Mobilizing climate investment: the role of international climate finance in creating scaled-up low-carbon energy

Mobilizing climate investment: the role of international climate finance in creating scaled-up low-carbon energy

It is estimated that developing countries need US$ 531 billion per year additional investment in energy supply and demand technologies, between now and 2050, in order to limit global temperature rise to two degrees above pre-industrial levels. This report looks at the ways in which public climate finance can help meet the investment needs of developing countries by creating conditions for scaled-up investment in low-carbon energy. It contends that developing country governments and custodians of international public finance must deploy limited public finance in ways that leverage an unprecedented volume of private sector investment. Without the appropriate policy, institutional, industry and finance conditions, it will be difficult to achieve the necessary scale of action. With this in mind, the report looks at six case studies before discussing the implications of the findings and drawing recommendations for the Green Climate Fund (GCF).

The report presents a series of case studies, identifying a number of policy, industry and financial sector conditions that can attract scaled-up public and private investment in low-carbon energy. It includes the following key lessons and insights.

  • Scaled-up investment can be significantly aided through the long-term investment of small amounts of resources; these tactics should be continued beyond scaling-up to address gaps.
  • The reform of policy and regulatory environment proved crucial to attracting significant scale investment; it is important that such mechanisms are integrated in such a way as to ensure a consistent, coherent and confident investment environment.
  • Investment in knowledge and knowledge sharing, particularly through international support, can especially strengthen small to medium sized enterprises. Combined with strengthening the capacity of financial institutions, these factors can enhance the attractiveness of even higher risk large-scale investment.
The paper proposes a framework to guide governments and international partners in how to provide readiness support to countries with low-carbon energy sectors at different stages of development. Early stage activities include the support of assessing energy options, engaging stakeholders in planning, capacity building and technical support. For more developed sectors, the framework includes activities concerning the design and implementation of regulatory and fiscal instruments and targeted capacity building for national and local government.
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