* Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.
By Yannick Glemarec, director of environmental finance at the United Nations Development Programme (UNDP) and UNDP/Global Environment Facility (GEF) executive coordinator
Green transformation of economies is a reality. More than 1,000 greening policies have already been implemented in various countries. Clean energy sector investments grew 30 percent to a record $243 billion between 2009 and 2010, demonstrating that investors believe in its future. However, around 90 percent of clean energy investments are made in G20 countries, with the remaining 10 percent going to the rest of the world.
Concentrating our work in 20 countries will not effectively tackle the global challenges of climate change. Energy use is projected to increase 35 percent globally over the next 25 years and, in the absence of clean energy investments, carbon dioxide released by developing countries will continue to contribute, increasingly, to global warming.
The good news is that the global financial market, valued at $180 trillion, holds the capacity to undertake a task as significant as transforming fossil-fuelled industries into low-emission, climate-resilient economies. More than 6,000 equity funds and scores of international public funds and carbon markets are active today in green investment business.
However, in the absence of capacity building and advisory services tailored to the unique needs of developing countries, there is a risk that only a few emerging economies will benefit from the expanding climate finance market. To lower barriers on access to these new financial sources, the United Nations Development Programme (UNDP) has released “Catalysing Climate Finance”, a guidebook for decision makers in developing countries on how to tap into the new market.
FAVOURABLE POLICY ENVIRONMENTS
The guidebook provides detailed advice on how governments can improve their countries’ risk-reward gradient by creating a long-term predictable policy environment and introducing economic incentives favourable for green investments.
Governments of developing countries face three major challenges when planning a green, low-emission and climate-resilient future: gaining access to new and innovative climate finance sources; creating links between climate change strategies and national development objectives; and identifying how to use limited public finance resources to attract private capital.
For example, when it comes to wind power, no country will succeed in attracting private investments if independent power producers face barriers in access to grids, lengthy and uncertain licensing processes or a lack of long-term price guarantees. In order for a government to succeed in attracting private investors, scarce national and international public funding should be used to remove those barriers and instead put in place supportive public policies.
The guidebook draws on UNDP’s experience managing one-thousand multi-million dollar climate projects in 140 countries during the last two decades. In a non-prescriptive manner that can be easily tailored to meet each country’s priorities, it contains step-by-step guidance for identification and implementation of an optimal mix of public policies and funding instruments to raise climate finance.
The guidebook is being offered at a critical moment, when new sources of public finance, such as a U.N. Green Climate Fund, are being established. But even with an additional $100 billion in promised public financing each year, public funds will always be dwarfed by private capital. It will be critical that public finances are used in a strategic way to create a favourable policy environment to attract massive private investments.
You can download the guidebook here: http://content.undp.org/go/cms-service/download/publication/?version=live&id=3267712.
