Private sector can fight climate change
JOSUE TANAKAAs Hurricane Sandy reminded us of the force of Mother Nature, the climate change debate – lately overshadowed by the financial crisis – is in the headlines again. Today in Istanbul, the Climate Investment Funds partnership forum – organized by the World Bank and co-hosted by the European Bank for Reconstruction and Development (EBRD) – will gather to discuss ways to stimulate investment in green energy. However, a lot is already being done.
The EBRD is proud to announce a milestone in its climate change mitigation activity.
EBRD financing under its Sustainable Energy Initiative has reached 10 billion euros since its launch in 2006, with the financing of the new 53 MW Kukinia wind farm in Poland. These EBRD-financed projects are estimated to reduce CO2 emissions by over 50 million tons.
Our biggest effort is in Turkey where sustainable energy projects account for nearly a half of the EBRD’s investment – about 1 billion euros. Our projects saved almost 1 percent of the country’s greenhouse gas emissions. This has been achieved through the direct financing of larger renewable energy projects, as well as through the direct financing of energy efficiency investments within industrial enterprises and municipal service providers. We have worked in close partnership with six Turkish banks to finance energy efficiency investments for households and SMEs and to finance renewable energy projects.
The price of carbon is not internalized in financial decisions and the level of subsidies to fossil fuels continues to run high, severely distorting energy investment decisions from the household level to companies and countries. Furthermore, the impact of the financial crisis has led to a dramatic refocusing of politics and policies to the short term.
The EBRD has been scaling up efforts to achieve concrete energy saving and carbon emissions reduction since 2006. So let’s now turn to the three factors which can make sustainable energy investments, well, sustainable.
First, a focus on concrete action and quick results. We place a strong focus on energy efficiency, where technology is available today for results tomorrow. One should go for the most efficient solution, beyond the current regulatory requirements.
Second, working directly with the private sector. This is key for rapid and effective implementation. The capacity of private sector financing is also crucial, considering the current fiscal constraints. Close to two-thirds of our 10 billion-euro sustainable energy financing has been with the private sector, which has contributed another 22 billion euros to the financing of these projects.
Third, we must seek to improve the policy context. While hoping that one day, true long-term economic signals can be sent through carbon pricing and the removal of fossil fuel subsidies, much can be done to develop specific policy measures. We are working closely with the Turkish government to support the development of sustainable energy; we will continue to work hard on the business-driven opportunities for sustainable energy that already exist. But what we are really hoping for is a much-expanded scope of investment brought about by policies which place the care for our future environment at their heart.
Josue Tanaka is a managing director at the EBRD that is responsible for the bank’s energy efficiency and climate change activities.