Although the nation’s midterm elections leave many wondering what will happen with clean energy investments
here in the United States, there are other countries around the world that are working on expanding their own renewable energy sector. A new report from the Global Climate Network (GCN) examines the need for public-private investments to meet renewable energy targets in four countries.
In the report, Investing in Clean Energy
(PDF), the Global Climate Network engaged in a two-stage study of climate financing with the first stage examining the costs of clean energy project installations and the second stage discussing the financial barriers to expanding the global clean energy economy.
Clean energy investments in four countries are addressed: China (hydro, wind and solar power), India (solar power), Nigeria (gas and small-scale hydropower) and South Africa (solar and wind power). To address climate change, we must first address the finance issue. Since most climate-affecting steps require capital investments, the public and private sector must work together to ensure adequate financing.
The report determined that there are several barriers to private sector investments in clean energy including high risks and low returns, poor competition in the energy market and a lack of investment-guiding policies. To help overcome these barriers, GCN has proposed five mechanisms to leverage private finance:
- Loan guarantees – governments would underwrite loans
- Policy insurance – governments could provide insurance against policy uncertainty
- Foreign exchange liquidity facility – credits could be offered to offset currency exchange fluctuation risks
- Pledge fund – a government-backed fund that would allow investors to pledge capital to smaller, low-risk projects
- Subordinated equity fund – this government-backed fund would be limited to higher risk clean energy projects
If these measures are implemented, private sector financing could run from $2 to $10 for every $1 of public money invested. In order to realize an increase in private sector funding, GCN recommends that public funds from developed countries be used strategically, ensure that there is favorable long-term policy in place in developing countries and provide a comprehensive assessment of all costs associated with clean energy projects.