European Union to establish global energy fund to boost investment in poor nations
The European Union's executive arm, the European Commission, proposes to establish a global fund for poor countries to help attract as much as €1 billion ($1.3 billion) for environmentally friendly energy projects in the South. Being the world's largest economy, the 25-nation block is the world's largest donor of international development aid and the largest contributor to the budget of international organisations like the UN and its development agencies. The EU has also been leading the fight against climate change.
The European Commission itself is now taking the initiative to blending these issues by creating a 100 million-euro global risk-capital fund to boost energy efficiency and renewable energy sources in developing nations. The Commission pledged to contribute four-fifths of the sum in the next four years. "This fund can mobilise private investments," the Brussels-based Commission said in a statement.
The Global Energy Efficiency and Renewable Energy Fund or GEEREF will accelerate the transfer, development and deployment of environmentally sound technologies and thereby help to bring secure energy supplies to people in poorer regions of the world. These projects will also combat climate change and air pollution. The Commission intends to kick-start the fund with a contribution of up to €80 million over the next four years, and expects that financing from other public and private sources will take funding to at least €100 million. This means that it will contribute to the financing of investment projects of a value up to 1 billion euro.
The Commissioner for the Environment, Stavros Dimas, and his collegue, Commissioner for Development Louis Michel are the driving force behind GEEREF:
One of the the EU's goals is to ensure that the global temperature rises no more than 2ºC above pre-industrial levels, since beyond this level the impacts of climate change are forecast to be far more severe. Business-as usual energy scenarios for the coming decades predict high growth in both energy use and greenhouse gas emissions. ‘Accelerated technology’ scenarios demonstrate that it is possible to reduce global electricity demand by one third simply by improving overall energy efficiency. In addition, the growth of oil demand could be halved by raising the share of renewable energy for global electricity generation from today’s 13 per cent to 34 per cent in 2050. This will decrease the impacts on the environment and will in particular bring future carbon dioxide (CO2) emission levels back down to current levels the International Energy Agency says.
While the main responsibility for triggering these changes lies with industrialised countries, scaling up energy efficiency and renewable energy initiatives will greatly benefit developing countries by providing clean and secure energy supplies to people who currently have no access to reliable energy sources:
Overcoming investment barriers
Despite improving prospects, energy efficiency and renewable energy projects face significant difficulties in raising commercial funding. The problems are complex but mainly concern a lack of risk capital, which provides important collateral for lenders. The need for risk capital in developing countries and transition economies is estimated at over €9 billion, far above current levels. Mobilising private sector finance is therefore essential:
biomass :: bioenergy :: biofuels :: energy :: sustainability :: renewables :: climate change :: Africa :: developing countries :: investing :: European Union ::
How GEEREF will work
GEEREF aims to help overcome these barriers by providing new risk-sharing and co-financing options to mobilise international and domestic commercial investments. It will invest in a broad mix of energy efficiency and renewable energy technologies. Priority will be given to deploying environmentally sound technologies with a proven technical track record.
GEEREF will stimulate the creation of regional sub-funds tailored to regional needs and conditions, rather than investing in projects directly. Sub-funds are envisaged for the African, Caribbean and Pacific (ACP) region, North Africa, non-EU Eastern Europe, Latin America and Asia. The focus will be on investments below €10 million as these are mostly ignored by commercial investors and international finance institutions. Corporate finance will be offered to support small and medium-sized enterprises as well as project finance
The Commission intends to put €80 million into GEEREF in 2007-2010, with a first contribution of €15 million next year to kick-start the initiative. Total initial funding from public and commercial sources of €100 million is anticipated, and this is expected to mobilise additional risk capital of at least €300 million and possibly up to €1 billion in the longer term.
Investment amounts at the top end of this range could bring almost 1 Gigawatt of environmentally sound energy capacity to third country markets, serving 1-3 million people with sustainable energy services and saving 1-2 million tonnes of CO2 emissions per year. It would also bring substantial benefits in terms of improved indoor and outdoor air quality and creation of local enterprises, jobs and income.
Next steps
The Commission has appointed Triodos International Fund Management b.v. in conjunction with E+Co, to facilitate the implemention of the GEEREF in close co-operation with the European Investment Bank, the European Bank for Reconstruction and Development, and other interested parties.
The Council, European Parliament and other stakeholders are invited to comment on the GEEREF initiative[1] and to endorse the Commission’s aim of reaching the initial funding target by mid-2007.
More information:
EU Commission: Commission proposes €100 million global risk capital fund for developing countries to boost energy efficiency and renewables - Oct. 6, 2007
The European Commission itself is now taking the initiative to blending these issues by creating a 100 million-euro global risk-capital fund to boost energy efficiency and renewable energy sources in developing nations. The Commission pledged to contribute four-fifths of the sum in the next four years. "This fund can mobilise private investments," the Brussels-based Commission said in a statement.
