Seetharaman School of Sustainability

Seetharaman School of Sustainability

Climate Change Financing Models will Contribute to Sustainable Development

On the sidelines of the COP 18 Summit the Third World Climate Summit was held at Ritz Carlton on 1st and 2nd December 2012. Dr. R Seetharaman, participated in the panel discussion “Climate Financing For Mitigation & Adaptation” on 2nd December 2012.

Speaking on the occasion Dr. R Seetharaman highlighted the importance of private players in climate change. He said “There is a need to find ways of engaging new private investors, particularly institutional investors to help address the climate financing gap. To engage the private sector, expected returns on climate-related investment should be commensurate with the perceived level of risk. This is however often not the case and the private sector continue to face challenges in investing in the low carbon sector. But, despite the concerns, the potential of Public private partnership may be wasted if profit is the main motivation for the private sector. Rather, combating climate change along with climate proofing of interventions and commitment to corporate social responsibility (CSR) must be a priority for business. “

Dr. R Seetharaman highlighted the various kinds of leverages prevalent in climate change financing. He said “Leverage is more often broadly applied to a set of instruments provided by a financial institution that encourage and catalyze other public and private investment by reducing investment risk or increasing project returns enough to attract private investors. A ratio of total private Foreign Direct Investment (FDI) flows to the net public guarantee coverage issued and ratio of the Net Present Value of the carbon finance unit to the overall capital investment needed for the project are some of the leverage ratios which are used in climate change financing.”

Dr. R Seetharaman highlighted the various models for climate change financing. He said “Carbon Finance, Global environmental facility, clean technology fund and Feed in tariff are some of the financing models for climate change financing. The World Bank Carbon Finance Unit (CFU) uses money contributed by governments and companies in OECD( Organization for economic cooperation and development ) countries to purchase project-based greenhouse gas emission reductions in developing countries and countries with economies in transition Carbon finance provides a means of leveraging new private and public investment into projects that reduce greenhouse gas emissions, thereby mitigating climate change while contributing to sustainable development”

Dr. R Seetharaman explained various climate change financing models. He said “The Global environment facility is today the largest funder of projects to improve the global environment which is supported by various UN bodies and World Bank. The Global Environmental Facility has in the past used the term leveraging to imply co- financing. Global Environmental Facility requires that co-finance from other public agencies is provided for Global Environmental Facility projects as it expands the resources available to finance environmental objectives. Clean Technology Fund is one of the climate investment funds which provide developing countries with positive incentives to scale up the demonstration, deployment, and transfer of technologies with a high potential for long-term greenhouse gas emissions savings. Clean technology fund concessional financing focuses on large-scale, country-initiated projects in power sector, transport sector and energy efficiency. In particular, public private partnerships (PPP) are emerging as a successful business model within the Clean technology to create scale and mobilize necessary funding. Feed-In Tariffs are payments to ordinary energy users for the renewable energy they generate. The tariffs give three financial benefits such as Generation tariff, Export tariff and Energy Bill savings.”

Dr. R Seetharaman explained the climate change trends in GCC. He said “Saudi Aramco and the Japanese refining company Showa Shell are to develop a pilot solar power plant that will have a capacity of 10 MW. Masdar project in Abu Dhabi got $615 million of bank financing for the world’s largest concentrated solar power (CSP) plant and $153 million equity from its Spanish and French partners In April 2011 the U.S. Department of Energy and the Qatar Science & Technology Park have signed a MOU for clean energy technologies.”

In his closing remarks Dr. R Seetharaman said “Climate change financing models will contribute to sustainable development.”

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