Financing for Clean Energy in Developing and Emerging Economies: The Key to Climate Goals

The International Energy Agency (IEA) released a report on Wednesday calling for a significant increase in financing clean energy in developing and emerging economies, excluding China, within the next decade in order to keep climate change to tolerable levels. To reach this goal, annual investments in non-fossil fuel energy in these Global South countries must jump from $260 billion to nearly $2 trillion. “Financing clean energy in the emerging and developing world is the fault line of reaching international climate goals,” IEA Executive Director Fatih Birol said. The report was released ahead of the two-day Summit for a New Global Financing Pact in Paris, which seeks to boost support for revamping the mid-20th century architecture governing financial flows from rich to developing nations. G20 nations are mainly responsible for the world's carbon emissions, causing increasing damage to the environment. “Many vulnerable, lower-income states have been overwhelmed by economic shocks, debts they cannot pay, and the effects of climate change – a crisis to which they contributed very little, but which is costing people in these countries dearly,” Agnès Callamard, Amnesty International’s secretary general, said.

Private Investment must increase in order to ensure a swift transition from dirty to clean energy in the Global South so that these nations can better cope and prepare for climate impacts. The summit seeks to work in this direction by increasing private investments in clean energy in emerging and developing economies, excluding China. According to the IEA report, two-thirds of the financing for such projects must come from the private sector, as public sector investments are inadequate. With China excluded in the calculation, private and public money pouring into renewables and other forms of carbon-neutral energy will need more than triple from $770 billion in 2022 to $2.5 trillion per year by the early 2030s. Private financing for clean energy in these economies must rise to about $1 trillion a year within the next decade, the report stated.

Solar energy is now the cheapest source of electricity generation across almost the entire world. At least 40 percent of the global solar radiation reaching the planet lands on sub-Saharan Africa, yet the region generates less solar electricity than the Netherlands,. Amnesty International raised the issue that poorer countries “cannot fairly phase out fossil fuels, protect people from the harms of the climate crisis and provide remedy to those most affected”, especially when wealthier countries “continue to evade their obligations of international cooperation and assistance”. The summit in Paris should ensure that wealthier nations “commit to comprehensive debt relief for lower-income nations” and fulfill their financial pledges, Amnesty said. Global leaders should “protect the rights of the world’s most marginalized people”, the statement added. Financing for clean energy in developing and emerging economies, excluding China, must increase drastically if global warming is to be kept at tolerable levels. To reach this goal, annual investments in non-fossil fuel energy in these Global South countries must jump from $260 billion to nearly $2 trillion. According to IEA Executive Director Fatih Birol, “Financing clean energy in the emerging and developing world is the fault line of reaching international climate goals”.

The report was released ahead of the two-day Summit for a New Global Financing Pact in Paris, which is aiming to boost support for revamping the mid-20th century architecture governing financial flows from rich to developing nations. G20 nations are mainly responsible for the world's carbon emissions, causing increasing damage to the environment. Two-thirds of the financing for clean energy projects in emerging and developing economies excluding China “will need to come from the private sector”, the report added. Keywords: