Borrowers need to invest at least $700 billion annually in infrastructure, clean energy, resource efficiency, and green construction between now and 2030.
There are great opportunities in climate-smart financial solutions. These run the range from green bonds issued by governments and international institutions to micro-loans for entrepreneurs. Just how much potential does the industry have?
The Paris climate conference brought into sharp focus the hazards of runaway climate change. It constitutes a fundamental threat to economic development in our lifetime and, left unchecked, could push 100 million people into poverty by 2030. That would undo the stunning progress the world has made in fighting poverty over the past fifteen years.
The private sector can help the planet avoid its fate. However, in many parts of the developing world, corruption and excessive red tape stifle investments in renewable energy and other climate-friendly projects. At the same time, state subsidies for fossil fuels keep prices artificially low, making it hard for renewables to compete.
Governments must remove these barriers and create an environment in which the private sector can thrive and in which investments in renewable energy make financial sense. The private sector should play a role in pushing for these reforms, which have the potential to unlock billions of dollars’ worth of investment opportunities. It is time for the private sector to seize this opportunity by developing business strategies fit for a future without carbon.
You don’t have to be a tech giant to embrace eco-friendly technology. Just ask Lebanon’s Arab Printing Press. The company, which has 130 employees, is a prime example of the growing number of small businesses that are going green. The Beirut-based firm installed solar panels at its headquarters a couple of years ago, cutting its reliance on expensive fuel oil.
Like any disruptive force, climate change is creating opportunities for companies willing to innovate. A report by the International Finance Corp. found that Eastern Europe, Central Asia, the Middle East, and North Africa could support up to $1 trillion in climate-related investments by 2020.
Globally, one area especially primed for growth is renewable energy. Countries from Honduras to India have set ambitious targets for wind, solar, and hydro-power generation and they’ll need private sector investment to get there. Just how widespread is the desire for clean energy? Even Saudi Arabia, home to one of the world’s biggest oil reserves, is looking to generate the bulk of its electricity from renewables and nuclear power by 2040.
We’ve already seen companies take up the mantle in Panama where a consortium is building what will become Central America’s largest wind farm. The 215-megawatt Penonome plant will prevent the release of 400,000 tons of carbon dioxide emissions each year – equivalent to taking some 84,000 cars off the road.
Meanwhile, the private sector is playing a key role in the construction of a massive 510-megawatt solar plant in the Moroccan desert that will provide power to 1.1 million people. The project, worth $2.6 billion, could help turn the North African kingdom into a renewable energy powerhouse and serve as a model for future public-private partnerships. In Nepal, the first project-financed hydropower plant in the country is expected to generate about 200 GWh of electricity, helping address debilitating power shortages which underlie the country’s lack of industrial progress.
Dimitris Tsitsiragos is vice-president of Global Client Services at the International Finance Corporation, a member of the World Bank Group.
EDITOR's NOTE: This is the second of a two-part series. Last week: The Private Sector Must Fund Energy Revolution.” The commentary, made available at the request of The Energy Times, was published in the Capital Finance International magazine on January 6.