RAMCC´s Trust Fund


23/01/2019

The Argentine Network of Municipalities against Climate Change (RAMCC) is currently composed of 160 local governments from all over the country, from big cities to small towns, that together represent 10.000.000 inhabitants. The RAMCC is an instrument for the coordination and promotion of local public policies fighting climate change, and as such, it´s main goal is the implementation of projects or programs at local, regional or national level for the mitigation of and/or adaptation to climate change through the mobilization of local, national and international resources.

In the efforts to bring forward ambitious actions in their cities and towns, RAMCC members established the first Argentinian trust fund conformed by local governments and exclusively dedicated to manage, collectively, funds to implement their local climate action plans. Gathering together through this new tool, municipalities create a transparent process and get technical and administrative support to develop sustainable projects, but fundamentally, the financial backing needed to join global financial flows they don´t have on their own because many of the local governments are not considered reliable and profitable partners, especially the small ones. Thereby, local administrations can be both, grantors and beneficiaries of this trust.

The first initiative developed taking this tool into account was a one about efficient public street lightining in 42 municipalities. It was developed with the cooperation of the Copenhagen Centre on Energy Efficiency. In this case, the RAMCC Trust Fund will be the vehicle company ('SPV'), having the interested municipalities as main shareholders and possibly adding local banks and/or the private sector. This SPV would be responsible for contracting financing, and for the energy efficiency project development and implementation.

Energy efficient street lighting is a widely available 'low-hanging fruit'. Argentina has currently an energy matrix that is highly dependent on fossil fuels, and therefore energy represents the largest greenhouse gases emitting sector. Being lighting a key public service provided mainly by local governments, many cities engaged in climate action had similar projects for the replacement of conventional lighting by LED lighting. Aggregating these relatively similar investment projects into a project ‘bundle’ which can be considered as a single investment project is the key innovation. By setting and communicating the criteria for bundling projects, and providing structures for prerequisite data and information that can allow governments to register themselves as interested in such project deployment, allowing for the possibility of accessing larger-scale funding, cost savings, and ensuring accelerated energy efficiency implementation.

Project: Efficient Public Street Lightining in Argentina: Technical Assistance.
Background and Context
Energy efficiency is part of the Sustainable Development Goal 7, under which the global rate of improvement should be double by 2030 ; moreover, the targets for emissions reductions set forth in the Paris Climate Agreement have put energy efficiency high on the political, industrial and civil society agenda, as a main tool for emissions reduction . The development of national policies on energy efficiency gains pace around the globe, namely encompassed in the National Determined Contributions and in policy and regulatory initiatives of individual countries. Policy developments put focus on creating a framework for further enhanced market design for energy efficiency products and secondary legislation to regulate sectoral operation.

Besides policy and regulatory framework design, investing in energy efficiency technology is also a key to success in emissions reductions, having the potential to cut up to 22 GtCO2e in 2030 and putting the world well on track to hitting the 2 degree C target . Although the energy needed to produce a unit of economic output globally has improved over the last years, the current energy intensity speed is not sufficient to achieve the proposed objectives. There is still a long way away in closing the gap between the national level policy and the local level's effective implementation and desirable investment.

Very often, shortcomings such as lack of data, shortage of properly trained personnel and absence of financial resources hinder the deployment of the full energy efficiency potential in buildings, industry and transport. Moreover, the inherent disperse characteristics of energy efficiency, its often-small size and in most cases its lack of visual impact, leave the concretization of opportunities behind. Still, the sum of the infinite number of small opportunities not yet grasped is delaying the progress on a substantial amount of energy that could be saved.

Energy Efficiency at local level
Local governments, as service providers and as energy consumers, play a fundamental role in the development of policies, as well as in the promotion and dissemination of best practices and technologies. In fact, municipalities have the tools to achieve sustainability of the system, work with stakeholders and develop measures in pursuit of energy efficiency. Local governments are responsible for community energy services, but can also invest, establish local laws and regulations, promote energy audits and assessments in public infrastructure and have direct access to the information needed.

Bottom up energy efficiency opportunities are well known at local level, however not yet grasped. Energy efficiency in local infrastructure can play a relevant role both on working towards the Paris Agreement objectives and for reducing expenditures with energy, making budget available for other applications like health, citizens wellbeing and education. Among priority energy efficiency interventions could be identified street lighting.

