Public and Private Financing Key to a Low-Carbon Future
(3BL Media/Justmeans) – At the 2015 Paris climate change summit, over 190 countries made a commitment to invest in renewable energy, reduce GHG emissions and increase resilience to climate impacts. Several donors pledged financial support to the Green Climate Fund (GCF), and multilateral development banks (MDBs) committed to significantly increasing their share of climate financing.
According to the Global Green Growth Institute (GGGI), the public and private sectors now need to unlock financing to pave way for a low-carbon future. Yvo de Boer, director-general of the Institute, says that to build renewable energy capacities in developing countries, it is important to create solid project proposals that can attract investment.
Developing countries need to create conducive environment for investors in order to access an array of green finance options. Turning Nationally Determined Contributions (NDCs) into long-term climate investment plans is critical for developing countries to mobilize the needed finance to combat climate change.
Signs of encouragement in this direction can be seen in the recent reports by Bloomberg and KPMG. A report released by Bloomberg New Energy Finance (BNEF) estimates that the renewable energy sector is set to attract $7.8 trillion investment, including $3.4 trillion for solar, $3.1 trillion for wind and $911 billion for hydro power by 2040.
A report by a global consultancy KPMG shows that the green bonds market more than tripled in size from $11 billion in 2013 to $36.6 billion in 2014, and the figure was set to hit $100 billion by end 2015. Investments in renewables have now globally overtaken investments in fossil fuel. At the same time, renewable investments in developing countries have overtaken those in industrialized countries.
However, the developing world still has a long way to go in terms of building institutional capabilities for a strong pipeline of project proposals. One of the challenges is that a number of developing countries are already deeply indebted and their ability to borrow money is limited.
Although there is a growing emphasis on making more capital available into the system, but not enough attention has been paid to enhancing the capacity of the system to absorb the capital in ways that are beneficial to the underprivileged in developing countries, and at the same time, are acceptable to those that bring the capital.
To begin to understand some of these financing challenges better, the GGGI and its partners will organize the Global Green Growth Week from September 5-9 in Republic of Korea. The five-day event will focus on finding innovative ways to mobilize finance for climate action and green growth, drive renewable energy and green investment, and bring benefits for all by using green growth policies.
Image Credit: Eco Business via ADB