The International Energy Agency (IEA) is set to collaborate with the World Bank, regional development banks, and other entities to ensure a focus on the cost of investing in clean energy in developing nations. This initiative comes in the wake of the recent COP28 United Nations climate conference in Dubai, where global governments committed to tripling renewable energy generation capacity by 2030 and transitioning away from fossil fuels.
Despite the ambitious targets set at COP28, no specific mechanism was agreed upon to finance the transition to clean energy in developing countries. Clean energy investments in emerging and developing nations have remained stagnant since 2015, in contrast to the global trend, which saw almost a doubling of investments, primarily driven by China and advanced economies, according to IEA Executive Director Fatih Birol.
Speaking on the sidelines of an energy conference in Istanbul, Birol emphasized the need for de-risking mechanisms to facilitate a consistent flow of capital to developing and emerging countries. He noted that risks associated with clean energy investments in these regions could result in capital costs for solar plants being up to four times higher compared to those in advanced economies, hindering the flow of funds.
“The main story between now and Baku will be how we can find de-risking mechanisms to make sure there is a flow of capital to developing and emerging countries,” Birol stated. The next climate summit is scheduled to take place in Baku next year.
Highlighting that there is a surplus of capital globally, Birol expressed optimism that, with guarantees and de-risking mechanisms from institutions like the World Bank and regional development banks, funds could quickly be mobilized. He stressed the importance of making the financing of clean energy a key priority for these institutions and the finance sector.
“We have more than enough capital in the world now. If the World Bank, regional development banks, and financial institutions provide some guarantees, de-risking mechanisms, the money will flow very quickly as the potential is huge,” Birol concluded.