Addressing the Financing Gap for Adaptation in Fragile and Conflict-Affected Countries

Bayat-Renoux, Fiona; Glemarec, Yannick

doi:10.1007/978-3-319-25814-0_24

Cited by 2 publications

(5 citation statements)

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“…Risks are highest in the bidding and development phases when project initiators commit equity financing. Primarily transactional, they stem from uncertainties about the permitting process and environmental reviews, difficulties in raising pre-funding from credible partners, and threats of contract renegotiation (Bayat-Renoux et al, 2020). They remain high in the construction period for less mature and more capital-intensive low-carbon options since surprises occur on equipment costs and performance, placing developers under threat of large creditworthiness losses.…”

Section: A Structural Problem: the Infrastructure Investment Gapmentioning

confidence: 99%

Accelerating the speed and scale of climate finance in the post-pandemic context

Hourcade

Dasgupta²,

Ghersi

2021

Climate Policy

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In this paper, we examine how to trigger a wave of low-carbon investments compatible with the wellbelow 2°C target of the Paris Agreement in the current post-pandemic context of increasing private and public debt. We argue that one major obstacle to catalyzing global excess savings at sufficient scale and speed on climate mitigation, and to 'greening' economic recovery packages, lies in the upfront risks of low-carbon investment. We then explain why public guarantees should be the preferred risk-sharing instrument to overcome that obstacle. We outline the basic principles of a multilateral sovereign guarantee mechanism able to maximize the leverage effect of public funds and massively redirect global savings towards low-carbon investments, with the double benefit of bridging the infrastructure investment gap in developing countries and reducing tension between developed and developing countries around accelerated funding for low-carbon transitions. We carry out numerical simulations demonstrating how the use of guarantees from AAA-rated sovereigns, calibrated on an agreed-upon 'social value of carbon', is compatible with public-budget constraints of developed countries. In summary, the use of such guarantee mechanisms provides a new form of 'where flexibility', which could turn real-world heterogeneity into a source of reciprocal gains for both developed and developing countries, and contribute to meeting the USD 100 billion + pledge of the Paris Agreement. Key policy insights Catalyzing excess world savings through low-carbon investments (LCIs) would secure a safer and fairer economic recovery from the COVID-19 crisis and avoid locking developing countries into carbon-intensive pathways. Public policy instruments focused on creation of public guarantees can reduce the up-front financial risks associated with LCIs, mobilize private money and increase the leverage of public finance. A multi-sovereign guarantee mechanism would yield financial support from developed to developing countries in cash grant equivalent and equity inflows two to four times higher than the 'USD 100 billion and more' commitment of the Paris Agreement, and provide greater confidence in meeting this commitment equitably and effectively with benefits for all.

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Section: A Structural Problem: the Infrastructure Investment Gapmentioning

confidence: 99%

Accelerating the speed and scale of climate finance in the post-pandemic context

Hourcade

Dasgupta²,

Ghersi

2021

Climate Policy

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“…The OECD 26 clusters these risks into three main categories according to the project development cycle: Political and regulatory risks: these arise from governmental actions, including changes in policies or regulations that adversely impact infrastructure investments. For example, complex, inconsistent, or opaque licensing procedures or sudden changes in tariff regulations will affect the profitability of investments 27 Macroeconomic and business risks: these arise from the possibility that the industry and/or economic environment are subject to change.…”

Section: Barriers To Green Climate Resilient Infrastructure Investmen...mentioning

confidence: 99%

“…These risks are magnified in low emission, resilient infrastructure investment. Green investments tend to have higher upfront capital requirements, longer pay‐back periods, and greater sensitivity to policy changes and technology risks than conventional investments 27–29 . For example, climate‐resilient infrastructure such as roads, buildings, or ports tend to have lower operating expenditure (OPEX) but higher upfront capital expenditure (CAPEX).…”

Section: Barriers To Green Climate Resilient Infrastructure Investmen...mentioning

confidence: 99%

“…For example, complex, inconsistent, or opaque licensing procedures or sudden changes in tariff regulations will affect the profitability of investments. 27 • Macroeconomic and business risks: these arise from the possibility that the industry and/or economic environment are subject to change. These include macroeconomic variables like inflation and exchange rate fluctuations, as well as shifts in consumers' demand and solvency of off-takers (e.g., power utilities, corporations, and so forth) or security conditions.…”

Section: Barriers To Green Climate Resilient Infrastructure Investmen...mentioning

confidence: 99%

“…Green investments tend to have higher upfront capital requirements, longer pay-back periods, and greater sensitivity to policy changes and technology risks than conventional investments. [27][28][29] For example, climate-resilient infrastructure such as roads, buildings, or ports tend to have lower operating expenditure (OPEX) but higher upfront capital expenditure (CAPEX). The longer payback period of low emission, resilient infrastructure compared with climate vulnerable investments due to their higher CAPEX and sensitivity to policy stability (e.g., renewable energy and feed-in-tariffs) will be additional sources of concerns for entrepreneurs and financiers, particularly in early stage markets.…”

Section: Barriers To Green Climate Resilient Infrastructure Investmen...mentioning

confidence: 99%

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Financing green and climate resilient infrastructure in ASEAN countries

Glemarec¹

2023

Env Prog and Sustain Energy

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Southeast Asia is one of the world's most energy-intensive and climate vulnerable regions, with rapid urbanization and industrialization increasing its greenhouse gas emissions and a high exposure to extreme weather events. The COVID-19 pandemic has had a massive impact on the region's economic growth. Decisions taken by leaders today to revive economies will either entrench the region's dependence on fossil fuels or accelerate decarbonization efforts to achieve the Paris Agreement and the Sustainable Development Goals. This article recalls the imperative of a green, climate resilient recovery from the COVID-19 pandemic to put ASEAN economies on a sustainable and inclusive development path before discussing the chronic infrastructure investment gap and reviewing options to catalyze climate investment to address this gap and finance recovery efforts.

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Addressing the Financing Gap for Adaptation in Fragile and Conflict-Affected Countries

Cited by 2 publications

References 0 publications

Accelerating the speed and scale of climate finance in the post-pandemic context

Accelerating the speed and scale of climate finance in the post-pandemic context

Financing green and climate resilient infrastructure in ASEAN countries

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