CTRL ALT DEL A GREEN REBOOT FOR EMERGING MARKETS KEY SECTORS FOR POST-COVID SUSTAINABLE GROWTH ABOUT IFC IFC— a sister organization of the World Bank and The material in this work is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. member of the World Bank Group—is the largest global IFC encourages dissemination of its work and will normally grant permission development institution focused on the private sector in to reproduce portions of the work promptly, and when the reproduction is for educational and noncommercial purposes, without a fee, subject to such emerging markets. We work in more than 100 countries, attributions and notices as we may reasonably require. using our capital, expertise, and influence to create markets IFC does not guarantee the accuracy, reliability, or completeness of the content and opportunities in developing countries. 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All names, logos, and trademarks are the property of IFC and any such materials may not be used for any purpose without the express written consent of IFC. “International Finance Corporation” © INTERNATIONAL FINANCE CORPORATION. JANUARY 2021. ALL RIGHTS RESERVED. and “IFC” are registered trademarks of IFC and are protected under 2121 PENNSYLVANIA AVENUE, N.W. WASHINGTON, D.C. 20433 international law. www.ifc.org/climatebusiness TABLE OF CONTENTS 6 24 EXECUTIVE SUMMARY TEN KEY SECTORS 7 Findings 24 SECTOR 1 50 SECTOR 6 Decarbonize the grid with renewable energy Create nature-based urban infrastructure 30 SECTOR 2 55 SECTOR 7 Scale up distributed generation and storage Decarbonize heavy industry with carbon capture, 10 utilization, and storage and green hydrogen 35 SECTOR 3 INTRODUCTION Retrofit buildings for energy efficiency 60 SECTOR 8 Scale climate-smart agriculture 40 SECTOR 4 12 Why build back green? Invest in low-carbon municipal waste and water 66 SECTOR 9 15 How to rebuild green Reinvent textile and apparel value chains 45 SECTOR 5 Expand green urban transport 71 SECTOR 10 Incentivize low-carbon airlines and shipping 76 77 CONCLUSION ANNEX 77 Definitions 78 Methodology AUTHORS “Ctrl-Alt-Delete: A Green Reboot for Emerging Markets” was prepared by the IFC Climate Business Department headed by Alzbeta Klein, Director, under the overall responsibility of Hans Peter Lankes, Vice President for Economics and Private Sector Development. The core team and authors are Marcene Mitchell, Irina Likhachova, and Elizabeth Minchew. Caitriona Palmer provided additional writing and editorial review. IFC colleagues who provided expertise and inputs throughout the preparation of the paper include Guido Agostinelli, Shari Friedman, Kartik Gopal, Ruth Hupart, Jim Michelsen, Peter Mockel, Ommid Saberi, Ahmad Slaibi, Charlene Sullivan, Ian Twinn, Sean Whittaker, and Nina Zegger. ACKNOWLEDGMENTS The paper received insightful comments from many peer reviewers and colleagues within the World Bank Group, as well as from external organizations. The authors are grateful to all peer reviewers for their contributions. These include: Simon Evans (Carbon Brief), Steve Hammer (World Bank), Joel Jaeger (World Resources Institute), Maxine Jordan (International Energy Agency), Alison Pridmore (International Energy Agency), Vikram Widge (Climate Policy Initiative), and IFC colleagues Tunc Alanyak, Farid Azouri, Yasser Charafi, Maria Lopez Conde, Diane Davoine, Michelle Farrell, Bill Gallery, Neil Gregory, Prashant Kapoor, Tom Kerr, Rosy Khanna, Alice Laidlaw, Jeremy Levin, Laila Nordine, Autif Sayyed, and Smita Thomas. The analysis of the investment potential, job creation, and greenhouse-gas (GHG) emissions reduction across eight sectors in the 21 emerging markets was conducted by Guidehouse Insights. The authors are grateful to Elizabeth Lewis, Elena Gex, and Monica De Leon who managed communications and the dissemination of the paper and to Irina Sarchenko who managed creative design and layout services provided by Design Army. A GREEN REBOOT FOR EMERGING MARKETS 3 ABBREVIATIONS AND ACRONYMS BRT bus rapid transport IEA International Energy Association C&I commercial & industrial IFI international financial institution CAGR compound annual growth rate ITS intelligent transportation systems CCUS carbon capture, utilization, and storage km kilometer CO2e carbon dioxide equivalent LCOE levelized cost of energy COVID-19 or COVID 2019 novel coronavirus LEILAC low emissions intensity lime and cement CSA climate-smart agriculture MW megawatt DFI development finance institution NDC Nationally Determined Contribution DG distributed generation NGO nongovernmental organization EDGE Enhancing Design for Greater Efficiency O&M operations and maintenance ESCO energy service company PPP public-private partnership EU European Union PV photovoltaic EV electric vehicle SAF sustainable aviation fuels FI financial institution SMEs small and medium enterprises FY fiscal year SOE state-owned enterprise GDP gross domestic product T&D transmission and distribution GHG greenhouse-gas UHV ultra-high voltage GW gigawatt A GREEN REBOOT FOR EMERGING MARKETS 4 FOREWORD The human health and economic costs of the COVID-19 pandemic The pandemic may have created lots of uncertainty, but one continue to be tragically high. But the crisis has also provided an thing remains clear: the climate requires action. COVID-19 may unprecedented opportunity to change course and to rebuild a have slowed our daily lives and the global economy, but it has global economy that is more resilient in the face of future shocks not slowed the pace of climate change. And as Mark Carney, such as climate change. the former governor of the Bank of England recently said, we cannot self-isolate from climate. Why? Even with the pandemic raging, it is imperative that we do not let up on ambitions for a safer, low-carbon future. But what’s That is why we should widen our focus and shift from the narrow more, it is possible to strengthen the economic recovery from initial rescue to factoring the climate into the recovery, even COVID-19 while at the same time building greener economies. as the world continues to be in the throes of the pandemic. Green industries have the potential to create millions of jobs We should not rebuild from this virus-borne economic crisis only not just in the long term, but today. Rebuilding with a strategic to face a climate-borne economic crisis down the road. focus on climate-smart approaches will help companies make the inevitable low-carbon transition. “ It is possible to strengthen That is why I am honored to present “Ctrl-Alt-Delete: A Green Reboot for Emerging Markets” that identifies 10 sectors that the economic recovery BY HANS PETER LANKES can support job-rich and sustainable growth across 21 emerging- from COVID-19 while Vice President for Economics and market economies. These sectors are grouped around green Private Sector Development, IFC at the same time building infrastructure, green cities, and supporting the transformation of carbon-intensive industries to green operations. greener economies.” The report identifies the economic benefits, investment opportunities, and commercial readiness of each sector and I encourage IFC’s client companies, governments, development examines how best to unlock these opportunities. For the most finance institutions and civil society partners to use “Ctrl-Alt- part, investment could be scaled rapidly as part of the recovery, Delete” as a road map for what a successful green recovery could but will require varying degrees of cooperation or coordination look like. Let’s embrace this once-in-a-lifetime opportunity to put between the public and private sectors. the world on a more equitable, prosperous, and cleaner path. A GREEN REBOOT FOR EMERGING MARKETS 5 EXECUTIVE SUMMARY The economic fallout associated with the COVID-19 pandemic