The need to address climate change while facilitating continued economic growth and social progress is one of the key challenges facing world leaders today. Future demand for energy is rising substantially, particularly in rapidly emerging economies and in many developing countries that lack even the most basic of energy services.
The investments required to address future energy demand as well as climate change are substantial. Significant scaling up of investment flows into the development and deployment of low-carbon energy technologies is urgently required in both developed and developing countries to bridge the “so-called” emerging investment gap. Additional finance is also needed for adaptation, particularly in the world's poorest countries. Private investment will be essential.
In its new report, Investing in a Low-Carbon Energy Future in the Developing World, the World Business Council for Sustainable Development (WBCSD) explores how governments and business can work together to solve these challenges by aligning policies, mechanisms and tools with the commercial conditions under which a business typically invests, in order to scale up private investment.
Commenting on some of the enablers for increased investment, WBCSD President Björn Stigson notes: “Raising finance is not necessarily the main problem, but stimulating large-scale investment and directing those financial flows toward commercially viable low- and zero-carbon energy technologies will be key.”
The ability of a technology or infrastructure project to attract investment depends heavily on commercial returns. The report provides a clear commercial business perspective by addressing how and why business invests, investment risk profiles, and the incentives needed in order to scale up investment in new technology research, development, demonstration and deployment.
Most stakeholders agree that it will take a combination of public and private financial sources, a broad range of mechanisms and instruments, carbon markets, and official development assistance to guarantee the energy demands of the future in a way that mitigates climate impacts. Policies are urgently needed that integrate development, energy and climate priorities.
Creating demand for new technologies, giving clear and strong expectations of a carbon price, building capacity through stable and transparent regulatory regimes, and providing incentives during crucial technology demonstration phases and fast-track approval processes are also likely to help green the investment flow and reduce the overall “energy bill” of developing countries.
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