Future of the Investment from the Private Sector: Reviews and Prospects of ICEF 2016 Concurrent Sessions

Posted by Takashi Hongo December 26, 2016 Other, Mitsui Global Strategic Studies Institute

-ICEF approach for dissemination of technologies-

Technology is the key to achieving the 2 degrees target aimed by the Paris Agreement.  ICEF aims to approach climate change issues by application of technologies, and discussions were held on the supporting mechanism of technology dissemination.

The Asian Development Bank shows its strength in large-scale investments in sectors such as the power sector. Investment for CO2 reduction, not limited to renewable energies, is greatly influenced by policies. Based on long-standing cooperative relationships with developing country governments, international organizations and public financing agencies are expected to contribute in the mitigation of policy risks and supporting businesses with low interest rates finance.

Funds investing in promising technologies at an early stage attracted attention with the unique approach that focuses also on the value chain (looking at new materials necessary for emission reduction equipment, etc.) as well as technologies such as geothermal. The ability to evaluate new technologies is a key for its successful operation.

The biggest challenge in new technologies is cost. The LED lighting is highly efficient but was hampered by its high cost. Therefore, the Government of India has introduced a system to standardize specifications and to purchase in large quantities at once, succeeding to lower the price by 75% in a year and a half. In terms of "creating new market", the development of energy-efficiency standards has the same effect. Regulation will kick out low-efficiency products from the market and encourage innovation.

The Green Climate Fund (GCF), which decided to finance $ 740 million just before the Marrakesh meeting (COP22), had a good start. They will have a new CEO in January. There is also strong expectation for innovation in climate financing, such as linking project financing and support for investment environment by energy efficiency standards, etc. (policy link finance) and finance based on CO2 reduction amount (outcome base finance).

2017 will be the year of politics in countries that lead the discussions for the Paris Agreement. There will be the start of Trump administration in the US, elections in Germany and France, and the Chinese Communist Party convention. There is a limit for funding resources, and it will be more important than ever to use finance efficiently. In addition to supporting individual projects, there is a need to also focus on improving the market environment. If there is a "promised market", the private sector will invest.