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Changing the climate for climate investments in emerging markets

Energy-transition investment surged by 24% in developed nations last year. In emerging markets strained by the COVID pandemic, it fell by almost as much. Global recovery efforts and the COP26 global climate summit in November create an opening to close that gap.

 

A new Africa Adaptation Acceleration Program is looking to secure $25 billion over five years for climate adaptation, for example. The prerequisite: an enabling policy environment. In Unlocking Private Climate Finance in Emerging Markets, the Climate Finance Leadership Initiative, an investor initiative created by Michael Bloomberg in partnership with the United Nations, lays out policy considerations to help attract private capital to green projects.

 

“When climate leadership in emerging markets is combined with the right mix of policy enhancement and commitment by the private sector, a thriving market for clean technologies can emerge rapidly,” the authors write. The report, produced in partnership with the Association of European Development Finance Institutions and the Global Infrastructure Facility, draws on insights from 6,000 global experts and stakeholders.

 

Beyond net-zero

Just 18% of developing nations have set net-zero goals. Policies addressing specific sectors such as clean energy, transportation and sustainable land use are also needed. The report points to Brazil, Vietnam and Chile as countries with strong enabling policies.

 

Chile set an ambitious target of 60% clean energy generation by 2035, with clean-energy auctions and net-metering schemes, to help expand wind and solar from 4% to 14% of total power generation between 2015 and 2019. Brazil’s clean-energy policies helped it attract $70 billion in clean energy over the past decade despite the country’s political volatility.

 

Pilot projects

India and Indonesia will be the first test-beds for CFLI, which will work governments to implement policy recommendations and drive investment. The pilots will build on the report’s recommendations with an eye towards replicating the model in other countries.

 

Carbon bubble

The real cost of electricity generated by coal, gas, nuclear, and hydro power plants has been vastly underestimated for years by policy makers, analysts and even bodies such as the International Energy Agency, according to a new analysis from RethinkX. Repricing such estimates makes renewables even more attractive in comparison. At issue: the assumption that utilization of capacity at such legacy energy plants will remain high over their lifetimes. In fact, usage is already declining. That results in overvalued fossil-fuel assets that are creating “a large and rapidly-expanding global financial bubble,” the authors warn.

 

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