Carbon Trust participation in the workshop on Financial Instruments to
Promote Sustainability and Climate Change Mitigation-The Experience from
Financial Institutions in Latin America and the Caribbean
Morelia, Michoacán, México, 29 November 2012
Daniel Buira
Senior Manager, Innovation
Daniel.Buira@carbontrust.co.uk
+44 7801 817532

Agenda
Carbon Trust is an independent company that helps partners and clients find the opportunities and face the challenges brought about from combating climate change
– We advise governments, businesses and public sectors
– We measure and certify products and organizations
– We help deploy and develop low carbon technologies
We have stimulated and financed SME EE investment for over 10 years
– Good project economics, but known barriers hold back investment
– Our proven advice programmes have overcome these barriers to catalyse investment
– Our loans programmes have lent over £120m, and our awareness campaigns have transformed the
UK market
This year we collaborated with INECC and the British Embassy on a study to identify the SME
EE opportunity in Mexico and design a programme to exploit it
– Large opportunity with human capital, information, and capital barriers holding back uptake
– Fragmented delivery picture, with sub-scale support for the opportunity
– However coordination, extended advice, national awareness, and additional capital can transform the landscape
Setting up an SME programme in Mexico
– Identifying roles and partners
– Coordinating detailed design and planning rollout
– Launch, expansion, and ongoing delivery

We have developed a number of approaches to overcome these barriers. For example our advice programmes have catalysed UK SME investment
Carbon Trust advice and support activities of £32m in FY2009/10 helped our customers save 5m tonnes of CO cost” of under £7/t
2 as well as create value for their companies, resulting in a “policy
716 432 in £m
(2009/10)
(32)
Catalysing ratio >13:1
Policy cost
Annual policy cost
(252)
Capital investment
Investment required to get the energy savings
Lifetime energy savings
Present value of total energy savings
Total cost savings
Lifetime project cost savings

Carbon Trust has also run two separate loans schemes, demonstrating that Energy Efficiency loans work
0% loans for the UK Treasury, lending over £120m to 3,500 SMEs between 2003 and 2010
– All projects which received funds had a strong business case based on energy savings, with paybacks of 4 years or less. In addition they had to meet a “carbon threshold” of CO
2 emissions reduction per £
– The risk profile of the companies that got a Carbon Trust low was, at a portfolio level, better than that of the general population of companies
£550m commercial loans programme launched in 2011 in partnership with Siemens Financial
Services
– During 2010, Carbon Trust sought out a financial partner to leverage the operational know-how, supplier networks, and strong brand already in place into a new scheme
– Partnership launched after discussions with a number of potential finace partners, including banks
– Carbon Trust provides the business case to ascertain cost, energy and carbon savings
Lessons learned
– Significant marketing effort, as well as advice, was needed to drive uptake
– Using equipment suppliers as main route to market greatly increased uptake and reduced costs
– As a group, SME applicants for energy efficiency financing have a lower credit risk than the average population of SMEs
– The Carbon Trust assessment of project savings gave customers confidence that their monthly energy savings would exceed loan repayments, ensuring positive cash flow impact from the start.
After the repayment period, projects yield significant cash benefits

And we have carried out national awareness raising campaigns to stimulate interest and demand
Theo Paphitis, well-known businessman and member of the “Dragon’s Den” television serial, fronted one of our print marketing campaigns

In Mexico, cost-effective SME energy efficiency measures could save MXN$28 billion (12%) and reduce emissions by 10MtCO
2
(14%) per year
Sector
Commerce / services
Industry
Other inc. agriculture
Total
Total carbon emissions
(ktCO2e)
Total energy costs
(millions MXN)
Potential carbon savings
(ktCO2e)
Potential cost savings
(millions MXN)
10,587
50,447
14,098
75,131
$71,237
$107,588
$46,432
$225,257
Other benefits:
Strengthening competitiveness
Sales of ‘greener’ products
Employee motivation
Indirect job creation though the energy efficiency sector
Mitigation against the impact of future regulation
1,669 $8,659
6,488
2,618
$11,765
$7,857
10,775 (14%) $28,283 (12%)
Source: GIZ (2012) “Recomendación estratégica sobre tecnologías y subsectors como orientación para sustentar acciones de eficiencia energética en el sector PyME”
BMZ for Ministerio Federal de Cooperacíon Económica y Desarrollo March 2012. Assumptions: average electricity saving of 19% for commerce/services, 11% for industry and 30% for agriculture (average of 17% across all sectors), and thermal energy savings of 10% across all sectors.

Many EE projects pay back quickly, yet despite the compelling project economics, a number of barriers stop many companies from investing
$
Human capital
– Lack of awareness about the commercial benefits of energy efficiency
– Lack of knowledge and expertise to identify and quantify costs and benefits of opportunities e.g. understanding energy consumption and knowing which technologies are appropriate.
– Lack of time and resource to manage implementation e.g. select suppliers, run feasibility studies etc.
Information
– Lack of data about energy consumption for own business or poor visibility of energy costs
– Lack of benchmarking data to understand relative performance
– No sharing of best-practice approaches to energy management
Finance
– High purchase costs for equipment (new or replacement) (in Mexico, partially due to import tariffs)
– High financing costs, (in Mexico, FIDE loans incurring 14% interest rates)
– Limited access to finance due to risk-adverse commercial banks that don’t understand energy efficiency projects (the nature of returns through energy savings)

