This paper provides novel evidence on the main factors behind consumer choices regarding investments in energy efficiency and renewable energy technologies using the OECD Survey on Household Environmental Behaviour and Attitudes. The empirical analysis is based on the estimation of binary logit regression models. Empirical results suggest that households' propensity to invest in clean energy technologies depends mainly on home ownership, income, social context and household energy conservation practices. Indeed, home owners and high-income households are more likely to invest than renters and low-income households. In addition, environmental attitudes and beliefs, as manifest in energy conservation practices or membership in an environmental non-governmental organisation, also play a relevant role in technology adoption.

The finance sector's response to pressures around climate change has emphasized disclosure, notably through the recommendations of the Financial Stability Board's Task Force on Climate-related Financial Disclosures (TCFD). The implicit assumption-that if risks are fully revealed, finance will respond rationally and in ways aligned with the public interest-is rooted in the "efficient market hypothesis" (EMH) applied to the finance sector and its perception of climate policy. For low carbon investment, particular hopes have been placed on the role of institutional investors, given the apparent matching of their assets and liabilities with the long timescales of climate change. We both explain theoretical frameworks (grounded in the "three domains", namely satisficing, optimizing, and transforming) and use empirical evidence (from a survey of institutional investors), to show that the EMH is unsupported by either theory or evidence: it follows that transparency alone will be an inadequate response. To some extent, transparency can address behavioural biases (first domain characteristics), and improving pricing and market efficiency (second domain); however, the strategic (third domain) limitations of EMH are more serious. We argue that whilst transparency can help, on its own it is a very long way from an adequate response to the challenges of 'aligning institutional climate finance'.

Finance is vital for the green energy transition, but access to low cost finance is uneven as the cost of capital differs substantially between regions. This study shows how modelled decarbonisation pathways for developing economies are disproportionately impacted by different weighted average cost of capital (WACC) assumptions. For example, representing regionally-specific WACC values indicates 35% lower green electricity production in Africa for a cost-optimal 2 °C pathway than when regional considerations are ignored. Moreover, policy interventions lowering WACC values for low-carbon and high-carbon technologies by 2050 would allow Africa to reach net-zero emissions approximately 10 years earlier than when the cost of capital reduction is not considered. A climate investment trap arises for developing economies when climate-related investments remain chronically insufficient. Current finance frameworks present barriers to these finance flows and radical changes are needed so that capital is more equitably distributed.

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ECO/WKP(2015)40 Unclassified English-Or. English ECO/WKP(2015)40 2 OECD Working Papers should not be reported as representing the official views of the OECD or of its member countries. The opinions expressed and arguments employed are those of the author(s). Working Papers describe preliminary results or research in progress by the author(s) and are published to stimulate discussion on a broad range of issues on which the OECD works.

New methods are needed to accelerate clean energy policy adoption. To that end, this study proposes an innovative financing scheme for renewable and energy efficiency deployment. Financing barriers represent a notable obstacle for energy improvements and this is particularly the case for low income households. Implementing a policy such as PACE-property assessed clean energy-allows for the provision of upfront funds for residential property owners to install electric and thermal solar systems and make energy efficiency improvements to their buildings. This paper will inform the design of better policies tailored to the creation of the appropriate conditions for such investments to occur, especially in those countries where most of the population belongs to the low-middle income range facing financial constraints.