Tag Archives: energy transition

National-level climate finance tracking can help countries meet NDC goals effectively

November 10, 2016 |

 

Around the world, 74% of total global climate finance and over 90% of total private climate finance is raised and spent in the same country. As low-carbon, climate-resilient assets become increasingly attractive to national actors compared to the alternatives, action on climate is largely happening within national contexts.

In fact, the domestic bias of climate finance is likely understated. CPI’s Global Landscape of Climate Finance reports have repeatedly highlighted substantial data gaps around domestic budgets in particular.

In 2014, the majority of global climate finance was raised and spent in the same country. Because domestic investment dominates, it is vital to get policies right. This requires robust national-level climate finance tracking.

The majority of finance was raised and spent in the same country. Because domestic investment dominates, it is vital to get policies right. This requires robust national-level climate finance tracking.

Clearly, understanding how finance flows within countries is key to accelerating countries’ transitions toward low-carbon and climate-resilient economies.
CPI has worked with counterparts in Germany, Indonesia and most recently Côte d’Ivoire to track their climate finance and other organizations are also tracking climate finance at the national level. For example, Institute for Climate Economics (I4CE) used CPI’s approach as a foundation to conduct a similar exercises in France, Trinomics has done similar work in Belgium, and the United Nations Development Programme (UNDP) has worked with seven Asia-Pacific countries to understand climate-related public expenditures in their national budgets.

While these countries have made a start, more work is urgently needed as improved national tracking will critically inform countries’ efforts to implement their Nationally Determined Contributions (NDCs) submitted under the Paris Agreement. The International Energy Agency (IEA) has estimated that, to implement NDCs, energy efficiency and low-carbon technologies require$13.5 trillion in investment over the next 15 years. Ensuring that investment from a range of national and international sources is optimized will help ensure impact and value for money.

There are many benefits to improving national-level climate finance tracking systems

Identifying, tagging, and tracking budget allocations that respond to climate change challenges enhances governments’ ability to allocate appropriate resources at the national and local levels and ensure they are being spent as intended.

Increasing understanding of what different domestic and international, public and private actors are investing, in which climate-relevant activities, and what instruments they are using to deliver finance, can help identify blockages, and highlight opportunities to better coordinate spending and reallocate finance to areas where it will have more impact.

Extending the scope of tracking exercises beyond climate finance can reveal how much public money is flowing to support business-as-usual investments including in fossil fuels, and unsustainable land use. Understanding where public incentives are misaligned with climate goals can highlight opportunities to improve policies and ensure public spending is coherent.

CPI has designed related tools to inform decision makers thinking around this broader question and is applying them in the context of REDD+ related finance in Côte d’Ivoire to support the country’s work to develop a REDD+ strategy.

Ultimately, such tracking provides a basis for decision makers to ensure that limited domestic and international public resources are targeted where and how they are needed most to help countries achieve their goals. Effective tracking provides a starting point to inform discussions about what is happening, and informs the design of more cost-effective policies and financial instruments to mobilize investment.

CPI remains committed to improving understanding of climate finance flows at the national and local levels.

Since 2010, CPI has supported decision makers from the public and private sectors, at international, national and local levels, to define and track how climate finance is flowing from sources and actors, through a range of financial instruments, to recipients and end uses. Providing decision makers with robust and comprehensive information helps them to assess progress against real investment goals and needs. It also improves understanding of how public policy, finance and support interact with, and drive climate-relevant investment from diverse private actors, and where opportunities exist to achieve greater scale and impact.

This blog is part of a series on climate finance tracking challenges. Read more here.

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This article first appeared on Public Finance International.

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Could New Investment Structures in the German Renewable Energy Market Make the Market More Cost-Competitive?

June 2, 2015 |

 

Germany is in the midst of a major energy transition, one that could serve as a model for the rest of the world. At the core of the challenge is the need to continue to grow renewable energy (and drastically reduce dependence on coal) while containing the cost of renewable energy to government and ratepayers.

German policymakers are looking to control costs by replacing the feed-in tariffs that have driven renewable energy deployment and cost reduction with new competitive mechanisms. However, if these policy changes are made without considering their impact on how projects are financed, they could inadvertently increase costs. Any changes to policy should be made with a comprehensive understanding of the current and potential investors in renewable energy and the impact that different policy mechanisms and financing structures could have on their costs and ability to invest.

CPI, with the support of the European Climate Foundation, is examining this important aspect of the transition to inform policy and financing activities that could allow Germany to advance its energy transition at lower cost. In this project, we will:

  1. Size the investment potential for different types of renewable energy across potential German investor groups in the sector – utilities, developers, financial investors, large energy users, small energy users, and municipal and other governments.
  2. Assess the market opportunity for new financing instruments, including new financing structures such as YieldCos, crowdsourcing, and municipal funding, which we identified as potential opportunities in previous work.
  3. Identify policy options that seem to have the most favorable impact or provide the biggest barriers to investment. Starting with opinions expressed by investor groups and their analysts and advisors, as well as a review of investment cases and our financial modelling, we will analyze the impact of policy changes to financing costs for different market segments.

 
Alongside this project, CPI is also working with the Stockholm Environment Institute (SEI) on a New Climate Economy project, to identify and analyze the barriers faced by investor groups across five European countries/regions (Germany, UK, Nordic countries, Iberia, Italy).

The lessons from these projects will be relevant for Europe and beyond. With Europe’s new, more ambitious renewable energy and carbon emissions reduction targets for 2030, changes to European policies and regulations will be necessary, as well as policy and regulation in EU member states.

Ultimately, the transition to a low-carbon electricity system will require wholesale changes to policy, technology, market design, consumer behavior, industry structure, and finance. Addressing the finance portion of the equation is critical to develop a true picture of the priorities for policy development in Germany and beyond.

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