An interview with Khalid Hamza, head of Egypt at the EBRD: Multilateral development banks like the European Bank for Reconstruction and Development (EBRD) play a key role in mobilizing climate finance for the private- and public sectors, and providing crucial assessment and consultancy services to government institutions. As it prepares to host COP27 in just a few weeks, Egypt is placing strong emphasis on the role of financial innovation to help developing countries mitigate and adapt to the effects of climate change. As COP27 nears, we spoke with the EBRD’s Egypt head, Khalid Hamza, about the lender’s role at the conference and the opportunities for climate investment in Egypt.
Below are edited excerpts of our conversation:
ENTERPRISE: Tell us what EBRD has in store for COP27.
KHALID HAMZA: EBRD is taking the lead on the energy component of the Nexus of Water, Food and Energy (NWFE) program, which will be unveiled at COP27. This USD 10 bn program aims to help Egypt decarbonize its electricity grid by decommissioning 5GW of conventional energy from carbon-based plants and replacing it with 10GW of renewable energy.
The bank is supporting concessional and grant fundraising enabling a smooth transition to renewable energy on the national grid, thereby allowing for larger private sector involvement in the renewable energy industry.
E: The bank said last month that it could provide as much as USD 1.3 bn to support clean energy projects in Egypt. Is this tied into NWFE?
KH: Yes, the EBRD is looking to begin investments under the program by next year. USD 300 mn of the USD 1.3 bn will go toward concessional or IFI financing to support the grid and the remaining USD 1 bn will go towards the private sector for supporting the 10 GW of renewable energy. We’ll do this either through loans or equity depending on the project structure itself, whether it is a private deal or a government tender.
E: What else can we look forward to?
KH: EBRD has been participating in the Green Cities program, which includes Cairo, Alexandria, and Sixth of October. We identify and prioritize the environmental challenges cities face then identify the type projects that would reduce those challenges. We gather this information into a document which can then be shared as a guide and resource for future investments and green projects the government can potentially include bond offerings. During COP27, we’ll showcase some of what we’ve been working on in an event.
We have also helped Egypt develop a low-carbon pathway for the cement industry, the fertilizer industry, and the oil and gas sector — looking at the necessary investments and policies required to be able to bring that particular sector down to net zero in detail. I believe the roadmap for the cement industry will be showcased during COP27.
Finally, we have been involved in Egypt’s hydrogen strategy by providing consultants and more will be revealed during COP27 on Energy Day. We hope the unveiling of the strategy will spur some of the interests that have already been put in place through the 14 MoUs that have been signed so far into a more concrete step towards actual projects.
E: What outcomes is the bank hoping to see from this year's conference?
KH: The year’s edition has been dubbed the COP of implementation. What we’re hoping to see is Egypt presenting a good model for implementing a decarbonization plan that can be applied across the world.
E: Climate financing — especially for developing nations — is expected to be a major talking point for the summit. How will EBRD contribute to this dialogue at COP27?
KH: We see our role as a catalyst. We would not necessarily be taking on a lionshare of the investments in the coming years, but our role can be more in the vein of removing roadblocks preventing the private sector from coming in and participating in investment.
The tns that are needed to address climate change worldwide are not going to come from government budgets or philanthropy, they’ll come from the private sector. To that end the EBRD will be unveiling a new awareness chapter we’ve been working on during COP27 which basically creates the necessary awareness for industries within the private sector regarding green aspects of business and how environmental risks can damage your company, how green investments open up new markets and opportunities for job creation.
Oftentimes there is a supply and demand mismatch in terms of securing financing. There are not enough projects which have been structured in a proper way in order to access the financing available. We have been able to come in and help projects accomplish this.
E: What about green bonds?
KH: The challenge with green bonds is that the burden of reporting is more extensive to satisfy bondholders and reassure them that the bonds are fulfilling what they set out to do. They’re not necessarily more expensive, but they are more cumbersome because you have to set up these new processes and reporting systems for shareholders.
However, what we’re seeing is there will be decreasingly less investments and financing appetite for non-green bonds. Projects will find it difficult to secure enough funding if they aren’t focused on ensuring their projects are green or have a green element considered.
E: What could climate investment mean for Egypt?
KH: If Egypt jumps on the train, it has a very good opportunity to become one of the industrial producing hubs of the world due to cheap energy and a close proximity to Europe. It has one of the world's best renewable reserves with good wind and extremely good sunlight with the right level of radiation to produce huge amounts of electricity across a massive land area, and can produce renewables very cheaply allowing a huge portion of the manufacturing chain to become green.
This will naturally attract industry to the country with carbon taxation coming into place, it will be more and more difficult to access global markets without being able to ensure or prove that you have a low carbon intensity supply chain creating the products.
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