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Green Infrastructure Finance

Green Infrastructure Finance

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Increasing concerns over the effects of climate change have heightened the importance of accelerating investments in green growth. The International Energy Agency, for example, estimates that to reduce carbon dioxide emissions by 50 percent by 2050, global investments in the energy sector alone will need to total US$750 billion a year by 2030 and over US$1.6 trillion a year from 2030-2050. Despite global efforts to mobilize required capital flows, the investments still fall far short. Bloomberg New Energy Finance argues that by 2020 investments will be US$150 billion short from the levels required simply to stabilize CO2 emissions. For the East Asia and Pacific region alone, the World Bank study Winds of Change suggests that additional investments of US$80 billion a year over the next two decades are required.Multiple factors affect green investments, often rendering them financially not attractive. Private investment flows, therefore, depend on public sectors interventions and support. As in many countries public sector resources are scarce and spread across many competing commitments, they need to be used judiciously and strategically to leverage sufficient private flows. Many governments, however, still lack a clear comprehensive framework for assessing green investment climate and formulating an efficient mix of measures to accelerate green investments and are unfamiliar with international funding sources that can be tapped. To address this challenge, the World Bank, with support from AusAID, conducts the work on improving the financing opportunities for green infrastructure investments among its client countries. This activity attempts to identify practical ways to value and monetize environmental externalities of investments and improve the promotion and bankability of green projects. This research report, as a key step in this activity, provides a structured compendium of ongoing leading initiatives and activities designed to accelerate private investment flows in green growth. It summarizes current investment challenges of green projects as well as proposed solutions, financing schemes and instruments, and initiatives that have set the stage for promoting green growth. The results of this work are intended to benefit the international community and policymakers who are seeking to deepen their knowledge of green investment environment. In addition, it is hoped that this work will be useful to practitioners, including fund managers and investors, seeking to have a better understanding of current trends, global initiatives, and available funding sources and mechanisms for financing green projects.
Increasing concerns over the effects of climate change have heightened the importance of accelerating investments in green growth. The International Energy Agency, for example, estimates that to reduce carbon dioxide emissions by 50 percent by 2050, global investments in the energy sector alone will need to total US$750 billion a year by 2030 and over US$1.6 trillion a year from 2030-2050. Despite global efforts to mobilize required capital flows, the investments still fall far short. Bloomberg New Energy Finance argues that by 2020 investments will be US$150 billion short from the levels required simply to stabilize CO2 emissions. For the East Asia and Pacific region alone, the World Bank study Winds of Change suggests that additional investments of US$80 billion a year over the next two decades are required.Multiple factors affect green investments, often rendering them financially not attractive. Private investment flows, therefore, depend on public sectors interventions and support. As in many countries public sector resources are scarce and spread across many competing commitments, they need to be used judiciously and strategically to leverage sufficient private flows. Many governments, however, still lack a clear comprehensive framework for assessing green investment climate and formulating an efficient mix of measures to accelerate green investments and are unfamiliar with international funding sources that can be tapped. To address this challenge, the World Bank, with support from AusAID, conducts the work on improving the financing opportunities for green infrastructure investments among its client countries. This activity attempts to identify practical ways to value and monetize environmental externalities of investments and improve the promotion and bankability of green projects. This research report, as a key step in this activity, provides a structured compendium of ongoing leading initiatives and activities designed to accelerate private investment flows in green growth. It summarizes current investment challenges of green projects as well as proposed solutions, financing schemes and instruments, and initiatives that have set the stage for promoting green growth. The results of this work are intended to benefit the international community and policymakers who are seeking to deepen their knowledge of green investment environment. In addition, it is hoped that this work will be useful to practitioners, including fund managers and investors, seeking to have a better understanding of current trends, global initiatives, and available funding sources and mechanisms for financing green projects.

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Categories:Topics, Art & Design
Publish date: Apr 18, 2012
Added to Scribd: Apr 18, 2012
Copyright:Attribution

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12/19/2015

The OECD defnes market creation as a process of assigning or clarifying property rights
over environmental inputs or outputs.263

Thus, when owners of environmental goods

and services (such as forests) are granted secure property rights over these resources, it

provides them with incentives to maximize the benefts from their use over time, rather
than over-exploit them for short-term gains. The concept (of market creation) has merit
and should be pursued, despite implementation difculties, such as who is assigned the
property rights, along with enforcement issues.
One approach to market creation would involve restructuring the electricity sector.
This would create a market because the process would change the nature of property
rights (efectively clarifying them). It can occur in several ways: (i) the electricity market
could be deregulated and privatized to make it more competitive, (i.e. remove regula-
tions that give state-owned power companies the exclusive right to sell electricity to the
power grid); and (ii) incentives could be provided for generating electricity from renew-
able sources through mechanisms such as feed-in-tarifs (FiT) and renewable portfolio
standards (RPS). Under the RPS, electricity grid operators must purchase a certain frac-
tion (quota) of their power from RE sources, with the price set by market forces. Under
the FiT, frms and households may sell any excess electricity they generate back to the
grid at a guaranteed price that is higher than current tarifs imposed by their local elec-
tricity provider—which should promote more RE sources.
In 2001, Malaysia followed this course. Since then, power generated from renewable
sources has been distributed through the national grid under long-term contracts.264

See

Table 9 for other examples of market creation.

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