The United Nations-backed Green Climate Fund (GCF) has approved $256.5 million in funding to help Bangladesh promote the large-scale adoption of energy-saving technologies and equipment in its textile and ready-made garment (RMG) sectors.
The disbursement, announced last week, will mark the first concessional GCF credit line for the South Asian nation, whose pandemic-battered garment industry generates more than 80 percent of its export earnings and nearly 16 percent of its gross domestic product (GDP). It’s also to date the largest approved funding proposal for any Direct Access Entity (DAE) of GCF, accredited globally, according to the Infrastructure Development Company, a government-owned non-bank financial institution that finances infrastructure and renewable energy projects in Bangladesh.
Established under UN climate talks in 2010, the GCF is the world’s largest dedicated fund to support developing countries seeking to reduce their greenhouse-gas emissions and tackle the impacts of climate change.
Bangladesh’s textile and RMG production currently accounts for 38 percent of the total energy consumption in the industrial sector, which in turn makes up 47.8 percent of the country’s commercial energy consumption, according to the Sustainable And Renewable Energy Development Authority.
The country’s 2015 Energy Efficiency and Conservation Master Plan noted that manufacturing industries in Bangladesh tend to practice poor energy management or utilize old and ill-maintained machines. Chief barriers to the adoption of energy-efficient technology include inadequate financial incentives and a dearth of technical expertise, it added.
Under the scheme, IDCOL will receive $250 million in concessional funds from the GCF for a tenure of 20 years, including a grace period of five years for financing energy-efficient equipment. Of this, $100 million will go toward energy-efficiency projects in the textile sector. IDCOL will funnel another $150 million to four local financial institutions for financing energy efficiency projects in the RMG sector.
The organization will receive an additional $6.5 million technical-assistance grant to cover areas such as capacity building, support in loan disbursal and monitoring and evaluation of program parameters.
With co-financing from IDCOL, local financiers and the project’s sponsors, the total program size will exceed $423 million, it said.
“This program is a remarkable success for IDCOL in terms of accessing climate change fund to pave the path for our country to achieve its Sustainable Development Goals (SDGs),” IDCOL said in a statement, singling out SDG 7 (affordable clean energy), SDG 9 (industry, infrastructure and innovation) and SDG 13 (climate change).
The scheme will also help the Bangladesh government achieve its goals of reducing the country’s greenhouse-gas emissions by 15 percent below business-as-usual levels by 2030 and its primary energy consumption by 20 percent per GDP by 2030, it added.
Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association, the nation’s largest union of garment factory owners, said she hoped the concessional financing will facilitate the adoption of energy efficient equipment and “further strengthen the competitive advantage of [the] Bangladesh RMG sector.”