all; SDG 9 sustainable industrialisation and SDG 13 combatting climate change. It will also support Government, in achieving the NDC conditional target to reduce GHG emissions by 15% below BAU levels by 2030 and also to achieve the target of 20% reduction of primary energy consumption per GDP by 2030 as per the Energy Efficiency and Conservation Master Plan 2015,” IDCOL said.
Dr Rubana Huq, president of the Bangladesh Garment Manufacturing and Exporters Association (BGMEA), said she hoped the financing will mean adopting energy-efficient equipment will be much more affordable for garment factory owners and will further strengthen the competitive advantage of the Bangladesh RMG sector.