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Clean Energy Investments to Reach $2.8 Trillion by 2030- IEA 

Adaobi Rhema Oguejiofor 

The International Energy Agency (IEA), in collaboration with the International Finance Corporation (IFC), has said that the annual clean energy investments in emerging and developing economies will need to be more than tripled from $770 billion in 2022 to as much as $2.8 trillion by the early 2030s in order to meet up with the growing energy needs and align with the climate goals, which have been set out in the Paris Agreement. 

This was disclosed in a joint report released by the two organizations on Wednesday. The report, which is titled “Scaling Up Private Finance for Clean Energy in Emerging and Developing Economies,” revealed that public investments alone would not be sufficient to deliver universal access to energy and tackle climate change. However, increased public funding can be used most effectively in partnership with private sector capital in order to reduce project risks, which is 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, and the current $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.

The Executive Director of IEA, Fatih Birol, said that the present energy world is moving fast, but there is a major risk of many countries around the world being left behind.  According to him, investment is the key to ensuring that these countries can benefit from the new global energy economy that is emerging rapidly. 

In his own words, “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 also emphasized the need for greater international technical, regulatory, and financial support in order to unlock the potential for clean energy in emerging and developing economies (EMDEs). It noted that by strengthening regulatory frameworks, energy institutions, and infrastructure, and improving access to finance, this financial support can help governments overcome obstacles that deter clean energy investments including relatively high upfront costs and a high cost of capital.

The Managing Director of IFC, Makhtar Diop, said that “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, as well as urgently develop more investable projects.

“This report is a call to action and offers a clear roadmap on what is needed to meet both climate and energy goals.”

Both Organizations also identified the importance of concessional financing for projects that involve newer technologies that have yet to scale and are not yet cost-competitive in many markets, such as battery storage, offshore wind, renewable-powered desalination, and low-emissions hydrogen. 

The report estimated that around $80 billion to $100 billion of concessional finance will be needed annually by the early 2030s in order to attract private investment at the scale required for the energy transition in emerging and developing economies outside China.

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