From pioneering green bonds to ambitious climate neutrality targets, Romania is transforming its economy and energy landscape.
Following the European Union (EU)’s adoption of the European Green Deal, Romania set out an ambitious target to reduce greenhouse gas (GHG) emissions by 78% in 2030 (compared to 1990 levels) and achieve climate neutrality by 2050. These goals have galvanized action across the country, leading to significant progress in emissions reduction.
Romania set out an ambitious target to reduce greenhouse gas (GHG) emissions by 78% in 2030 (compared to 1990 levels) and achieve climate neutrality by 2050.
Building a low-carbon, resilient economy
In 2022, Romania’s net GHG emissions per capita fell below the EU average. Its net domestic GHG emissions, including the Land Use, Land Use Change and Forestry sector, were 75.1% lower than 1990 levels. To maintain the momentum, Romania is strategically focusing its decarbonization efforts across key sectors.
At present, the energy sector is the primary source of GHG emissions, contributing to 68% of its emissions. Within the energy sector, 28% of the total emissions is attributable to transportation, 24% to energy industries, and 18% to manufacturing. Beyond the energy sector, agriculture accounts for 16%, industrial processes and product usage for 9%, and waste for 6% (Figure 1).
Figure 1: Romania’s GHG emissions by sector, 2022
Source: EEA GHG Data Viewer, European Environment Agency
Romania’s energy supply is dominated by carbon intensive sources. Fossil fuels account for approximately 36% of total electricity generation (Figure 2). In response, the government has developed a plan to transition to clean energy across both energy supply and electricity generation sectors.
Romania’s energy supply is dominated by carbon intensive sources. Fossil fuels account for approximately 36% of total electricity generation.
Figure 2: Romania’s electricity generation by source, 2021
Source: International Energy Agency
Romania also grapples with a wide array of natural disasters, such as floods, storms, and droughts which are becoming exacerbated due to climate change. From 1900 to 2021, the country endured over 100 catastrophic events, impacting over 2 million people, resulting in nearly 5,000 fatalities, and causing losses exceeding $17.2 billion. The escalating risks posed by floods and storms are intensified by aging infrastructure. In the event of a major disaster, the government’s potential liability from losses could surpass 0.4% of the nation’s GDP.
From 1900 to 2021, Romania endured over 100 catastrophic events, impacting over 2 million people, resulting in nearly 5,000 fatalities, and causing losses exceeding $17.2 billion.
Prioritizing decarbonization and adapting to natural disasters
Romania has developed a series of policy measures to reinforce its commitment to decarbonization and adaptation to climate change. In 2020 and 2022, the government adopted the Integrated National Energy and Climate Plan 2021-30 and the National Strategy for Sustainable Development 2030, respectively. More recently, in August 2024, the National Strategy on Adaptation to Climate Change was adopted for the period 2024-2030. The strategy outlines Romania’s integrated approach to preparing for natural disasters and addressing climate change.
Diversifying financing options to attract investors
Transitioning the economy comes at a cost and requires significant up-front and ongoing investment in the form of public and private investments. Investment needs to achieve the objectives of the Romanian Energy Strategy are estimated at EUR 127 billion overall from 2021 to 2030 (annually around 6% of current GDP). The National Recovery and Resilience Plan (2021-2026) details priority areas for investment in the country. About 44% of the plan supports green transition, which requires about EUR 12.5 billion in investments.
To meet the substantial financing needs of achieving these priorities, Romania set out a program to diversify its funding options. In 2023, the Ministry of Finance modified the relevant government decisions to include green, social, and sustainability (GSS) bonds in its funding strategy and drafted a Green Bond Framework. The framework outlines how the funds raised will be used and the governance arrangements that will ensure the credibility of bonds issued. The adoption of the framework was a critical reform supported through a World Bank Development Policy Operation (Fiscal Management and Green Growth Development Policy Loan (P181517)).
In 2023, the Ministry of Finance modified the relevant government decisions to include green, social, and sustainability (GSS) bonds in its funding strategy and drafted a Green Bond Framework.
In February 2024, Romania announced the issuance of a EUR 2 billion sovereign green bond. The twelve-year bond was the largest green euro-denominated bond by an emerging market issuer. It was also the largest transaction for Romania in the international financial markets and investor subscription was the largest achieved by Romania to date. About 45% of the green bond was allocated to investors with green-ESG mandates or known to use socially responsible investment principles/green investment principles. The issuance also provided a much-needed opportunity for many domestic investors to participate in the financing of green projects. Currently, green assets make up only 3% of the portfolio of Romanian banks, less than half the euro area average.
Facilitating climate financing solutions for Romania
In addition to implementing the recommendations from its Country Climate and Development Report and the Systematics Country Diagnostic Update, the World Bank is leveraging its expertise to help emerging markets mobilize private capital. The World Bank Treasury’s Sustainable Finance and ESG Advisory Program, in coordination with the Finance, Competitiveness & Innovation Global Practice, provided technical assistance to establish the sovereign green bond program and facilitate this transaction.
Encouraged by the success of this transaction, on October 4, 2024, Romania announced its first yen-denominated green bond issued in the Japanese market, also known as Samurai green bond. The JPY33bn (EUR200m equivalent) issuance further diversified Romania’s investor base, while addressing the interest of Japanese investors in sustainable investments in Romania. Following these two successful issuances, the Ministry of Finance is planning to access other markets and encourage the issuance of green bonds by the private sector. Romania’s first historic green bond is producing multiple opportunities to scale up market activity to ensure a successful green transition and climate resilience, with strong indications that this will make a positive contribution to the future competitiveness of the country’s economy.
Source link : https://blogs.worldbank.org/en/climatechange/romania-leverages-climate-financing-to-achieve-national-prioriti
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Publish date : 2024-10-29 13:23:00
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