Unlocking the Potentials of Private Financing for Accelerated Low-Carbon Energy Transition: An Overview

Emerging economies of Asia will need to see some US$200 billion in annual capital expenditure on low-carbon energy supply and in energy efficiency to meet the Nationally Determined Contributions (NDCs) targets under the Paris agreement framework. The scale of this investment required to decouple carbon emissions from economic growth, will inevitably have to rely largely on mobilizing private capital. This chapter provides an overview of available channels to mobilize private investment in low-carbon transition. It argues that the private capital that can be mobilized to support low-carbon transition, is very much depend on the risk return profile of the investment and the regulatory environment in which these investors operate. If the governments wish to mobilize capital from the markets, they need to simultaneously understand not only the barriers to the investment but also effective channels through which such capital can flow. This chapter also presents an analytical framework that can characterize the risks to private investments and highlights the role of transaction enablers that governments can use to mobilize institutionally held capital in support of low-carbon energy transition.