Concerns Mount Over Cost of Capital for Energy Transition Ahead of COP28 Summit

Ahead of the summit in Dubai, advocates for the energy transition express growing concerns about the elevated cost of capital and its potential impact on climate initiatives. Policymakers are increasingly emphasizing the need for tight monetary policy, raising fears about the availability of affordable to drive the necessary changes.

COP28 is expected to focus on climate finance, particularly building upon the nations' commitment to tripling renewables deployment to approximately 11,000 gigawatts by 2030, requiring funds of around $4.5 trillion.

Gauri Singh, Deputy Director General at the (IRENA), expressed worry about the impact of higher interest rates on climate initiatives, noting that the rates available have shifted significantly. Climate finance is anticipated to be a critical aspect of COP28 discussions, with concerns raised about potential challenges in reaching a consensus on funding reforms.

Vaibhav Chaturvedi, Fellow at the Council on Energy, Environment, and Water (CEEW), highlighted climate finance as the potential “Achilles' heel” of COP28, emphasizing the need to address the issue of who bears the financial responsibility.

The summit will explore financing reforms, including the Bridgetown Initiative led by Barbados, which aims to unlock additional capital for climate change, focusing on multilateral banks. Questions have been raised about the feasibility of this initiative, with concerns about the hosting the facility if funding remains uncertain.

Linda-Eling Lee, Head of the MSCI Sustainability Institute, emphasized the importance of policy certainty to encourage long-term capital commitments from companies and investors in the energy transition. The MSCI Net-Zero Tracker indicates a slower pace of decarbonization by listed companies in nine G20 nations.

Greater transparency in disclosures and financial innovations are seen as key to mobilizing more private sector funds, addressing the challenges posed by policy uncertainties and financial commitments in the transition to a sustainable energy landscape.

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