Financing renewable energy in Sub-Saharan Africa important topic during COP 17

To define what a government should do in order to attract renewable energy investments is no easy task. In the Sub-Saharan Africa, home to some of the poorest nations in the world, this question becomes even more complex. One thing is clear though: the mobilization of private capital will be crucial in this process, even though investments in infrastructure such as energy have traditionally been carried out by governments.

This is one of the questions that the United Nations Environment Programme Finance Initiative (UNEP FI) intends on bringing focus to during COP 17 in Durban later this year. UNEP FI is a unique public-private partnership between UNEP and the finance industry, with the objective of exploring how financial performance relates to environmental and social issues. Through this cooperation, UNEP FI ensures that the opinions and expertise of the finance sector regarding renewable energy and climate change are brought to the attention of policy makers.

One of the main barriers for renewable energy investment, in Sub-Saharan Africa as in the rest of the world, is that most existing technologies are simply not competitive when compared to conventional, carbon-intense energy sources. This is in large due to the fact that the negative externalities of carbon emissions are not included in the analysis.

Measures to make renewable energy more competitive are however being undertaken by many African governments. For example, Feed-in-Tariffs can be useful for this purpose, if properly designed. That Feed-in-Tariffs are generally viewed in a positive light by international investors, when considering renewable energy opportunities in developing countries, according to a global survey conducted by UNEP FI earlier this year.

This might not be surprising, but it does confirm the validity of a wide array of policy incentives sharing similar features across the globe. In Kenya, the Feed-in-Tariff implemented in 2008 and later revised in 2010, has encouraged entrepreneurs to step up their efforts to harness the vast geothermal and wind potential that exists in the country.

The environmental advantages of renewable energy expansions resulting from Feed-in-Tariffs and other policy incentives are important on their own, but they also offer a number of added social and economic benefits, such as reduced energy poverty and job creation.

That the long-term visions and commitments of governments in Sub-Saharan Africa regarding renewable energy and environmental issues has become blatant to many observers. But it is also crucial to be mindful that in order to ground this commitment, the international community must help financiers to bridge local constraints, so that the full leverage of private investments may be utilized. COP 17 will be an excellent opportunity to figure out how.

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