Insights and Commentaries
CCS Trust Funds at Two Development Banks Set to Close – Where Do We Go From Here?
14th March 2022
During a recent webinar hosted by the Clean Energy Ministerial CCUS Initiative, speakers from the World Bank (WB) and the Asian Development Bank (ADB) revealed that both of their CCS Trust Funds, which have been in operation since 2009, are set to close within the next two years; sparking questions about what steps should be taken to replenish them.
Multilateral Development Banks (MDBs) have long been key catalysts for transformation in the energy sectors of many developing countries. It has been a win-win for MDBs to steer emerging countries to participate in the development, demonstration, and deployment of CCUS because it fulfils their low carbon portfolio commitments and aligns perfectly with their goals of facilitating sustainable development and enhancing quality of life. Moreover, it is also a win for the developing countries who benefit from the MDBs’ unique capabilities in building technical capacity, steering policy development, and investing in projects that would be highly beneficial in driving CCUS acceptance and adoption.
MDBs have numerous tools at their disposal to support CCUS projects. For example, they can provide: grants to less-developed economies; large, long term concessional loans, private sector guarantees, and/or intensive due-diligence.
Indeed, the WB and the ADB have already played key roles in building knowledge and supporting CCS deployment in some countries. To date, the WB has allocated more than $55 million from its CCS Trust Fund. It has undertaken comprehensive legal and regulatory reviews in Mexico and South Africa, and has recently announced that, together with the International Finance Corporation, it will provide support for the Nigerian CCUS program, led by the Office of the Vice President. Similarly, the ADB has also been working on CCS since 2009, undertaking capacity building activities and setting up ‘Centres of Excellence’. However, it appears the Trust Fund run by the ADB will expire by the end of 2022, whilst the WB’s trust fund will be closing by December 2023. For both organisations, replenishment of the current funds or setting up a new dedicated CCS Trust Fund (as may be the case may be for the WB, following the recent trust fund reform) is vital and will need to start with the annual consultation process with the donors.
Fortunately, all of the key enabling conditions are in place. The 2019 Joint Report on MDBs’ Climate Finance classifies CCS as a technology eligible for climate mitigation finance. Both the WB’s recently approved Climate Action Plan and the ADB’s 2021 Energy Policy Document include CCS as a key mitigation technology, particularly for hard-to-abate sectors in the case of the ADB. Meanwhile, national policies of several key MDB donor countries, such as the United States, Norway, Japan, and United Kingdom, support the development and deployment of CCS.
In short, it is clear that greater effort is required to move potential CCS projects forward in the Global South, and MDBs can and should continue to play an active role in this development.