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Resource guide for NDC finance

Selecting effective financial instruments to support action on climate change

This low emission development strategies (LEDS) Finance Resource Guide presents a curated selection of resources on a range of topics around finance for LEDS and Nationally Determined Contributions (NDCs). It is designed to help LEDS practitioners find high-quality resources that meet their specific needs, avoiding time-consuming searches on the internet. It will be useful to individuals working on, or interested in, LEDS and NDC finance in both developed and developing countries.

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5.1 General resources

A large number of resources have been produced in recent years on the topic of financial instruments that can be used to stimulate investment in low carbon markets. Many of these cover several different instrument types, including those focused more on reducing risks, and more on increasing returns. This section presents a selection of these more general resources about instruments, including both introductory resources and more comprehensive resources and frameworks. A number of case studies showing how countries have implemented different instruments are provided, either within the main resources or as standalone case study documents.

Related resources

Derisking renewable energy investment: A framework to support policymakers in selecting public instruments to promote renewable energy investment in developing countries

Organization(s):UNDP

  • General resources

The DREI framework systematically identifies the barriers and associated risks that can hold back private sector investment in renewable energy. It assists policymakers to put in place packages of targeted public interventions to address these risks. Each public intervention acts in one of three ways: reducing, transferring, or compensating for risk. The overall aim is to cost effectively achieve a risk return profile that catalyzes private sector investment in developing countries at scale. The report describes the framework’s four stages: risk environment; public instruments; levelized cost; and evaluation. Section 2.2 of the report provides a guide for selecting specific instruments to address the risks and barriers identified, and for quantifying their impact. To illustrate how the framework can support decision making in practice, it presents findings from illustrative case studies for large scale wind energy in four developing countries (Kenya, Mongolia, Panama, and South Africa).

The design and sustainability of renewable energy incentives: An economic analysis

Organization(s):World Bank

  • General resources

This comprehensive study assesses the effectiveness of different types of incentive mechanism for renewable energy, including feed-in tariffs, portfolio standards, quotas, auctions, and avoided cost tariffs. It provides a global taxonomy of the different economic and financial incentives provided by renewable energy support schemes. The study considers the effectiveness of incentive mechanisms, the details of tariff design, the integration of climate finance considerations into existing regulatory processes, and financing and affordability issues. The work is based on detailed case studies of Brazil, Egypt, Indonesia, South Africa, Sri Lanka, Tanzania, Turkey, and Vietnam, which are included in the report. This study will be of use to policymakers and advisors considering the design of incentive schemes and who wish to take economic principles and evidence into account when setting targets and tariffs.

Designing smart green finance incentive schemes: The role of the public sector and development banks

Organization(s):E3G

  • General resources

This paper identifies criteria and principles for assessing whether a green incentive scheme is ‘smart,’ and uses these to evaluate financial instruments most commonly used in designing green incentive schemes (concessional lending). This includes green credit lines, grants for technical assistance and investments, and guarantees and insurance products. Chapter 5 of the publication provides a case study analysis of the use of these green financial incentives (6 pp). The authors note that while this paper focuses on the role of development finance institutions in the design of smart green incentives, such work should ideally be led by developing country governments and their national development finance institutions.

Moving the fulcrum: A primer on public climate financing instruments used to leverage private capital

Organization(s):WRI

  • General resources

This paper from WRI serves as a useful introduction to the use of financial instruments to promote climate action from the private sector. It demonstrates how the public sector can employ different types of public financing instruments—whether loans, equity, or derisking instruments—alongside policy and technical support to scale up private sector investment in low carbon markets. Appendix 1 (also available as a standalone document) contains a useful glossary explaining a range of instruments.

Financial incentives to enable clean energy deployment: Policy overview and good practices

Organization(s):Clean Energy Solutions Centre/NREL

  • General resources

This policy brief serves as a useful primer on the use of incentives for clean energy and energy efficiency. It introduces the main types of incentive (including tax measures, rebates and performance based incentives, and loans and credit enhancements), and outlines key design elements for incentives, as well as showcasing some lessons from different country experiences. The references list further useful resources for more detailed, country specific information on financial incentive design.

Country case study

The design and sustainability of renewable energy incentives: An economic analysis

Organization(s):World Bank

  • General resources

The World Bank’s The design and sustainability of renewable energy incentives: An economic analysis (see Key resources, this subsection) contains eight detailed case studies on Brazil, Egypt, Indonesia, South Africa, Sri Lanka, Tanzania, Turkey, and Viet Nam.

Country case study

Designing smart green finance incentive schemes: The role of the public sector and development banks

Organization(s):E3G

  • General resources

E3G’s Designing smart green finance incentive schemes: The role of the public sector and development banks (see Key resources, this subsection) contains case studies in chapter 5.

Country case study

Derisking renewable energy investment: A framework to support policymakers in selecting public instruments to promote renewable energy investment in developing countries

Organization(s):UNDP

  • General resources

This publication presents four illustrative case studies for wind energy in Kenya, Mongolia, Panama, and South Africa.

Country case study

Taxes and incentives for renewable energy

Organization(s):KPMG

  • General resources

While this report is principally designed to help companies and investors stay current with government policies and programs that support renewable energy, it does provide a useful summary of tax and nontax incentives in use in 31 countries, which may be helpful for developing country policymakers who wish to see which incentive measures are being used in other countries, as a starting point for comparative analysis. The table on p. 10 summarizes the different instruments used in these countries, and the following country pages provide brief information about the specific incentives.

 

Country case study

San Giorgio Group > Publications

Organization(s):CPI

  • General resources

CPI’s Publications webpage features case studies exploring best practice in the use of public finance to stimulate private investment. Numerous technologies and instruments are covered.

Country case study

Using private finance to accelerate geothermal deployment: Sarulla geothermal power plant, Indonesia

Organization(s):CPI

  • General resources

This case study analyzes the Sarulla geothermal power plant which, if successful, will be the largest single contract geothermal power plant project in the world, with a total capacity of 330 megawatts in 2018. The project has the highest private sector involvement of any geothermal project on a previously undeveloped field in Indonesia, thanks to substantial public support provided through a package of instruments: financing, guarantees, and a feed-in tariff.