Reducing the cost of capital to finance the energy transition in developing countries
OPEN ACCESS
Author / Producer
Date
2024-10
Publication Type
Journal Article
ETH Bibliography
yes
Citations
Altmetric
OPEN ACCESS
Data
Abstract
Climate stabilization requires the mobilization of substantial investments in low- and zero-carbon technologies, especially in emerging and developing economies. However, access to stable and affordable finance varies dramatically across countries. Models used to evaluate the energy transition do not differentiate regional financing costs and therefore cannot study risk-sharing mechanisms for renewable electricity generation. In this study, we incorporated the empirically estimated cost of capital differentiated by country and technology into an ensemble of five climate-energy-economy models. We quantified the additional financing cost of decarbonization borne by developing regions and explored policies of risk premium convergence across countries. We found that alleviating financial constraints benefits both climate and equity as a result of more renewable and affordable energy in the developing world. This highlights the importance of fair finance for energy availability, affordability and sustainability, as well as the need to include financial considerations in model-based assessments.
Permanent link
Publication status
published
External links
Editor
Book title
Journal / series
Volume
9
Pages / Article No.
1241 - 1251
Publisher
Nature
Event
Edition / version
Methods
Software
Geographic location
Date collected
Date created
Subject
Climate-change mitigation; energy access; finance; renewable energy
Organisational unit
09742 - Steffen, Bjarne (ehemalig) / Steffen, Bjarne (former)
09550 - Schmidt, Tobias / Schmidt, Tobias
Notes
Funding
101081604/22.00541 - NET ZERO PATHWAY RESEARCH THROUGH INTEGRATED ASSESSMENT MODEL ADVANCEMENTS (SBFI)
730403 - Innovation pathways, strategies and policies for the Low-Carbon Transition in Europe (SBFI)
870245 - Global Excellence in mOdeling Climate and Energy Policies (EC)
948220 - Effective green financial policies for the low-carbon transition (EC)
730403 - Innovation pathways, strategies and policies for the Low-Carbon Transition in Europe (SBFI)
870245 - Global Excellence in mOdeling Climate and Energy Policies (EC)
948220 - Effective green financial policies for the low-carbon transition (EC)