Interview: Successful rollout of PAT requires low cost technology besides financing

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Takashi Hongo from Japan Bank for International Cooperation talks about their mechanisms for financing projects focused at reduction of GHG emission and Indo-Japan potential collaboration opportunities.

Takashi Hongo is the Special Advisor for Environment Business Promotion at the Japan Bank for International Cooperation (JBIC). He has initiated numerous carbon initiatives such as the Nikkei-JBIC Carbon Quotation Index, the first and only carbon price index in Japan, and Carbon Trading Platform.

Can you elaborate on Japan Bank for International Cooperation’s GREEN credit programme?

JBIC has launched the "Global action for Reconciling Economic growth and environmental preservation (GREEN)" programme to support projects aiming to prevent global warming.  The GREEN credit program focuses on preventing global warming through financing projects aiming to reduce emission of GHG. We are required to validate the emission reductions and so the process needs to be simple and practical. That is why JBIC established Guidelines for Measurement, Reporting and Verification of greenhouse gas (GHG) Emission Reductions in JBIC's GREEN (the "J-MRV Guidelines"). I believe this is one of the most practical MRVs and hope it would adopted by a cross-section of industries. As far as I know, J-MRV is the first MRV for evaluating GHG emission reductions developed by financial institutions.

Source: Presentation by Takashi Hongo at Carbon Conclave

Does JBIC have any partnerships or programs with Indian banks?

Earlier this year, a loan was made to ICICI Bank by JBIC for financing renewable energy, energy efficiency and other environment-related projects in India. This is the first loan provided in the Asian region for GREEN operations

JBIC and ICICI have developed close ties through the funding of supporting industries dealing with Japanese affiliates and subsidiaries operating in India. Collaboration with a domestic Indian bank on this loan facility will enable identification and formulation of promising projects from early stages.

Source: Presentation by Takashi Hongo at Carbon Conclave

What are some of the major sustainability related financial programmes that JBIC has been able to replicate in the Indian market?

JBIC uses“Guidelines for Confirmation of Environmental and Social Considerations (Environment Guideline)” to review implementation of environment consideration by project parties. These guidelines specify policies and procedures forvalidation of the necessary measures for environmental and social parameters undertaken by the project proponents. All the projects financed by JBIC shall be reviewed under this guideline. But this is not enough because banks have a big responsibility to impact the society positively by mobilizing funds forthe ‘green’ projects. JBIC proactively provides financing to the projects which make a positive environmental contribution and the GREEN programme is one such initiative of JBIC.

I think the banks in India can also adopt similar policies and use Environment Guideline and J-MRV guideline as good practices. Both these guidelines are practical and take into consideration the local conditions. MRV is an indispensable instrument for greening the banking sector and it is expected to lead to great momentum in the financial market.

What do you feel about the Government of India’s PAT scheme programme – especially from a global perspective?

PAT is a unique but very effective approach for catalyzing energy efficiency interventions being pushed by the Indian government. Key factors for the successful implementation of PAT would be technology at a reasonable cost plus funding. I think a practical option for technology would be a combination of Indian technology and internationally proventechnology such as Japanese technology. I think India would become a very attractive market for the international technology providers and many global companies will come to Indian market because through mechanisms like PAT, the Indian government has clearly demonstrated its commitment to shaping a low carbon economy. I think the first country adoptinga clear policy will receive largeamounts of investment and would run faster than others. The PAT mechanism would provide huge economic and environment benefits to India.

I feel there is similarity between PAT’s methodology and J-MRV. JBIC can financially support the investment to achieve PAT requirement by GREEN and other financial program. 

Which are the major areas where you see a potential collaboration opportunity between India and Japan?

Energy efficiency and climate change mitigation present an enormous potential for collaboration. PAT and REC are very interesting instruments for improving environment conditions in India and also improving investment climate for energy efficiency and renewable projects. I think Japanese companies will show interest when they know more about these mechanisms.JBIC can support these investments through the methods I indicated earlier in this discussion.  And in addition to finance, there are also likely to be opportunities using Japanese Bilateral Offset Scheme too. Both governments are discussing the framework and implementation process of the scheme. It will provide financial incentive to GHG emission reduction projects. I hope both governmentscanformulate a consensus on the salient aspects of the scheme so that the scheme can be launched shortly enabling both sides to gain from new business.

Source: Japanese government

This interview has been conducted by Pramita Sen from the India Carbon Outlook editorial team.

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Author: Pramita Sen