SECTION: E 6.1 FRONTIER TECHNOLOGY – FINANCING FIT-FOR-FUTURE INFRASTRUCTURE 0.0
Growing the pipeline of energy transition investments Decarbonising infrastructure
G lobal efforts to address climate change are off track. Without a signifi- cant, immediate course correction, the Paris Agree- ment goal of limiting the average global temperature rise to below 2°C above pre-industrial levels will not be reached. Decarbonising infrastructure is key to achieving these objectives, as existing infrastructure accounts for about 80% of greenhouse gas emis- sions and 90% of adaptation costs. The pledge made at the 28th Conference of the Parties to the United Nations Frame- work Convention on Climate Change to triple the global renewable power capacity and double the annual rate of energy efficiency improvement by 2030 demonstrates governments’ commit- ment to a sustainable energy transition. Transforming the global energy system will create new jobs, enhance lives and livelihoods, empower people, and foster resilient communities. Keeping the global temperature rise to 1.5°C in line with the Paris Agreement requires accelerated action, ambitious policy implementa- tion and exponential investment. To achieve universal access to electric- ity and ensure energy security and affordability, financing the energy transition – shifting from fossil fuels to cleaner energy sources such as wind, solar, hydropower and new technologies such as green hydro- gen – requires strategic partnerships and transformational investment, including using innovative finan- cial instruments. The International Energy Agency estimates that low- and middle-income countries need to mobilise $1.9 trillion annu- ally by 2030 to achieve their clean energy goals. This is a sevenfold
will be key to achieving the Paris Agreement, and for that to happen, there needs to be a shovel-ready pipeline. The Global Infrastructure Facility, a G20 initiative, aims to support and transform the process for private investors.
increase from the current annual $260 billion. Barriers to investment Given the scale of financing needs, two-thirds of the capital needed is expected to come from the private sector. However, there remain signif- icant barriers to private investment in energy transition. There is no shortage of private capital, yet attract- ing private investment in emerging markets and developing economies is often constrained by the slow pace of utility and market reform. This has led to restricted fiscal space to make catalytic investments, limited consumer affordability and inade- quate access to affordable capital. The actual and perceived risks associated with energy transition investments directly increase the cost of capi- tal, in turn raising the overall cost of the energy transition. Mobilising pri- vate resources at the pace and scale required to meet the investment needs and broader Sustainable Development Goals in EMDEs requires a systemic shift in approach. Private finance for the energy tran- sition starts with the availability of a shovel-ready investment pipeline. A significant obstacle in EMDEs is the scarcity of bankable climate-smart infrastructure projects and pro- grammes, as governments in these regions often need more expertise to identify, plan, prepare, structure and negotiate such projects effec- tively. Upstream, EMDE governments require capacity building and sup- port in developing their plans to achieve their national determined contributions, creating the enabling investment climate and sector regula- tory frameworks, and developing local
Astrid Manroth, head, Global Infrastructure Facility
KEEPING THE GLOBAL TEMPERATURE RISE ÏÊ !¾ÄÉÇÄÉÀ WITH THE PARIS AGREEMENT REQUIRES ¼¾¾ÀÇÀͼÏÀ¿¼¾ÏÄÊÉ
AMBITIOUS POLICY IMPLEMENTATION AND EXPONENTIAL INVESTMENT.
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Financing a Just Transition
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