Side Event at the United Nations Climate Change Conference
Get Fit: De-risking Clean Energy Models in a Development Country Context
4 December 2010, Cancun
Mr Caio Koch-Weser,
Distinguished private sector representatives,
Ladies and gentlemen,
I am honoured to address you on the most important issue of clean energy business models in developing countries.
I would like to thank the organizers, Deutsche Bank and the UNEP Financing Initiative for giving me this opportunity.
Deutsche Bank has an illustrious record of leadership in sustainable development and corporate social responsibility.
It has consistently promoted sustainable development principles, including those in the Global Compact. It has pioneered studies of financing options for sustainable development and renewable energy.
I also wish to express my personal thanks to our host, Caio Koch-Weser. I have high regard for his personal contributions and leadership on these issues.
My thanks also go to Mark Fulton for collaborating so effectively with the staff in my Department on today’s event.
Ladies and gentlemen,
I am not a technical expert on energy financing. My UN colleagues have deep technical expertise and they will contribute to today’s later sessions.
I am a career diplomat, steeped in politics, and I will talk from a politician’s perspective. I will try to pose provocative and incisive questions to stimulate your discussion rather than provide answers.
I will address you in my capacity as the Secretary-General of the forthcoming UN Conference on Sustainable Development, also known as Rio+20.
I am sure you are aware of this conference. It was convened by the UN General Assembly, and it will take place in Rio de Janeiro in 2012.
Its objectives are to secure renewed political commitment for sustainable development, assess progress to date and gaps in implementation, and address new and emerging challenges.
It has two themes, namely: a green economy in the context of sustainable development and poverty eradication, and the institutional framework for sustainable development.
The subject of our discussion today is highly relevant to these themes and objectives.
Billions of people lack access to energy and many more lack access to clean energy.
This deficit means that countless families live without access to electricity, clean water, and basic sanitation services.
Children in households without energy access fall sick more easily, are less likely to become educated and are more likely to live out their lives in the extreme poverty that their parents experienced.
We must work together to not only expand clean energy access, but to make it affordable to poor households.
Our progress in this sphere will be a key indicator of progress in sustainable development.
In recent years, the idea of a global renewable energy fund to support feed-in tariff programs in developing countries has been gaining ground. Indeed, the idea of the green climate fund is under discussion here in Cancun.
I was happy to hear that Deutsche Bank, through its independent and detailed research, has also reached the conclusion that such a fund is needed. It is reassuring to see that different organizations, with different sources of expertise and knowledge reach virtually identical conclusions.
My hope is that the Rio+20 Conference will bring together innovative ideas and solutions from all sectors.
As part of the preparations for the Rio20 Conference, and in direct response to a mandate from United Nations Member States, my office circulated a questionnaire on the experiences and lessons learnt on sustainable development.
Government and NGO representatives as well as civil society and private sector representatives were invited to respond.
We are going over the responses received thus far. They are posted on our website, uncsd2012.org, and I urge you to visit the site and to complete the questionnaire as well.
We are accepting responses through 15 December 2010. It is short window, but I would be so grateful for your input. It will inform the content and agenda of the Conference and the future of sustainable development.
Let me shift to some models of clean energy.
I know that the Brazilian example of ethanol investments, the German example of feed-in-tariffs, and the stimulus packages in some countries, especially in China, Korea, and the US will be discussed today.
These examples are significant because the planning that went into them was long-term.
In some cases, the investments and actions taken did not become commercially viable for many years.
In Brazil, the government’s decision to support ethanol was criticized when oil prices declined during the 1980s.
Today Brazil is at the forefront of climate change and clean transportation solutions.
What kind of lessons can we draw from these experiences?
Is it viable for private sector investors to use long-term horizons for cost-benefit analysis?
How do feed-in tariffs play into long-term approaches?
Feed-in tariffs have been successful in scaling up renewable electricity generation in some countries, especially in Europe.
They are also used in some developing countries; all together about 63 countries have enacted some type of feed-in tariff.
Kenya hopes that its feed-in tariff policy will lead to a doubling of geothermal capacity and benefit low-income households.
Similarly, the DESERTEC project aims to build collaboration between Europe and Africa through a feed-in-tariff framework.
If the DESERTEC project succeeds it will accelerate technology transfer and bring shared prosperity to both regions.
These initiatives and other are still in experimental stages.
What kind of lessons are to be learnt from these projects?
What are the risks and challenges in adopting feed-in tariffs?
What kind of international support will be needed by developing countries to make feed-in tariffs successful?
Another important issue relates to international financing options.
So far, much of the international support for renewable energy has been channelled through the Clean Development Mechanism (CDM) and the climate investment funds established by the World Bank and other multilateral banks.
Can feed-in tariff proposals fit into the current financial architecture for clean energy?
Or do they require some other type of financial structures?
Current levels of international financing are quite modest compared to the size of global energy investment outlays.
Current financial flows are intended only for financing the high upfront costs.
They do not address the problem of per-kilowatt costs, which are so high that they place energy, especially renewable energy, beyond the reach of almost all consumers in developing countries.
How can your proposals result in increased international financial commitments, especially for addressing per-kilowatt costs?
In addition to financing problems, renewable energy projects are hampered by inadequate institutional or legal frameworks, weak markets and infrastructure constraints.
These barriers can be overcome of course – a number of developing countries have done so – but they require international support from public and private sectors as well.
Furthermore, current flows are dedicated to relatively few countries. My country, China, is among them because of its large market prospects.
And within countries, most proposals are for grid-connected areas.
We need to devise ways to distribute international financing flows more equitably. If they are not reaching off-grid areas and rural populations then our current system is unsatisfactory.
I hope that you can address these issues today.
Ladies and Gentlemen,
I promised that I would ask questions instead of giving answers. I hope I have not disappointed you.
In concluding, allow me to briefly return to the Rio+20 Conference and one of its two themes – a green economy.
While opinions differ on what belongs in a green economy and what does not, there is general agreeme
nt that renewable energy and energy access are central to it.
We need a global programme of financing and technical support for renewable energy in developing countries.
We need to expand our horizons and think about how clean energy can help eradicate poverty and hunger, and contribute to social development in general.
I hope that you will put your talents, knowledge and experience to work in helping the United Nations and the entire international community on these issues.
Again, I encourage you to view the Rio+20 Conference as a destination for all the important work you are doing on renewable energy.
We need your knowledge and expertise in enriching the Conference’s deliberations.
We need your understanding of what works and what doesn’t work.
We need the power you have to convene experts, business leaders and policy makers.
Your insights on these matters will not only contribute to the Conference’s success but also to the implementation of its agreements and decisions on sustainable development.
Thank you for your time and I wish you a productive meeting.