How can meaningful mitigation actions receive financing?
The overarching objective of this assignment, led by Ricardo-AEA, was to carry out a detailed analysis for a specific group of countries/sectors of their plans for mitigation action and associated investment plans, along with the possible ways in which financial instruments could best be employed in the country/sector to help realise their mitigation ambition/pledge.
The report analysed the financing of meaningful climate mitigation actions and initiatives across case studies in Chile, India, Vietnam and South Africa in the transport and industrial energy efficiency sectors, as well as the renewable energy sector in Ecuador. The work specifically emphasises bankable ‘best practices’ of equity-based solutions and debt finance options with profitable project returns that have a large potential for upscaling to other sectors and countries.
Five main conclusions for scaling up climate finance were delivered:
- For most sectors/countries, financial and non-financial barriers exist. Hence, for climate finance to be successful, both need to be addressed simultaneously.
- Due to the specific requirements and barriers within each sector, climate finance needs to be targeted differently (even inside the same country).
- Climate finance and financial instruments need to be country-specific to take into account the stages of development as well as nuances in barriers and climate policy approaches.
- Climate finance should increasingly involve the private sector: delivering new commercial opportunities while increasing finance available for low carbon and climate resilient development. The status and maturity of the local financial sector is of prime importance, as well as identifying hotspots where local/private interventions are difficult.
- Whilst recognising that climate finance should always align with country level priorities, there may be scope to harness additional low-cost emission reduction policies.