Renewables, why bother?

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Ben Garside
04 August 2010

For much of the developing world producing clean energy that also mitigates carbon emissions is a very low priority. After all, why should countries that haven't significantly contributed to climate change worry about reducing their relatively tiny carbon emissions? In any case who would pay for it all?

As last week's post pointed out, the priority for least developed countries (LDCs) is development, not mitigating climate change. Nevertheless, countries that position themselves well by developing effective policies on how to react to climate change are more likely to attract climate finance, both for mitigation and increasingly for adaptation. Such support could be leveraged to develop low-carbon or renewable energy - a good reason why development policies and climate change strategies need to be joined up.

In addition, the developed world is moving towards low-carbon energy solutions driven by the need for both energy security and competitive low-carbon economies. LDCs that continue with the business-as-usual model may find themselves with increasingly uncertain and volatile energy supplies.

Funding opportunities

Middle-income countries such as Brazil, India and China are already investing heavily in moving their economies to lower-carbon power supplies - see for example the recent post on China. But where will the money come from for LDCs to do the same?

The answer to this is only beginning to emerge, and hence there is an element of speculation. The idea behind the Clean Development Mechanism (CDM) is to set up projects in developing countries that implement carbon emissions reductions. The resulting carbon savings can be sold as certified emission reduction credits, bought by developed countries that exceed their emissions quotas as an alternative to domestic cuts.

So far the CDM has had mixed success, with much of the money going to cheaper and easier projects than renewable energy provision - the so called low-hanging fruit. Since Copenhagen there have been calls to ensure that the CDM reaches LDCs in a more meaningful way. One suggestion by the EU is to divide the CDM into broad sectors such as transport and energy. This would mean that the energy sector in an emissions high country would have to purchase energy sector credits in LDCs - effectively a way to incentivise the development of low-carbon energy in LDCs.

But this could still exclude poor communities in rural off-grid areas. In these cases there is not such a compelling argument for mitigation finance. The low-powered nature of most off-grid renewables means that greenhouse gas mitigation is generally low, and therefore of little interest to low-carbon project developers.

Carbon credits for adaptation are beginning to emerge and are potentially a good source of finance for off-grid energy development. The World Bank's climate investment funds, for example, requires a component of projects to be targeted at ‘climate resilience' (that is, adaptation) in LDCs. The International Monetary Fund has recently published the first details of a proposed financing framework, dubbed the 'Green Fund', intended to mobilise US$100 billion a year by 2020 to help developing countries adapt and mitigate further emissions.

A share of CDM proceeds is also the source of income for the UNFCCC Adaptation Fund, which could raise between US$300 million and US$600 million over the 2008-12 period.

Beyond finance

The lack of large-scale and reliable finance as well as a lack of joined-up policies have been barriers for rural electrification. But other factors are also key. The failure of attempts of the World Bank and Global Environment Facility to establish off-grid electrification has been attributed to the top-down approaches, which have tried to push renewable systems, such as solar home systems, to rural areas.

Equally there has been a strong focus on renewables for household-level electricity supply. This focus needs to be broadened. There are other opportunities for community-level electricity use such as solar powered water pumps and mobile phone charging stations. These community services provide indirect access to electricity, which can benefit the poorest in developing climate-resilient livelihood strategies.

National renewables strategies

There cannot be a successful conclusion to the international climate change negotiations without more money flowing to LDCs for both mitigation and adaptation. This is not to say that all LDCs should jump on the renewables bandwagon now, but energy provision is a key area where development and climate policy can be linked. Countries should be ready to receive the finance when it does arrive as well as demonstrate how it will be used.

To make significant progress with renewables in LDCs will certainly require coordinated policies at the national level that link development strategies and climate finance (see IRENA for a new promising initiative that may help define this). Particularly important in reaching the poorest is linking adaptation to off-grid rural electricity provision and ensuring that policy provides incentives for local actors to get involved.


Ben Garside is a researcher in the Sustainable Markets Group