World Bank2012-07-022012-07-022012978-0-8213-9527-1https://hdl.handle.net/10986/9367The report estimated that in the East Asia and Pacific (EAP) region alone about US$80 billion a year of additional investments would be required in low-emission projects (green investments), resulting in a significant financing challenge. The report argues that the solution lies in understanding the causes of the financial viability gap, and then investigating how specific actions, including strategic subsidies, concessional financing, and public policy interventions and reforms, can bridge this gap to make green investment transactions viable. The green infrastructure finance framework also underscores the benefits of valuing and monetizing carbon externalities. Moreover, it recognizes the effects of policy distortions and other negative factors that impinge on financial viability, emphasizing the need for an approach to analyze and explain the gap and to attribute its components to different stakeholders. This report shows that it is essential to measure global and local externality benefits against the causes of the viability gap such as perceptions of added risks, cost differentials, policy distortions, and other factors. Once these elements are fully considered, policy makers can identify practical ways to better structure the financing of green investment projects that can be supported by the market. Three key principals have guided the development of the framework: (i) targeting green finance resources on sectors that have large numbers of projects with low abatement costs; (ii) setting ceilings on the value of support that will be provided for a tone of greenhouse gas (GHG) abatement in any sector or project; and (iii) using competitive mechanisms to ensure that projects do not receive more support than needed to make them financially attractive. This report is the second of a continuing series of green infrastructure finance publications. The first part undertook a stocktaking of leading initiatives and literature related to the green infrastructure finance theme. This second part is a conceptual piece that bridges ideas and concepts between environmental economics and project finance practices. Work will continue over the next months by operationalizing this framework (analytical methodology and assessment of green infrastructure investment climate) through a pilot in a selected EAP developing country. Given a better understanding of the financing challenges of different green projects, work will also continue in developing more customized and innovative financing instruments that can be specifically tailored to address the requirements of these projects.CC BY 3.0 IGOABATEMENT COSTSAIRALLOCATIONALTERNATIVE INVESTMENTALTERNATIVE INVESTMENTSBALANCE SHEETBIOMASSBRIDGEBUSBUSINESS OPPORTUNITIESCAPITAL COSTCAPITAL COSTSCAPITAL FLOWSCAPITAL INTENSIVE PROJECTSCAPITAL INVESTMENTCAPITAL MARKETCAPITAL MARKETSCAPITAL REQUIREMENTSCARBON ABATEMENTCARBON CAPTURECARBON DIOXIDECARBON DIOXIDE EMISSIONSCARBON