While a number of effective programmes offering advice and finance already exist, they are fragmented and sub-scale
CCE
Gobierno Federal
SEMARNAT
CESPEDES CONCANACO
SERVYTUR
CONCAMIN
PEMEX
CFE
FIDE CRE
SENER
CONUEE INECC
SHCP
SE
COMPITE
BANCOMEXT NAFIN
Mexico GHG
Program
• GHG emissions reporting & sectorial analysis
CFEctiva Empresarial
• Funds for power factor correction (<90%) & voltage optimisation (low to medium voltage)
• Energy efficiency education for equipment operators, obsolete equipment replacement, & specialist advice for process improvement
Eficiencia Energética
• Advice and technical assistance – with or without funding - to modernise facilities and apply new technologies in productive sectors
Programa de Ahorro y
Eficiencia Energética
Empresarial (PAEEEM)
• Financing to replace obsolete equipment (with
Sello FIDE equipment)
• Funding for refrigeration,
AC and LEDs ($MN200k);
• 10% scrappage bonus for other efficient equipment such as motors
Mi Tortilla
• $MN150k for tortilla manufacturers
• Training & advice to improve efficiency
• financial advisor (via
SE) to help access funds
Programa Nacional
Educación para el Uso
Racional y Ahorro de la
Energía Eléctrica
(EDUCAREE)
• Dissemination activity
• Awareness workshops
• Training developers
• Implementation support
(elements for an energy assessment) paral el
Aprovechamiento
Sustentables de la
Energia (PRONASE)
• Electrical substitution
(Motor replacement)
• Normas Oficiales
Mexicanas (NOM) /
Normas Mexicanas
(NMX)
Fondo PyMES
• Targets SMEs to improve competitiveness through business management and access to finance:
• National Guarantee System
• Financial advisors network
• business centres (189)
• Technological Innovation
Fund (SE-CONACYT)
• Projects for innovative products, processes, services or materials
• Training & business consulting
• SME Library
8

To be transformational, a co-ordinated Program is proposed to raise awareness, deliver advice and provide finance in a cost-effective manner
COORDINATION & PROMOTION
• Strategic coordination
• Program marketing
• Program management & Quality Assurance (QA)
ADVICE
• Website & publications
• Advice centre (calls/emails)
• Training & events
FINANCE
• Loans
• Investment support
• On-site energy audits
$2/tonne
10 employees
Cost effectiveness of delivering service
SME size and therefore saving potential
$20/tonne
250 employees
9

The Programme will reach at least 150,000 SMEs over 5 years, delivering more direct support to
10,000 larger SMEs, lending $100m and reducing emissions by 1MtCO2 at programme cost of $6.1/t
5-year reach
All
SMEs
Annual activities
Access to website and
20-30 new publications each year
Service Carbon saving lifetime
(tCO2)
Energy saving lifetime
(MWh)
Cost saving
- lifetime
(US$m)
Cost
US$/tCO2 lifetime
150,00
0
30,000 calls and emails handled each year
Website & publications
303,902 876,658 114 2.2
4,000 100 events each year, with 40 SMEs at each
Advice
Centre
Training & events
203,540
143,822
587,144
414,879
76
54
2.2
2.2
10,000 2,000 audits for larger
SMEs each year
Site audits 266,950 732,499 95 10.4
Loans 99,262 159,530 21 20.4
6,265
660 loans in year 1, up to 1,900 by year 5
Total 1,017 ktCO2 2,771 GWh 360 6.1
10

The total cost of the SME Programme, including loans capital is ~US$134M over 5 years
Service element
Co-ordination
Advice
Finance
Total
Set-up cost
Local
($m)
Consultancy
($m)
Operational cost (5-years)
Local
($m)
Consultancy
($m)
Total cost
($m)
0.57
0.30
0.23
1.10
1.03
0.17
0.07
1.27
5.41
7.08
7.17
19.67
3.63
7.89
-
11.52
10.65
15.44
7.48
33.57
Capital for loans 100.00

Agenda
Carbon Trust is an independent company that helps partners and clients find the opportunities and face the challenges brought about from combating climate change
– We advise governments, businesses and public sectors
– We measure and certify products and organizations
– We help deploy and develop low carbon technologies
We have stimulated and financed SME EE investment for over 10 years
– Good project economics, but known barriers hold back investment
– Our proven advice programmes have overcome these barriers to catalyse investment
– Our loans programmes have lent over £120m, and our awareness campaigns have transformed the
UK market
This year we collaborated with INECC and the British Embassy on a study to identify the SME
EE opportunity in Mexico and design a programme to exploit it
– Large opportunity with human capital, information, and capital barriers holding back uptake
– Fragmented delivery picture, with sub-scale support for the opportunity
– However coordination, extended advice, national awareness, and additional capital can transform the landscape
Setting up an SME programme in Mexico
– Identifying roles and partners
– Coordinating detailed design and planning rollout
– Launch, expansion, and ongoing delivery

Carbon Trust presentation for the Financial Instruments to Promote
Sustainability and Climate Change Mitigation-The Experience from Financial
Institutions in Latin America and the Caribbean workshop
Morelia, Michoacán, México, 29 November 2012
Daniel Buira
Senior Manager, Innovation
Daniel.Buira@carbontrust.co.uk
+44 7801 817532