Reinvigorated by the United Nations Environment Programme (UNEP), a global discussion and national activities on green economy transitions have regained momentum since 2008. The increase in interest is, among other things, due to the growing understanding of the similarity and interlinkages between many of the recent financial, economic, environmental and social crises.
The 2008 global financial crisis focused attention not only on the financial losses, and implications for economies, jobs and housing, but also raised questions as to the fundamental imbalance in our economies. The choice of capital allocation - investment in property, fossil fuels and financial assets, rather than in measures to encourage resource efficiency - has created destructive imbalances. A further common element to all these crises is the focus of decision making on short time horizons and trust in what has often proven to be an incomplete evidence base including a lack of proper accounting, for example as regards the cost of climate change and biodiversity.
This report aims at providing the emerging lessons from a representative sample of case studies in 20 developing countries that could help policy makers to address implementation challenges, including overcoming political economy and affordability constraints. The sample has selected on the basis of a number of criteria, including the country's level of development (and consumption), developing country region, energy security and the fuel it subsidies (petroleum fuel, electricity, natural gas).
This paper fills a gap in the macroeconomic literature on renewable sources of energy. It offers a definition of green investment and analyzes the trends and determinants of this investment over the last decade for 35 advanced and emerging countries. We use a new multi-country historical dataset and find that green investment has become a key driver of the energy sector and that its rapid growth is now mostly driven by China. Our econometric results suggest that green investment is boosted by economic growth, a sound financial system conducive to low interest rates, and high fuel prices. We also find that some policy interventions, such as the introduction of carbon pricing schemes, or “feed-in-tariffs,” which require use of “green”energy, have a positive and significant impact on green investment. Other interventions, such as biofuel support, do not appear to be associated with higher green investment.
One of the strong messages that came out of the United Nations Climate Change conference in Durban was that the private sector has to play an important role if we are to globally move toward a low carbon, climate resilient—or “climate compatible”—future. However, private investment will only flow at the scale and pace necessary if it is supported by clear, credible, and long-term policy frameworks that shift the risk-reward balance in favor of less carbon-intensive investment. The private sector also needs information on where to invest in clean energy in emerging markets, and it needs policy support to lower investment risk. Barriers to low carbon investments often include unclear and inconsistent energy policies, monopoly structures for existing producers, stronger incentives for conventional energy than clean energy, and a domestic financial sector not experienced in new technologies.