This co-financing scheme allows the World Bank, Clean Technology Fund, and Global Environmental Facility to jointly support Mexico’s National Climate Change Strategy. A broader group of consumers will gain access to energy efficient lighting and appliances through financial incentives. The concessional financing package will help reduce more emissions that what would have otherwise been possible. implement the scrapping of old appliances, public intervention coupled with innovative financing was Mexico ranks 12th in the world in terms of total needed to correct market failures and catalyze greenhouse gas (GHG) emissions and is the second investment. This project’s viability was dependent on largest emitter in Latin America. In its national securing low-cost financing and providing monetary strategy for climate change mitigation and incentives to encourage the participation of low- adaptation, Mexico has committed to cutting GHG income consumers in the adoption of energy efficient emissions in coming years. As part of this program, compact fluorescent lamps (CFLs) and appliance Mexico has launched an energy efficiency strategy renewal and to promote future investment by other that targets power consumption in the residential financiers in full sector transformation. sector by increasing the efficiency of household lighting and appliances. Large-scale lighting substitution and appliance replacement programs The customized financing package for the Mexico could reduce the residential electricity sector’s Efficient Lighting and Appliances Project involved carbon footprint by over 10 percent in the next few blending a US$50 million loan from the Clean years. Technology Fund (CTF) under concessional terms with a US$250 million IBRD loan and a US$7 million Global Environmental Facility (GEF) grant. Funds are In order to increase the penetration of more efficient being channeled through NAFIN, a state-owned technologies in the residential electricity sector and bank, and through the federal government. The project may also generate future carbon revenues, financing. which could be reinvested in the transformation Associated emissions reductions are estimated at initiative. 5.14 million tCO2e (tonnes of CO2 equivalent). The co-financing package provides financial Potential project electricity savings of 10 TWh incentives to consumers in the form of free CFLs for (terawatt-hour) over the five-year implementation the replacement of inefficient incandescent bulbs, period represent about 17% of Mexico’s 2009 and instant discount vouchers and low-cost loans to residential electricity consumption and exceed reduce the cost of replacing inefficient appliances. Paraguay’s estimated 2009 total electricity consumption. Financing at concessional terms facilitates greater consumer participation, which is needed to demonstrate the merits of the residential energy efficiency program and thus enable full market Table 1. Financial Terms transformation. GEF IBRD Loan CTF Loan Grant Amount US$250 m US$50 m US$7 m Maturity 12 years 20 years n/a The blending of concessional funding from different sources enlarges the pool of low-cost financing Repayment Amortizing available and addresses several of the financial Bullet from year n/a 10 barriers associated with these investments to Interest 6M LIBOR 0.75% facilitate Mexico’s path to a low carbon economy. Rate + annual Furthermore, the co-financing scheme allows the n/a variable service Bank, CTF and GEF to jointly support Mexico’s spread charge National Climate Change Strategy and partner with Mexico to reduce more emissions than what would have otherwise been possible without this type of Co-Financing Package: Photo Credits Front: Curt Carnemark / World Bank *Another US$ 2 million in grant funding from GEF partially funds the technical assistance component of this project. Miguel Navarro-Martin, Head of Banking Products, mnavarromartin@worldbank.org, +1 (202) 458 4722 Roberto Aiello, Senior Energy Specialist, Latin America and the Caribbean Region, raiello@worldbank.org, +1 (202) 473-3806