Annual clean energy investments in emerging and developing economies need to more than triple by the early 2030s to meet energy needs and the climate goals set out in the Paris Agreement.
A new report released by the International Energy Agency (IEA) and International Finance Corporation (IFC) shows that investment needs to rise from US$770bn in 2022 to as much as US$2.8 trillion at the start of the next decade.
It adds that public investments alone would be insufficient to deliver universal access to energy and tackle climate change.
According to Scaling Up Private Finance for Clean Energy in Emerging and Developing Economies 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.
Two-thirds of the finance for clean energy projects in emerging and developing economies (outside China) will need to come from the private sector, the report states.
Today’s US$135bn in annual private financing for clean energy in these economies will need to rise to as much as US$1.1trillion a year within the next decade, it adds.
IEA’s executive director Fatih Birol (pictured) said: “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.
“The investment needs 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 reports 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, it argues.