$7.6 billion needed for
climate-related projects

Targeted sectors: Energy, water, transport, and solid waste, as per World Bank report

The country needs to invest an estimated $7.6 billion in energy, water, transport, and solid waste between 2024 and 2030 in order to align its recovery with cost-effective climate action, according to the just released World Bank’s Lebanon - Country Climate and Development Report.

“The capital-intensive energy sector alone requires approximately $4 billion in investment to diversify the generation mix toward cleaner, affordable renewable energy sources and to switch from liquid fuel to natural gas,” the World Bank said.

The water sector needs investments of more than $1.8 billion. The aim is to boost storage capacity in order to improve water security besides improving water use efficiency, and restoring resilient water services.

Investments required for the transport sector are estimated at $1.6 billion. Around $915 million of this amount is for new projects to kick-start an effective green public transport system. The remaining $665 million aims to enhance the resilience of the transport infrastructure including roads, bridges, and ports. “Major transport assets such as Beirut Airport, Port of Beirut, and Port of Tripoli could benefit from climate-driven public-private partnership projects that consider effective green building systems and energy efficiency,” the report said.

Around $200 million is required for the solid waste sector in order to rehabilitate existing treatment facilities involved in sorting and composting activities as well as for constructing new treatment facilities, and building and equipping sanitary landfills.

The financing outlook of the climate-related projects will depend on two scenarios, according to the report. The recovery least-cost scenario assumes that adequate reforms are underway which will increase fiscal space for capital expenditures. It also assumes that debt restructuring is completed in 2025 which will improve sovereign credit rating, ease financing constraint, and reduce borrowing cost. Access to international capital markets is possible. “The earlier that structural reforms to mobilize capital at scale are implemented, the faster the sector recovery could embark on a least-cost, sustainable path,” the report said.

The second scenario is the muddling through scenario which is predicated on the continuation of the status quo of lagging and inadequate macro-fiscal reforms and that assumes that debt restructuring will not be completed before 2030. “Lack of reforms adversely affects fiscal and external stances. Lack of fiscal space, coupled with an impaired banking sector that is incapable of performing its financial intermediation functions and an inability to tap into international capital markets because of the sovereign default, implies that funding for capital expenditures and, consequently, the energy transition and climate adaptation, is lacking. Financing constraints lead to anemic economic growth, and climate-related financing is scarce in the next decade,” the World Bank said.

Although it could embark on either of the two scenarios, the country may end up on a path somewhere in between. Under any scenario, it urgently needs investment for the 2024-2026 period with a financing envelope of $770 million. This short-term investment aims to address partial yet critical needs in key service and growth-providing sectors. The short-term priority investment envelope for energy is $300 million, water $260 million, transport $120 million, and solid waste $90 million. The report assumes that non-concessional financing will represent 80 percent of the financing with the remaining 20 percent consisting of concessional financing and grants. “Lebanon cannot afford to delay these much-needed investments. Macroeconomic modeling of the impacts of the priority investments package showed that it would not place debt on an unsustainable footing. The fiscal and debt dynamics can be enhanced by mobilizing private sector financing, reducing the central government’s share of total investment spending,” the World Bank said.