Encouraging clean energy investment in developing countries: what role for aid?

Abstract

A large portion of foreign assistance for climate change mitigation in developing countries is directed to clean energy facilities. To support international mitigation goals, however, donors must make investments that have effects beyond individual facilities. They must reduce barriers to private-sector investment by generating information for developers, improving relevant infrastructure, or changing policies. We examine whether donor agencies target financing for commercial-scale wind and solar facilities to countries where private investment in clean energy is limited and whether donor investments lead to more private investments. On average, we find no positive evidence for these patterns of targeting and impact. Coupled with model results that show feed-in tariffs increase private investment, we argue that donor agencies should reallocate resources to improve policies that promote private investment in developing countries, rather than finance individual clean energy facilities. Policy relevanceWe suggest that international negotiations could usefully shift the focus of climate change finance towards adaptation in exchange for mitigation-improving policy reforms in developing countries. There is little evidence that mitigation-related financing is having broader effects on energy production, so new financial arrangements should be the focus of future negotiations. Additionally, international donors should focus efforts on reforming policies to attract private investment.

Non-hydropower Renewable Energy in Central Asia: Assessment of Deployment Status and Analysis of Underlying Factors

“…Yet, Kim [58,59] holds that donors' energy aid-giving patterns changed after the adoption of the Kyoto Protocol, and now their aid decisions are influenced by the recipient energy needs aligned with the SDG. Delina [59], Buntaine and Pizer [60] and Kim [58] argue that by trying to meet the donors' financing priorities that favor sustainable energy (the Norwegian Sovereign Wealth Fund, Saudi Arabia's Public Investment Fund, European Investment Bank, among others), the developing nations update their climate policies to become eligible for the ODA.…”

Cofinancing in Environment and Development: Evidence from the Global Environment Facility

“…In a recent paper, Buntaine and Pizer (2014) consider whether aid directed at renewable energy facilities catalyzes private investment in clean energy. They find that aid targets countries that already have substantial private investment in renewable energy, and that greater amounts of aid do not spur additional private investment.…”

“…They find that aid targets countries that already have substantial private investment in renewable energy, and that greater amounts of aid do not spur additional private investment. Accordingly, Buntaine and Pizer (2014) raise questions about whether aid can effectively leverage the private sector to mitigate greenhouse-gas emissions through the promotion of renewable energy. Our approach is different in that we examine factors that influence private sector cofinancing alongside aid on a project-by-project basis, including projects focused on climate change and other environmental issues.…”

“…Within the push for greater cofinancing, there is also growing emphasis on the need to leverage the private sector in particular, and to employ more non-grant financial instruments, such as loans, guarantees, bonds, and equity. This is considered particularly important for environment and development projects focused on global problems, where the objective is frequently to catalyze broad and transformative impacts, with climate change being the leading example (Venugopal and Srivastava 2012;Buntaine and Pizer 2014).…”

GHG emissions inventory: a statistical analysis of the voluntary disclosure in Brazil

“…This was ratified in 2015 in the Paris Climate Agreement signed in Paris/France. These efforts include both public and private funds for adaptations of technologies worldwide in order to mitigate climate change (Buntaine and Pizer 2015;Westphal et al, 2015). Some DCs have focused on CO 2 equivalent emission goals established in terms of percentage reductions to be achieved in a given period of time.…”