Os annual investments in clean energy in emerging and developing economies will need to more than triple $ 770 billion in 2022 to up to US$2,8 trillion by the early 2030s to meet growing energy needs as well as align with climate goals established in the Paris Agreement.
This is what the new report released this Thursday (22) by IEA (International Energy Agency) and IFC (International Finance Corporation).
O Scaling Up Private Finance for Clean Energy in Emerging and Developing Economies shows that public investments alone would be insufficient to provide universal access to energy and combat climate change.
According to the IEA, increased public funding can be used more effectively in partnership with private sector capital to reduce project risks – a concept widely known as blended finance.
The study found that two-thirds of financing for clean energy projects in emerging and developing economies (outside China) will need to come from the private sector. The current $135 billion in annual private financing for renewable energy in these economies will need to increase to $1,1 trillion per year over the next decade.
“Today’s energy world is moving quickly, but there is a great risk that many countries around the world will be left behind. Investment is key to ensuring they can benefit from the new global energy economy that is rapidly emerging,” said Fatih Birol, IEA Executive Director.
According to Birol, investment needs go far beyond the capacity of public financing alone, making it urgent to quickly scale up much larger private financing for clean energy projects in emerging economies.
“As this report shows, this offers many advantages and opportunities – including expanded access to energy, job creation, growing industries, greater energy security and a sustainable future for all,” he highlighted.
Measures to boost investments in renewables
The research emphasized the need for greater international technical, regulatory and financial to unlock clean energy potential in emerging and developing economies (EMDEs).
By strengthening regulatory frameworks, institutions and energy infrastructure and improving access to financing, this can help governments overcome obstacles that currently impede clean energy investments, including relatively high upfront costs and a high cost of capital.
“The battle against climate change will be won in emerging and developing economies, where the potential for clean energy is strong, but the level of investment is far below what it should be,” commented Makhtar Diop, managing director at IFC.
“To meet pressing energy demands and emissions reduction targets in EMDEs, we need to mobilize private capital at speed and scale and urgently develop more investable projects. This report is a call to action and offers a clear roap on what is needed to achieve climate and energy goals”, he pointed out.
Concessional financing and green bonds
The IEA report also identified the importance of concessional financing for projects involving newer technologies that have yet to be scaled and are not competitive in many markets, such as battery storage, offshore wind, renewable energy desalination or low-emission hydrogen, or that are in riskier markets.
The Agency estimated that US$80 billion to US$100 billion in concessional financing will be needed annually until the early 2030s to attract private contributions on the scale needed for the energy transition in emerging and developing economies outside China.
Another finding highlighted the potential to issue more green, social, sustainable and sustainability-linked bonds – provided industry guidelines, harmonized taxonomies and robust third-party certification are developed.
political reforms
To expand opportunities for private investors, the International Energy Agency has emphasized the need for policy reforms in emerging and developing economies.
A number of cross-cutting policy issues, such as fossil fuel subsidies, long licensing processes, unclear land use rights, restrictions on private or foreign ownership, and inappropriate pricing policies, create barriers to investment or increase the cost of energy projects clean.
Removing these barriers, in the company's view, will help economies benefit more fully from the opportunities of the new global electricity economy.
