Enhancing Climate Finance Readiness: A Review of Selected Investment Frameworks as Tools of Multilevel Governance

Abstract

The International Renewable Energy Agency (IRENA) has estimated that to reduce greenhouse gas emissions and limit global mean temperature rise to well below 2° Celsius, new forms of low-carbon investment must be unlocked and cost-effectively doubled by 2030. This level of deployment of low-carbon solutions require doubling current investment in renewable energy to US$500 billion per year up to 2020 and tripling in the 2020s to reach US$900 billion each year up to 2030. However, the mechanisms for scaling up such investments remain constrained by high transaction costs, insufficient investment size, and limited market liquidity. We explore recent development of climate investment readiness frameworks (CIRFs) and their application in support of low-carbon development strategies. The paper focuses on two objectives driving the creation and use of such frameworks: (a) barriers to attracting large-scale private investment in climate-sensitive technologies, and (b) how these barriers can be reduced through effective capacity building mechanisms. We consider the utility of the main investment readiness (IR) frameworks with a particular focus on their contributions to developing a climate investment-friendly policy regime through appropriate governance reforms and technical capacity building measures. Important connections between the performance of climate investment readiness frameworks and broader governance issues are highlighted. Conclusions for strengthening such frameworks as tools of multilevel governance regimes are offered.

Keywords: Climate investment readiness, Renewable energy, Climate finance, Investability, International finance institutions, Public policy

JEL Classification: P28, F33, F55, F53, F13, F38, K32, O33, O32, O44, G18