Montpelier, VT, USA, 6 December 2011
Governments facing budget deficits have to implement more creative and effective policies to address funding gaps and barriers in their public finance support for clean energy industries, according to a new report issued by an international coalition of public funding agencies. The United Nations Environment Programme Sustainable Energy Finance Alliance (UNEP SEF Alliance), with its secretariat managed by Clean Energy Group, released a report today that can help governments examine, adjust, or adopt proven and reliable practices to ensure that best value for public clean energy expenditures is achieved. No matter if the focus is on clean energy start-ups, proof of concept, or deployment of clean energy at scale, this report provides high benchmarks that governments can use to develop more effective clean energy public finance mechanisms.
"This report demonstrates the ever-increasing value that can be gained from public-sector clean energy funders sharing their successes about how to effectively support and accelerate low-carbon, clean technology markets" says Dean Cooper, Head, Energy Finance Unit, UNEP, Paris.
The report, titled "Evaluating Clean Energy Public Finance Mechanisms," developed a methodology to evaluate and identify leading practices in the design and delivery of clean energy public finance mechanisms. Eight case studies, which examine leading public finance mechanisms from eight countries, were evaluated against the methodology and leading practices are highlighted in the report. The case studies are widely recognised as 'successful' clean energy public finance mechanisms from both developed and developing country markets such as Germany, France, Canada, Ireland, and the UK as well as China, Chile, and Brazil.
The public finance mechanisms included support for clean energy R&D through incubation services, grants for project demonstration, loan guarantees, and soft loans for deployment.
- By identifying and analyzing the design, implementation, and market impacts of effective clean energy public finance mechanisms, the report found that many of the public finance programs leveraged as much as twenty times the amount in private-sector capital, and operated with approximately 5% in operation costs.
- The study also found that the most effective way to measure public finance impact is not only through private-sector leverage but also to account for more indirect outcomes such as job creation, net economic benefits, and reductions in health costs. This can illustrate the importance of the industry to the general economy beyond its support in achieving dedicated clean energy targets.
The research underlines the importance of taking into account context-specific barriers in designing public finance interventions to support clean energy markets. Furthermore, any intervention needs to communicate clear conditions-based indicators of success to not only safeguard value for public money but also to prepare the private sector for eventual withdrawal of public support.
It is particularly important that public finance interventions provide joined-up support for clean energy industries in transitioning from lab-based R&D right through to commercial deployment and diffusion, otherwise the benefits achieved may be negated by pitfalls further along the development chain.
In recent years, the clean energy industry has experienced unprecedented growth and development, driven in large part by supportive government policies and regulations. Governments and public finance agencies have also often intervened through public finance mechanisms to address funding gaps or specific barriers that stand in the way of successful growth of the clean energy industry.
As a result, investment flows in clean energy have grown substantially since 2008, overcoming the global economic and financial crisis with the aid of substantial public funding stimulus. However, current economic conditions and increased pressure on sovereign balance sheets leave the clean energy sector facing complex challenges in maintaining investment flows, achieving price parity and reaching scale.
Under these situations, targeted public finance mechanisms, along with policy and regulatory certainty, are particularly important to maintain growth and realise economic potential.
The UNEP SEF Alliance and its members see great benefit in cross-sharing experiences to maximize the effectiveness of their programs. The report, prepared for UNEP SEF Alliance by authors Irbaris and Climate Bonds Initiative, can be found on the following website: www.UNEPSEFAlliance.org.
About UNEP Sustainable Energy Finance Alliance
The UNEP Sustainable Energy Finance (SEF) Alliance is the only convening body for publicly funded organisations that finance, support, and accelerate low-carbon, clean technology markets. The UNEP SEF Alliance membership represents the most diverse, successful, and innovative public finance entities present in the global arena. Members seek to learn from each other's unique experiences, to build and strengthen their capacity, and to collaborate internationally in order to increase the effectiveness within each of their national missions. The UNEP SEF Alliance provides a framework for an expanding international network of public funding entities that support low-carbon, clean energy technologies, with a focus on working together to overcome finance and deployment challenges, and to accelerate the adoption of solutions.
About Clean Energy Group
Clean Energy Group (CEG), a national U.S. nonprofit organization, promotes effective clean energy policies, develops low-carbon technology innovation strategies, and works to develop new financial tools to stabilize greenhouse gas emissions. Clean Energy Group concentrates on climate and clean energy issues at the state, national, and international levels, as it works with diverse stakeholders from governments as well as the private and nonprofit sectors. For more information on Clean Energy Group, see: www.cleanegroup.org.
About Irbaris and Climate Bonds Initiative
Irbaris is a specialist advisory business that brings together a highly experienced, multi-disciplinary team of business advisers with deep international expertise in carbon, climate change and wider sustainability issues, as well as clean technologies. See www.irbaris.com.
The Climate Bonds Initiative, a project of the Network for Sustainable Financial Markets, is a global civil society network created to serve as a catalyst for the rapid emergence of Climate Bonds. See www.climatebonds.net.
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