Annual clean energy investments in emerging and developing economies will need to more than triple from $770 billion in 2022 to as much as $2.8 trillion by the early 2030s to meet rising energy needs and align with the climate goals set out in the Paris Agreement, according to a new report released by the International Energy Agency (IEA) and International Finance Corporation (IFC).
The report, titled Scaling Up Private Finance for Clean Energy in Emerging and Developing Economies, shows that public investments alone would be insufficient to deliver universal access to energy and tackle climate change.
Increased public funding can be used most effectively in partnership with private sector capital to reduce project risks – a concept known broadly as blended finance.
According to the report, two-thirds of the finance for clean energy projects in emerging and developing economies (outside China) will need to come from the private sector. Today’s $135 billion in annual private financing for clean energy in these economies will need to rise to as much as $1.1 trillion a year within the next decade.
“Today’s energy world is moving fast, but there is a major risk of many countries around the world being left behind. Investment is the key to ensuring they can benefit from the new global energy economy that is emerging rapidly,” said IEA Executive Director Fatih Birol.
“The investment needs to go well beyond the capacity of public financing alone, making it urgent to rapidly scale up much greater private financing for clean energy projects in emerging and developing economies. As this report shows, this offers many advantages and opportunities – including expanded energy access, job creation, growing industries, improved energy security, and a sustainable future for all.”
The report emphasizes the need for greater international technical, regulatory, and financial support to unlock the potential for clean energy in emerging and developing economies (EMDEs).
By strengthening regulatory frameworks, energy institutions, and infrastructure, and improving access to finance, this support can help governments overcome obstacles that deter clean energy investments today, including relatively high upfront costs and a high cost of capital.
IFC Managing Director Makhtar Diop said: “The battle against climate change will be won in emerging and developing economies where the potential for clean energy is strong but the level of investments is far below where it should be.”
“To address the pressing energy demands and emissions reduction goals in EMDEs, we need to mobilize private capital at speed and scale and urgently develop more investable projects,” he stated.
“This report is a call to action and offers a clear roadmap on what is needed to meet both climate and energy goals,” he added.