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Rich nations need to 'prime the pump' for clean energy development - report

by Laurie Goering | @lauriegoering | Thomson Reuters Foundation
Tuesday, 2 November 2010 16:09 GMT

LONDON (AlertNet) Â? If rich countries want poorer ones to use clean sources of power Â? something crucial to limiting the scale of climate change Â? they need to invest cash now to "prime the pump" for larger-scale private investment, a report released on Tuesday argues.

Investment in clean energy in China, India, Nigeria and South Africa needs to nearly double, from $34 billion in 2009 to $63.6 billion over the 2010 to 2020 period, just to meet existing national renewable energy ambitions in those countries according to the report.

But given the recent financial crisis and cost cutting in many parts of the world, that is unlikely to happen - unless private investors can be persuaded to jump into the market, says Investing in Clean Energy, a study by the Global Climate Network, an international group of research and policy organizations.

The best way to persuade them, the reports' authors say, is for wealthier countries to come up with some "up-front cash" Â? perhaps channeled through the emerging U.N. climate aid fund Â? to lower the risk of such developing-world projects and "help give the private sector confidence to make the transformational investments needed."

"Not only is this the right thing to do, it will also ensure massive growth in these countries' clean energy use, which will bring down the cost of low-carbon technologies the world over," said Kate Gordon, vice president for energy and climate policy at the Center for American Progress, a U.S. member of the climate network.

That could help bring renewable energy sources into widespread use much more rapidly than currently expected, and play a major role in curbing climate change.

SPEEDING THINGS UP

"To get technology to the point where it's the norm is very slow. It could take 20 or 40 years," said Manish Kumar Shrivastava, a climate change researcher at TERI, the Energy and Resources Institute in New Delhi. "Normally there's nothing wrong with that. But when you bring in climate concerns and the need to stop using fossil fuels, you have to find a way to speed it up."

The report, which examines renewable energy efforts in four major developing countries, argues that each dollar of public financing put toward clean energy projects is likely to leverage at least $2 and perhaps as much as $10 in private investment.

The study comes as the United Nations Advisory Group on Finance Â? charged with finding creative ways to raise $100 billion in assistance for climate-vulnerable poor countries Â? is due to release its own report.

The authors of the clean energy study say tapping a share of the climate assistance funds to jump-start clean energy technology would meet the U.N. group's guidelines, which are expected to say that "careful and wise use of public funds in combination with private funds can generate truly transformational investments."

"If the balance of risk and return is acceptable, then the private sector will invest," the clean energy report notes. But "the unequivocal finding of this study is that government intervention will be needed to ensure the private sector's perception of risk does not exceed its expectation of return."

South Africa, for instance, one of the countries looked at in the study, aims to get 15 to 20 percent of its energy from wind and solar by 2020, according to Marie Parramon, a sustainability consultant with IMBEWU Research Limited, a South African legal consultancy group and member of the Global Climate Network.

But "I'm not sure itÂ?s going to be an easy task to get the amount of money we need over the next 10 to 15 years, especially considering where we are globally with financial stability," she said.

Public spending on renewables, however, could help reassure private investors wary of investing in developing countries or new technologies, the report said.

Parramon says they have a lot of potential and a lot of interest in renewable energy in South Africa.

"Now it's a matter of getting financing and a regulatory framework in place to get investors to invest," she added.

Other members of the Global Climate Network include the Institute for Public Policy Research in London, the Bellona Foundation in Norway, the Climate Institute in Australia, the International Centre for Energy, Environment and Development in Nigeria and the Research Centre for Sustainable Development in China.

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