ECONOMYCARBON EMISSIONCARBON EMISSIONSCARBON FINANCECARBON MARKETCARBON MARKETSCARBON PRICECARBON TAXESCARBON TECHNOLOGIESCASH FLOWCASH FLOWSCLEAN ENERGYCLEAN TECHNOLOGIESCLEAN TECHNOLOGYCLIMATECLIMATE CHANGECOCO2COALCOAL PLANTCOLORSCOMMERCIAL LOANCOMMERCIAL LOANSCOST OF CARBONCOST-BENEFITDAMAGESDEBTDEBT PAYMENTSDEBT SERVICEDEVELOPING COUNTRIESDEVELOPING COUNTRYDEVELOPMENT BANKSDIFFUSIONDISCOUNT RATEDOMESTIC CARBONDONOR COMMUNITYDONOR SUPPORTECONOMIC BENEFITSECONOMIC COSTSECONOMIC OPPORTUNITIESECONOMIC PERSPECTIVEECONOMIC POLICYECONOMICS OF CLIMATE CHANGEEFFICIENT TRANSPORT INFRASTRUCTUREEMISSIONEMISSION ABATEMENTEMISSION REDUCTIONEMISSION TECHNOLOGIESEMISSIONSEMISSIONS ABATEMENTEMISSIONS REDUCTIONEMISSIONS REDUCTIONSENERGY CONSUMPTIONENERGY EFFICIENCYENERGY EFFICIENCY MEASURESENERGY EFFICIENT LIGHT BULBSENERGY EFFICIENT TRANSPORTENERGY PORTFOLIOENERGY SAVINGSENVIRONMENTAL ECONOMICSEQUITY INVESTOREQUITY INVESTORSEQUITY RATIOEXTERNALITIESFINANCE INITIATIVEFINANCIAL CONTRIBUTIONFINANCIAL COSTSFINANCIAL CRISISFINANCIAL INSTITUTIONFINANCIAL INSTITUTIONSFINANCIAL INSTRUMENTSFINANCIAL MARKETSFINANCIAL PRODUCTSFINANCIAL RESOURCEFINANCIAL STRUCTUREFINANCIAL STRUCTURESFINANCIAL SUPPORTFINANCIAL VIABILITYFINANCING NEEDSFISCAL SUPPORTFLOW OF FUNDSFOSSIL FUELFOSSIL FUELSFUEL COSTFUEL SUBSIDIESGHGGHGSGLOBAL ENVIRONMENT FACILITYGLOBAL RECESSIONGLOBAL WARMINGGREENHOUSEGREENHOUSE GASGROSS DOMESTIC PRODUCTHIGH ENERGYHOMEOWNERHOUSEHOLDSHYBRID FINANCINGIMPORT DUTIESIMPORTSINCOMEINFRASTRUCTURE FINANCEINFRASTRUCTURE FINANCINGINFRASTRUCTURE INVESTMENTINFRASTRUCTURE INVESTMENTSINFRASTRUCTURE PROJECTSINNOVATIVE FINANCIAL INSTRUMENTSINNOVATIVE FINANCINGINSTITUTIONAL INVESTORSINTEREST PAYMENTINTEREST RATEINTERNATIONAL BANKINTERNATIONAL DEVELOPMENTINTERNATIONAL FINANCIAL INSTITUTIONINVESTINGINVESTMENT CLIMATEINVESTMENT CORPORATIONINVESTMENT FUNDSINVESTMENT OPPORTUNITIESINVESTMENT PROJECTSKEY BENEFITLENDERLENDERSLOANLOAN TERMSLOCAL AIR POLLUTIONLONG-TERM FINANCINGLOW-CARBONLOWER COSTSMARGINAL ABATEMENTMARGINAL ABATEMENT COSTMARKET FAILUREMARKET INTEREST RATESMASS TRANSITMUNICIPAL ENGINEERNEGATIVE IMPACTNOXO&MOPERATING COSTSPARTICULATEPERSONAL TRANSPORTATIONPOLICY ANALYSISPOLICY MAKERSPOLLUTIONPORTFOLIOPOWER GENERATIONPOWER PLANTSPOWER SECTORPRESENT VALUEPRICE DISTORTIONSPRICE OF COALPRICE TAGPRIVATE FINANCIAL MARKETSPRIVATE FINANCINGPRIVATE INVESTMENTPRIVATE INVESTMENTSPRIVATE INVESTORSPROPERTY RIGHTSPUBLIC EDUCATIONPUBLIC FINANCEPUBLIC FUNDSPUBLIC POLICYPUBLIC-PRIVATE PARTNERSHIPSRAILRAIL PROJECTSRAPID TRANSITRAPID TRANSIT SYSTEMSRATES OF RETURNREAL ESTATERENEWABLE ENERGYRESERVE ACCOUNTSRESOURCE COSTRETAIL ELECTRICITYRETURN ON INVESTMENTRISK PERCEPTIONSSANITATIONSOURCES OF FUNDSSOXSPILLOVER EFFECTSSTREET LIGHTINGSUBSIDY COSTSSUPPLY SIDETAXTAX INCENTIVESTECHNICAL ASSISTANCETOTAL AMOUNT OF ABATEMENTTRADABLE PERMITSTRADINGTRAFFICTRANSACTION COSTSTRANSIT SYSTEMTRANSIT SYSTEMSTRANSPORTTRANSPORTATION INFRASTRUCTURETRUETRUST FUNDUNCERTAINTIESUNEPURBAN TRANSPORTWINDWIND ENERGYWIND FARMSWorld Bank10.1596/978-0-8213-9527-1