The Global Energy Efficiency and Renewable Energy Fund or GEEREF will accelerate the transfer, development and deployment of environmentally sound technologies and thereby help to bring secure energy supplies to people in poorer regions of the world. These projects will also combat climate change and air pollution. The Commission intends to kick-start the fund with a contribution of up to €80 million over the next four years, and expects that financing from other public and private sources will take funding to at least €100 million. This means that it will contribute to the financing of investment projects of a value up to 1 billion euro.
The Commissioner for the Environment, Stavros Dimas, and his collegue, Commissioner for Development Louis Michel are the driving force behind GEEREF:
“This is an innovative mechanism. It underlines the Commission’s commitment to help developing countries invest in renewable energy and energy efficiency. It will contribute to bringing clean, secure and affordable energy supplies to the 1.6 billion people around the world who have no access to electricity.” - Environment Commissioner Stavros DimasNeed for action
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“The lack of access to energy is a major obstacle for regions that already experience problems in accessing to capitals. This Fund can mobilize private investments and become a real source of development, especially in Africa.” - Development Commissioner Louis Michel
One of the the EU's goals is to ensure that the global temperature rises no more than 2ºC above pre-industrial levels, since beyond this level the impacts of climate change are forecast to be far more severe. Business-as usual energy scenarios for the coming decades predict high growth in both energy use and greenhouse gas emissions. ‘Accelerated technology’ scenarios demonstrate that it is possible to reduce global electricity demand by one third simply by improving overall energy efficiency. In addition, the growth of oil demand could be halved by raising the share of renewable energy for global electricity generation from today’s 13 per cent to 34 per cent in 2050. This will decrease the impacts on the environment and will in particular bring future carbon dioxide (CO2) emission levels back down to current levels the International Energy Agency says.
While the main responsibility for triggering these changes lies with industrialised countries, scaling up energy efficiency and renewable energy initiatives will greatly benefit developing countries by providing clean and secure energy supplies to people who currently have no access to reliable energy sources:
Overcoming investment barriers
Despite improving prospects, energy efficiency and renewable energy projects face significant difficulties in raising commercial funding. The problems are complex but mainly concern a lack of risk capital, which provides important collateral for lenders. The need for risk capital in developing countries and transition economies is estimated at over €9 billion, far above current levels. Mobilising private sector finance is therefore essential:
biomass :: bioenergy :: biofuels :: energy :: sustainability :: renewables :: climate change :: Africa :: developing countries :: investing :: European Union ::
How GEEREF will work
GEEREF aims to help overcome these barriers by providing new risk-sharing and co-financing options to mobilise international and domestic commercial investments. It will invest in a broad mix of energy efficiency and renewable energy technologies. Priority will be given to deploying environmentally sound technologies with a proven technical track record.
GEEREF will stimulate the creation of regional sub-funds tailored to regional needs and conditions, rather than investing in projects directly. Sub-funds are envisaged for the African, Caribbean and Pacific (ACP) region, North Africa, non-EU Eastern Europe, Latin America and Asia. The focus will be on investments below €10 million as these are mostly ignored by commercial investors and international finance institutions. Corporate finance will be offered to support small and medium-sized enterprises as well as project finance
The Commission intends to put €80 million into GEEREF in 2007-2010, with a first contribution of €15 million next year to kick-start the initiative. Total initial funding from public and commercial sources of €100 million is anticipated, and this is expected to mobilise additional risk capital of at least €300 million and possibly up to €1 billion in the longer term.
Investment amounts at the top end of this range could bring almost 1 Gigawatt of environmentally sound energy capacity to third country markets, serving 1-3 million people with sustainable energy services and saving 1-2 million tonnes of CO2 emissions per year. It would also bring substantial benefits in terms of improved indoor and outdoor air quality and creation of local enterprises, jobs and income.
Next steps
The Commission has appointed Triodos International Fund Management b.v. in conjunction with E+Co, to facilitate the implemention of the GEEREF in close co-operation with the European Investment Bank, the European Bank for Reconstruction and Development, and other interested parties.
The Council, European Parliament and other stakeholders are invited to comment on the GEEREF initiative[1] and to endorse the Commission’s aim of reaching the initial funding target by mid-2007.
More information:
EU Commission: Commission proposes €100 million global risk capital fund for developing countries to boost energy efficiency and renewables - Oct. 6, 2007
1 Comments:
Nice write up. This is indeed a great step towards promiting clean energy in Poor countries with infrastructural problems. I feel Africa could be a great source for utilizing renewable sources especially solar power, seeing the high amounts solar energy present there. I found a similar post 100 Million Euro Fund to Boost Renewable Energy & Energy Efficiency also discussing the obstructions that could come in EU's way and found it quite interesting.
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