Climate Action 2010-2011

Finance and Markets
Private sector is paramount
It is a simple truth that applies as much for clean energy
as it does for industrial development more broadly: the
private sector is the world’s main source of technology,
financial flows and investment. For example, the private
sector is responsible for 85 per cent of energy investment.
Business, is the main partner for governments in
building a low carbon future. In developing countries,
private sector investment in clean energy in 2009
was treble that of public finance. While estimates of
investment needs for mitigation vary substantially, one
authoritative assessment by the International Energy
Agency (IEA) estimates that we must invest US$2 trillion
a year to keep global temperature increases within ‘safe’
limits. Most of this funding must be generated nationally.
What is more, the UN Framework Convention on
Climate Change (UNFCCC) estimates 86 per cent of
this money will come from private sector flows in the
form of foreign direct investment by companies. The
private sector is an important part of the solution.
Picking up the pace
Although no comprehensive accounting exists that tallies
global investment in green growth, it is clear that we are
falling far short of the US$2 trillion investment needed
per year. To accelerate the low-carbon transition, the
world must take the following measures to spur greater
private investment:
Grow domestic demand: To stay competitive, countries
must transform their home markets to stimulate domestic
demand for low-carbon solutions and to build scale and
export capability.
Business engagement at international level: It is vital
for governments to engage business at a much deeper
level, particularly in the international climate framework
negotiations, and to look to business as the main driver of
clean investments. By doing so, governments can leverage
their investments up to 15-fold.
Business often invests for
the long term, especially in large,
billion-dollar infrastructure
projects and needs long-term
green policies to match this.
Long-term government incentives: Investing in clean
energy and mitigation technologies by business requires
policies that encourage stable, long-term financial flows.
These policies must be at national, bilateral, multilateral
and possibly at a global level. Business often invests for the
long term, especially in large, billion-dollar infrastructure
projects and needs long-term green policies to match
this. Legislation is an important element in what makes a
country an attractive – or unattractive – place to invest in
clean technology. A recent demonstration of this was the
statement by Deutsche Bank that it would focus its US$7
billion green investment fund outside the US after the US
failed to pass legislation that would put a price on carbon.
Address the obstacles to clean tech investment in
developing countries: So far, many developing countries
have failed to unlock sufficient private investment
because a number of specific risks associated with clean
energy have not been addressed.
Funding and subsidies for clean energy: Governments
must put in place measures to reduce investment risks,
such as combined funding of projects, outright subsidies
and/or risk guarantees. Greater international financial
support will be needed to increase mitigation measures in
developing countries.
New public private partnership models: Given the scale
of investment required, neither the private sector nor the
public sector can address the decarbonisation challenge
alone. New, straightforward public private partnership
models must be developed that can drive investment into
tried-and-tested green technology.
Individual governments have started to implement
incentives to stimulate investments. At the same time,
business continues to seek opportunities to invest in and
develop low-carbon products. However, the negotiations
in Cancun are still being counted on to provide the
greatest incentive. For business, the market will always
provide the most effective stimulus. Carbon needs to be
valued appropriately and a global market driver needs to
be created for clean, low-carbon investment.
Matthew Bateson is Director of Energy & Climate for
the WBCSD, one of four key areas of focus for the Council.
Prior to his appointment in 2008, he worked for Shell
for over 14 years, in Finance and latterly in Corporate
Affairs. He also worked in the company’s International
Government Relations department, handling government
relations in Nigeria and those pertaining to Shell’s
Canadian oil sands development.
The WBCSD is a CEO-led, global association of some 200
companies. It provides a platform for companies to explore
sustainable development, share knowledge, experiences and
best practice, and to advocate business positions on these
issues in a variety of forums, working with governments,
non-governmental and intergovernmental organisations.
Members are drawn from more than 30 countries and 20
major industrial sectors. The WBCSD also benefits from a
global network of some 60 national and regional business
councils and regional partners.
Matthew Bateson, Managing Director
Energy & Climate Focus Area
Tel: +41 (22) 839 3137
Fax: +41 (22) 839 3131
Email: bateson@wbcsd.org
Website: www.wbcsd.org
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