The project of UNDP-GEF and the RK Government: «Sustainable cities for low carbon development» Stimulation of investments for energy efficiency of municipal infrastructure of the Republic of Kazakhstan Informational case Astana 2018 Content Brief description of UNDP-GEF Project 4 Summary about UNDP-GEF project partners 5 Introduction 6 Climate change. Green-house gases. Energy efficiency 8 Where to get money for energy efficiency? The mechanism of energy service contract. PPP mechanism – energy service contract 12 UNDP-GEF: mechanism of financial support for energy service initiatives 32 Rules for provision of financial support to business («Green grant») 37 List of examples of some energy-service initiatives supported within financial support mechanism 72 Frequently Asked Questions 75 The form of submitting a business proposal for provision of «green subsidies” 80 UNDP-GEF and the RK Government Project «Sustainable cities for 3 low carbon development» Brief description of UNDP-DEF Project UNDP and the RK Government with financial participation of GEF supports Kazakhstan’s efforts to reduce the impact on climate change in municipal sector, including the development and testing of various conditions and incentives to implement necessary measures and, above all, to improve the energy efficiency of various sectors of housing and utilities, energy supply, transport and waste management. The project “Sustainable cities for low carbon development” assists 15 pilot cities (regions) in several areas: firstly, in defining (identifying) and developing concepts for projects and initiatives that reduce energy consumption; secondly, in preparation of necessary organizational structure for their implementation; thirdly, in supporting the development of a financial and economic model and finding the optimal way to stimulate implementation of projects in the regions. In the end of 2017, within the framework of UNDP-GEF and the RK Government project “Sustainable Cities for Low-Carbon Development”, a model of organizational and financial support was launched to implement low- carbon urban initiatives and it was proposed to test it with participation of MID RK, DAMU Entrepreneurship Development Fund JSC and UNDP through grants from the Global Environmental Facility (GEF). For approbation of support, the “Rules for the provision of financial assistance for the implementation of a mechanism to stimulate investment in energy efficiency of municipal infrastructure of the Republic of Kazakhstan” were developed. The project is focused on supporting small and medium-sized businesses representatives, as well as the owners of facilities with experience in providing energy services through provision of financial support to them in implementation of energy-efficient municipal projects. Support to low-carbon projects involves subsidy assistance of loan for their implementation, namely, to cover a 10% bank rate of a commercial loan in order to improve the financial indicators of the project and reduce its payback period. Thus, with an average bank loan rate of 15%, the rate for the recipient of financial support from UNDP will be about 5%, which is comparable to the rates for projects in OECD countries. Within the framework of mechanism, technical support is also provided to the project stakeholders – owners of facilities, business companies, banks, local executive bodies for the successful preparation and implementation of energy service projects, including through the promotion of previously tested typical energy saving solutions in cities, such as: installation of automated heat points, modern pumps, modernization of boiler equipment, high- efficient street and indoor lighting, and others. As of October 2018, 33 projects have been approved for the total amount of financing 2.3 billion tenge and leverage support through a reduction in bank rate of 0.4 billion tenge, and a cumulative decrease in energy consumption by 15-70% or 40.2 thousand tons of CO2 equivalent / per year. More detailed information is available on the portal «Energy Efficiency +»: www.eep.kz The United Nations Development Program (UNDP) cooperates with representatives of all sectors of society, providing assistance to the state construction of countries so that they can withstand the crisis, encouraging and supporting growth resulting in the improvement of life quality of each person. Working in 177 countries and territories, we offer a global vision and local solutions that promote a more full life of people and increase the resilience of nations. www.kz.undp.org The Global Environment Facility (GEF), which brings together 182 countries, in partnership with international organizations, civil society and private businesses, provides grants to developing countries and countries with economies in transition to jointly address local, national and global environmental issues in order to achieve sustainable development worldwide. Established in 1991, the GEF is currently the largest public donor organization which activity is dedicated to improving the global environment and supporting more than 2,700 projects. www.thegef.org UNDP-GEF and the RK Government Project 4 «Sustainable cities for low carbon development» Information about UNDP-GEF project partners Ministry of Investment and Development of the Republic of Kazakhstan: The Ministry of Investment and Development of the Republic of Kazakhstan is the state body of the Republic of Kazakhstan and the executive partner of UNDP-GEF Project “Sustainable Cities for Low-Carbon Development”, which manages and forms state policy in such areas as energy saving and energy efficiency; government investment policy and investment support policies, creating a favorable investment climate, the implementation of state policy in supporting investments; architectural, urban planning and construction activity, housing relations, utilities and municipal waste management (with the exception of solid domestic waste), state regulation in the sphere of water supply and disposal, heat supply. The implementation of UNDP-GEF Project is carried out with the direct participation and leadership of the Ministry. “Damu” Entrepreneurship Support Fund JSC: Mission The mission of the Fund is to play an active role in the sustainable development of micro, small and medium- size enterprises (MSME) in Kazakhstan, through the implementation of complex and effective support tools. Tasks 1. Expansion of micro-business lending, development and implementation of tools to support MFOs and credit societies 2. Increase of share of existing MSME coverage by the Fund’s financial programs 3. Improved cost-effectiveness of supported MSME enterprises 4. Attracting additional sources of funding 5. Achievement of the planned level of financial performance 6. Automation of business processes 7. Improving the level of corporate governance UNDP-GEF and the RK Government Project «Sustainable cities for 5 low carbon development» Introduction Dear Partner! This publication has been published to answer the basic questions faced by entrepreneur who plans to implement a business initiative that brings energy saving in municipal infrastructure sectors, thereby contributing to the construction of a “sustainable city”. In the broad sense of the word “sustainable cities” are cities designed taking into account the impact on the environment, populated by the people trying to minimize consumption of energy, water and food, to exclude unreasonable heat generation, air pollution, including greenhouse gases emissions, as well as pollution of water and other environment. A sustainable city can provide itself with minimum dependence on the surrounding area, and energy can be efficiently spent, as well as produced as much as possible using renewable sources. The challenge is to ensure the lowest possible ecological footprint and minimize possible pollution. To do this, we must try to use energy efficiently, for example, through improving the energy efficiency of buildings, structures (residential buildings and public buildings), introducing modern LED lighting, upgrading boiler houses, pumping plants, etc. If this practice is applied, the city’s overall contribution to climate change will be minimal. It is estimated that about 50% of the world’s population lives in cities and urban settlements. These large communities present both challenges and good opportunities for environmentally focused action. In order to make the city more stable, the design and operation of buildings, as well as the lifestyles and minds of residents, must be turned towards stable thinking. According to the statistics of the Republic of Kazakhstan, about 57% of the country’s population lives in urban areas, given the rapid pace of urbanization, this figure will be about 66% by 2030. In this regard, the cities «assigned» a significant place in terms of impact on climate. In the UNFCCC National Communications, the “municipal sector” (district heating, lighting, buildings, waste and transport) with a possible reduction in annual GHG emissions of 20-30 million tons of CO2 / year was chosen as a priority for climate change mitigation which represents about 30% of the country’s cumulative total GHG emission reduction. UNDP-GEF and the RK Government Project 6 «Sustainable cities for low carbon development» In the Republic of Kazakhstan, global programs of country importance are being implemented, such as industrialization of Kazakhstan, the construction of affordable housing, the well-being of the population increases, which leads to the