At the financial level, mainly linked to international or regional funds and financing mechanisms, many of the local governments are not considered reliable and profitable partners to be worthy of such resources. They lack credit guarantees, they have not previously managed international external resources, they are unaware of the international mechanisms of financial and economic movements, and in many cases their projects do not comply with the basic international standards established by the donors themselves, especially if we refer to the system of credits. These asymmetries are more harshly experienced when we compare small and medium-sized local governments with cities that exceed one million inhabitants or are capitals of countries or provincial states, where most of the cooperation funds and contributions provided by governments are focused.

Energy efficient street lighting as a widely available 'low-hanging fruit'
Lighting is a key public service provided mainly by local governments, essential for safety of road users and pedestrians. Public lighting service has a greater demand nowadays due to the growth of population living in cities and its direct relationship with wellbeing and urban image. However, still many existing public lighting fittings globally are outdated and, therefore, highly energy inefficient. This fact leads to a greater energy demand, as well as increased needs for maintenance and assistance, which are consequently reflected in higher costs that local governments have to bear. Currently, technological changes in the lighting industry allow good service quality levels associated with lower energy consumption, up to 80% lower than the majority of existing fixtures. Moreover, the new technologies also benefit from a longer life and lower maintenance costs.

Energy situation in Argentina
Argentina has currently an energy matrix that is highly dependent on fossil fuels and, in recent years, energy import levels have generated a significant dependence on the international markets and imbalanced national fiscal accounts. The national electricity system also faces difficulties to satisfy a rising demand. In this context, there is a need for a paradigm shift in all sectors. Considering the total of the greenhouse gas emissions of Argentina, energy represents the largest emitting sector, thus constituting a fundamental pillar in the development of energy and environmental policies, establishing itself as a concrete mitigation policy towards climate change. Argentina has a National Action Plan on Energy and Climate Change in force, in which the urgent need to promote energy efficiency is highlighted, stressing among its actions the promotion of energy efficiency. Within the established measures is included the replacement of conventional lighting by LED lighting both in private and public uses and a country-wide standards and labelling scheme for energy efficiency performance of buildings.

One of the most innovative aggregation project developments is being held in Argentina where extensive data collection and pre-assessment has been done on municipal street lighting fittings. A total of 42 municipalities have now a deep knowledge of the existing lighting infrastructure and the energy efficiency opportunities associated with it: totaling more than 300 thousand lighting fixtures to replace and representing an investment of over 130 million dollars.
Model to be deployed

Scalability is key to achieving global impact in energy efficiency implementation. There is a relatively high commonality between the type of energy efficiency measures that could be implemented between cities and districts within a similar context, and many successful examples of where this has been done. The overall initiative aims to provide a standardized model whereby good practices that are yielding results can be replicated with similar measures within similar contexts where standardization, transferability and replication can apply, ensuring high quality, speed and high impact in aspiring municipalities. Significant transaction cost savings will be available for widely accessible opportunities that many municipalities aspire to, and which lend themselves towards standardization and replication, for example as in public lighting projects.
Aggregating these relatively similar investment projects into a project ‘bundle’ which can be considered as a single investment project is the key innovation. By setting and communicating the criteria for bundling projects, and providing structures for prerequisite data and information that can allow governments to register themselves as interested in such project deployment, allowing for the possibility of accessing larger-scale funding and ensuring accelerated energy efficiency implementation.

For such cases it is being created a special purpose vehicle company ('SPV', also known as Fideicomiso in Argentina), having the interested municipalities as main shareholders and possibly adding local banks and/or the private sector. This SPV would be responsible for contracting financing, and for the energy efficiency project development and implementation. Eventually this SPV would also need a guarantee to support the contracted loan.

This initiative is engaging in discussions with multilateral development banks, IFIs and donors that could either way support the still pending activities of technical-economic feasibility studies, financial modelling, project finance development, all towards the investment phase.

Overall objective
The team overseeing this initiative is seeking funding for the development of a feasibility study for efficient street lighting in 42 municipalities in Argentina, among 10 different provinces of the country.

Local governments, as providers of street lighting service in their respective municipalities, have the capacity to design local policies and develop measures to institutionally sustain such projects. Yet, the municipalities seek for support on the technical and socio-economic terms of the retrofitting, to advance towards the late stage phase of the project preparation. At the moment, the 42 municipalities have each undertaken pre-feasibility studies, to assess the potential energy and economic savings, the GHG emissions reduction and the approximate number of lighting fixtures to retrofit.

