Assessing the Investment Climate for Climate Investments : A Comparative Framework for Clean Energy Investments in South Asia in a Global Context

Abstract

One of the strong messages that came out of the recent United Nations Climate Change conference in Durban was that the private sector has to play an important role if we are to globally move toward a low carbon, climate resilient -- or "climate compatible" -- future. However, private investment will only flow at the scale and pace necessary if it is supported by clear, credible, and long-term policy frameworks that shift the risk-reward balance in favor of less carbon-intensive investment. The private sector also needs information on where to invest in clean energy in emerging markets, and it needs policy support to lower investment risk. Barriers to low carbon investments often include unclear and inconsistent energy policies, monopoly structures for existing producers, stronger incentives for conventional energy than clean energy, and a domestic financial sector not experienced in new technologies. With the long-term goal of promoting and accelerating the implementation of climate mitigation technologies, this study aims to facilitate development of a policy framework for promoting sustainable investment climates for clean energy investments in South Asia and elsewhere. A key aspect of the study is also the pilot construction of the Climate Investment Readiness Index for several countries. The index is a tool to objectively evaluate the enabling environment for supporting private sector investment in select climate mitigation or low carbon technologies.