Armenia Receives Landmark Grant in Energy Efficiency

Diana Harutyunyan is UNDP in Armenia’s foremost Climate Change guru. Between heading an all-star team of experts and giving now-renowned TEDx talks, Diana’s team have just secured the region’s first investment from the new Green Climate Fund. We sat down with her to find out more…

Diana, you and your team have just been allocated $20 Million USD from the Green Climate Fund, the first in the region. It’s also only the second GCF grant on energy efficiency worldwide, as well as one of the largest single investments UNDP in Armenia has ever received. What, in a nutshell, are you planning to do with this investment?

Firstly, it’s important to point out that this was a combination of the work of many people, across UNDP and beyond – at the Country Office here in Armenia, at the Regional Hub and in HQ. As for what we will do: the grant will allow us to upgrade and insulate external walls, entrances, roofs, ceilings, floors and windows – around 6000 family apartments and over 150 public buildings, including schools and kindergartens – helping to achieve a reduction in energy use for heating, cost-savings, and association reduction in CO2 emissions.

Historically, Armenia suffers from very poorly insulated housing stock. Most of its multi-apartment buildings were built 40, 50, even 60 years ago. Even those built more recently were constructed without a consideration that energy prices might increase and the buildings’ operational costs would ever become such a burden. We have the same issue in the public sector, in schools, hospitals, ministries, etc. Financial resources that are being spent on heating costs could be reinvested into other critical areas. Say nothing of the negative environmental consequences that this kind of energy use produces. Thirdly, Armenia’s rural areas are at higher risk of energy insecurity. The houses built there, many of which are larger than their urban counterparts, are exposed to harsher climatic conditions. This also increases the pressure on local woodland areas, as people burn wood for heating. If we address these houses’ energy efficiency, then we can also reduce gas consumption and deforestation, thereby having a double or triple impact when we also consider decreases to land degradation and landslides.

This is all the more important in the context of Armenia’s national energy security. Over a third of the country’s energy supply is generated through an ageing nuclear power plant. Sooner or later, this energy demand will need to be covered from somewhere. Renewable energy cannot cover all the demand. This would mean a future in which we will be more dependent on imported gas and which the effects of climate change would only get worse, not better. However, if we can reduce consumption, we can mitigate the problem.

How significant would these reductions be to the average family?

Very significant. We have two statistics, which were generated out of the experience of our pilot projects. In the residential sector, in multi-apartment buildings, we reached a reduction in energy consumption of 63%. In public facilities, in another pilot project, there was a minimum reduction of 50%. This is what we’re doing –  better insulating buildings to reduce consumption, while maintaining or even increasing comfort.

There are a lot of other funds out there, so what makes the Green Climate Fund any different? What’s all the hype about?

The Green Climate Fund, or GCF, is the primary financial instrument of the Paris Agreement, as well as the largest and the most unique. It is targeted at both mitigation – reducing further emissions – and adaption – adapting to the climactic changes that have already been caused.

When the world came together to agree on the landmark Paris Agreement last December, leaders agreed on a plan to keep the world’s temperatures from rising beyond 2 degrees Celsius - the minimum through which the effects of climate change are manageable. To reach this target, each country needs to limit the amount of greenhouse gases they emit through sustainable production and consumption. These reforms cost money. It is thought that we are talking in the area of $100 Billion USD per year.

During the Paris talks, it became clear that developing countries are expecting support for adaptation, as historical responsibility for Climate Change lies with the developed world. So a core theme of negotiation during the talks centred around the compromise of developing countries making commitments in the mitigation sphere, in exchange for adaptation. They were saying: “you have to help us, and if you do, we’ll also take obligations for mitigation”. This is where the GCF came in, as a bargaining chip.

Why was your proposal invested in?

It was not that it was picked and chosen. We did a lot of preparation. Our proposal package was an 800-page document and contained 16 annexes. In the end it was well-prepared and met all the GCF requirements.

The GCF now livestreams all their Board meetings in an effort to boost transparency amongst decision-making, and it was useful to watch these to find out what kind of things they look out for. The system in fact demands that a lot of issues have been taken into consideration – gender issues should be streamlined, social and environmental screening must be done and its impacts and risks properly considered, so a lot of things are important for the board.

We’re also thankful to the GCF Board member from Georgia, representing the Eastern Europe region, for intervening in defense of Armenia's proposal and saying that it could be a good example for replication in countries in the region which suffer from high levels of energy poverty, understood to be when households spend over 10% of their budget on energy.

Why is the GCF investing in UNDP? Why not go straight to national governments?

The GCF Board is moving towards directly accessing national institutions in developing countries. However, for now international organisations can act as a go-between. UNDP as an organisation has the institutional capacity to be able to deal with the challenge of producing proposals and implementing. In fact, almost half of GCF grants that have been approved involve UNDP as an accredited entity. UNDP in Armenia, starting in 2004, has been steadily working across three pillars energy efficiency: first the heating sector, afterwards in the building sector, where we did a lot of policy work and engagement with the private sector, and now in the lighting sector.

Also, it’s important to mention that UNDP in Armenia has proven experience working with International Financial Institutions. Our work with the European Investment Bank proved that we can handle loan-based projects. If you use just grant money, then you can’t ensure tangible change – the private sector and financial institutions have to be involved too.

When we talk about Climate Change funding, Eastern Europe is rarely seen as a critical area in need of assistance. What can the region as a whole learn from this success?

From an adaptation perspective, we have to understand that the GCF will deliver support to the most vulnerable - small-island states and the least-developed countries, which under climate change are considered most at risk. So we don’t have such a big comparative advantage as a region and as a country. Instead, we thought in terms of mitigation. We concluded that energy efficiency projects can have the most impact in countries where there is a high energy usage, either as a result of extreme climatic conditions, and a high-level of energy infrastructure, developmentally speaking more likely to be a middle-income country.

If we want to think about adaptation, it is best to think about a regional project where the GCF Board can really see a cost-effective added value. The challenges of climate change necessitate that we increase our cooperation.