The specific objectives of this proposal are the following:
- To analyse the technical options for the retrofitting design: luminic studies, electric grid supply conditions, infrastructure conditions and technical economic assessment of different solutions.
- To develop the technical designs which will be implemented in the street lighting retrofitting.
- To estimate and evaluate the results of the project in a socio-economic framework, in line with the local context.
In a second stage, financial assistance and fund will be needed for the implementation of the best technical option identified.

RAMCC´s Trust Fund
The Argentine network of municipalities against climate change (RAMCC) is composed of 158 municipal governments of 16 Argentine provinces, it has been working for eight years, and in their territory have ten million inhabitants seat of small, medium and large cities. As part of its institutional actions, the RAMCC has proposed to support the design and to accompany the formulation of proposals and concrete actions of adaptation and climate change mitigation feasible to be financed.

In this context, a group of local governments of the RAMCC represented by their highest authorities, on December 27th joined to give birth to the first Argentine trust destined to manage, support and implement projects, programs and policies linked to adaptation and mitigation of climate change: the "RAMCC Trust".

The RAMCC Trust was formed by an initial group of municipalities, these were:
- Mónica Fein, mayor of Rosario (Santa Fe Province)
- Carlos Briner, mayor of Bell Ville (Córdoba Province)
- Carlos Carignano, mayor of Camino Aldao (Córdoba Province)
- Tadeo García Zalazar, mayor of Godoy Cruz (Mendoza Province)
- Mercedes Altamirano, mayor of Los Molles (San Luis Province)
- Adrián Tagliari, Communal president of Llambi Campbell (Santa Fe Province)
- Amadeo Vallejos, mayor of Reconquista (Santa Fe Province)
- Alejandro Luciani, Communal president of Soldini (Santa Fe Province)
- Mauricio Tartaglini, Communal president of Villa Eloísa (Santa Fe Province).

The RAMCC Trust becomes thus a new tool for municipalities to have the support and transparency necessary to give viability to investments that could not be channelled to an individual municipality. This mechanism allows to synergize the efforts of all individual municipal governments that wish to contribute resources to face climate change, turning them into beneficiaries of the resources, funds and services that the RAMCC Trust will manage.

Through its mayors, the member municipalities of the RAMCC adhere to the Trust by signing a contract and letter of accession. Once this is done, they are constituted as trustors and direct beneficiaries, for which they provide an initial amount of money and undertake to make an annual financial contribution to the support of the tool. In this sense, the RAMCC Trust has a period of functionality of thirty years.

The trustees assign a Council of Mayors, which constitutes the decision-making body of the Trust. Conformed by trusting mayors, it takes the central decisions, approves the actions, budgets, internal policies and login of new members, the policy of allocation of projects, and determines the functions and competencies of the other parties of the tool. It also assigns the resources managed by both the Trust itself and the Executive Secretary.

The Executive Secretary, for its part, is responsible for, on the one hand, obtaining resources and contributions from third parties that can be assigned to the Trust. On the other, it accompanies and supports potential beneficiaries in the elaboration and presentation of projects, programs and policies related to climate change adaptation and mitigation financed through this mechanism.

Besides, the Trust has a trustee (Rosario Municipal Bank B.M. R Mandates & Business), which is the responsible for administering the funds available based on the advice of Council and executive Secretariat that composes the Trust.

The main objective of the RAMCC Trust is to promote concrete actions in terms of mitigation and adaptation to climate change, mobilizing local, national and international resources and executing municipal, regional, national and International projects and programs. In this context, the Trust has a strict policy of project allocation, which is endorsed and approved by the trustees (municipalities) in the Assembly of Trustees. Additionally, it is a requirement, for the municipalities that make up the Trust, to have their inventory of greenhouse gases for the purposes of being beneficiaries of the resources and funds.

Besides, the projects supported by the Trust must contain the following principles:

  • Transparency and access to information
  • Justice
  • Equity
  • Non-discrimination
  • Contribution to the improvement and conservation of the environment
  • Promote sustainability
  • Boost triple impact

In its initial stage, the Trust is constituted with the contributions of the trustees (municipalities), being one of its main advantages compared to alternative financing instruments, leaving open the possibility of receiving contributions from third parties (international organizations, multilateral agencies, banks, financial institutions, funds, trusts, promotion agencies, investment agencies, development agencies, government agencies, civil society organizations, associations, foundations, etc.) in the form of loans, concessions, investments, donations and non-reimbursable contributions, among others. These contributions from third parties, local or external, can be translated into assets and economic resources that allow beneficiaries to carry out their actions and programs facing climate change. Besides, the Trust itself can make investments that impact later in profits applicable to the projects it manages.