Financing Clean Energy Transitions in Emerging and Developing Economies

Financing Clean Energy Transitions in Emerging and Developing Economies

Introduction The International Energy Agency (IEA) and its partners, the World Bank and the World Economic Forum, have collaborated to produce a special report focusing on financing clean energy transitions in emerging and developing economies (EMDEs). The report highlights the urgent need to accelerate these transitions to mitigate climate change impacts and promote sustainable development.

Key Challenges

1. Global Emissions Growth: Most of the growth in global emissions over the next few decades is expected to come from EMDEs as they industrialize and urbanize.
2. Capital Availability: While there is ample capital globally, it is not effectively reaching the countries and sectors that need it most.
3. Private Capital Hesitation: Private capital is hesitant due to perceived risks and lack of balanced returns in clean energy projects.
4. Institutional Support: Various institutions are supporting energy transitions, but more concerted efforts are needed from international financial institutions, donors, and multilateral development banks.

Recommendations To address these challenges, the report recommends several measures:

1. Enhancing Financial Markets: Improving access to finance and creating favorable market conditions.
2. Improving Policy Visibility: Increasing transparency and clarity of public policies to attract investment.
3. Removing Market Distortions: Addressing distortions in energy markets to make them more conducive to clean energy investments.
4. Grid Integration: Enabling better integration of renewable power into existing grid systems.
5. Empowering Local Entrepreneurs: Supporting local initiatives to develop small-scale clean energy solutions.
6. Building Models for Universal Access: Creating frameworks for ensuring universal access to modern energy.

Case Studies The report draws on nearly 50 on-the-ground case studies from countries like Brazil, Indonesia, Senegal, and Bangladesh, covering various aspects of clean power, efficiency, and electrification. These case studies provide insights into successful practices and areas for improvement.

Global Collaboration Addressing the global challenge of climate change requires global cooperation. Governments should give strong strategic mandates to international public finance institutions to finance clean energy transitions in developing countries. Accelerating clean energy transitions must become a top priority for both governments and investors worldwide.

IEA's Role The IEA is committed to playing a leading role in facilitating international cooperation to share resources and expertise in tackling key sources of emissions. Initiatives like the Clean Energy Transitions Programme aim to leverage the IEA's unique energy expertise to accelerate global clean energy transitions, particularly in major emerging economies.

Conclusion The report aims to catalyze concrete actions to enable a greater number of clean energy projects to thrive globally. It serves as a guiding light for the IEA's ongoing work on investment and finance, providing data, insights, and advice to policymakers and practitioners.

Acknowledgements The report was prepared by the Energy Investment Unit in the Energy Supply and Investment Outlook (ESIO) Division of the Directorate of Sustainability, Technology and Outlooks (STO). Key contributors include Michael Waldron, Tim Gould, and a team of principal authors and coordinators. The report also benefited from contributions from various IEA experts and support from senior management.