Green Finance and Investment

2409-0344 (online)
2409-0336 (print)
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Green growth means achieving economic growth while reducing pollution and greenhouse gas emissions, minimising waste and improving efficiency in the use of natural resources. This requires long-term investment and sustained financing. Public budgets have traditionally been an important source of green infrastructure financing. But given the strains on public finances, large-scale private investment will be needed for the transition towards a green economy. Governments have a key role to play in strengthening domestic policy frameworks to catalyse and mobilise private finance and investment in support of green growth. It is necessary to better align and reform policies across the regulatory spectrum to overcome barriers to green investment, and to provide an enabling environment that can attract both domestic and international investment. This OECD series on Green Finance and Investment provides policy analysis and guidance to scale up financing and investment in technologies, infrastructure and companies that will be critical in the transition to a low-carbon, climate-resilient and resource-efficient economy.

Overcoming Barriers to International Investment in Clean Energy

Overcoming Barriers to International Investment in Clean Energy You do not have access to this content

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09 June 2015
9789264227064 (PDF) ;9789264227040(print)

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The perceived potential of clean energy to support employment in the post-crisis recovery context has led several OECD and emerging economies to design green industrial policies aimed at protecting domestic manufacturers, notably through local-content requirements (LCRs). These typically require solar or wind developers to source a specific share of jobs, components or costs locally. Such requirements have been designed or implemented in the solar- and wind-energy sectors in at least 21 countries, including 16 OECD countries and emerging economies, mostly since 2009.

Empirical evidence gathered in this report shows however that LCRs have actually hindered international investment across the solar PV and wind-energy value chains, by increasing the cost of inputs for downstream activities. This report also takes stock of other measures that can restrict international investment in solar PV and wind energy, such as trade remedies and technical barriers. This report provides policy makers with evidence-based analysis to guide their decisions in designing clean-energy support policies.

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  • Foreword and acknowledgements

    Limiting the extent of climate change requires substantial and sustained reductions in greenhouse gas emissions. Emissions from fossil-fuel use currently account for around two-thirds of total emissions. Investment in clean energy therefore needs to be scaled up significantly if we are to limit the severe risks we face from climate change. Mobilising clean-energy investment also creates benefits and opportunities for developed and developing countries alike, such as: reduced local air pollution and associated health costs; cost-effective access to energy in rural and remote areas; improved energy security and reduced reliance on fossil-fuel imports; and technology transfer and innovation across the value chain.

  • Acronyms and abbreviations
  • Executive summary

    Investment in clean energy needs to be mobilised at pace and at scale to contribute to mitigating climate change and achieve the transition to a low-carbon energy system. Doing so can also provide numerous other social and economic benefits for both developed and developing countries. "Clean energy" as defined in this paper includes the following sectors: solar, wind, small and large hydroelectric, geothermal, marine, biomass and wasteto- energy power plants, carbon capture and storage (CCS) technologies and energy-efficient technologies such as smart grids and electric vehicles. Scaling up investment in clean energy will require the mobilisation of private investment from both domestic and international sources and policies that provide a supportive domestic investment environment.

  • Achieving a level playing field for international investment in solar and wind energy

    This chapter provides an integrated overview of the structure and scope of the report, which: 1) takes stock of outstanding barriers to international investment in solar PV and wind energy in OECD countries and emerging economies, with a focus on local-content requirements; and 2) assesses the impacts of local-content requirements on international investment in solar PV and wind energy, in a context of global value chains. This chapter also provides an overview of the rationale for scaling up investment in clean energy and summarises key implications of the report’s findings for policy makers.

  • Key trends within the solar- and wind-energy global value chains

    This chapter provides an overview of the solar-PV and wind-energy global value chains, discussing each in turn. It describes how international trade and foreign direct investment in greenfield projects have contributed to the emergence of global value chains in both solar-PV and wind-energy sectors. For both sectors, the report discusses trends in production, trade volumes, industry concentration, as well as domestic and international investment. Similarities and differences between the two sectors are noted. Particular attention is given to the increasing reliance of domestic production on imported intermediate inputs. The chapter highlights the growing importance of downstream activities (project development, installation, and maintenance) compared to midstream activities (manufacturing) in terms of value added, employment and investment, and discusses some of the policy implications.

  • Local-content requirements in the solar- and wind-energy global value chains

    This chapter describes the increasing use of local-content requirements in green industrial policies. It discusses the arguments for and against such policies and describes the key findings of recent evidence-based analysis regarding their possible impacts on international investment in different segments of the global value chains. The analyses include; (i) a review of recent WTO disputes associated with the use of LCRs in solar and wind energy; (ii) an overview of recent investorstate disputes; (iii) results from a 2014 OECD Investor Survey assessing how leading international investors in wind and solar projects perceive the impacts of policies that differentiate between foreign and domestic investors; (iv) results from a consultation with key private and public stakeholders in solar and wind energy hosted by the OECD in December 2013; (v) results from a new econometric analysis conducted by the OECD to estimate the quantitative impact of LCRs on international investment flows to the solar- and wind-energy sectors; (vi) findings from other quantitative analyses of the impact of LCRs on international trade; and (vii) empirical evidence compiled from the literature on the effects of LCRs in several individual countries. Finally, the chapter discusses the policy implications of these research findings.

  • Other policy-related financial, trade and technical barriers to clean-energy investments

    This chapter discusses a number of policies other than local-content requirements that may also hinder international investment in the solar-PV and wind-energy sectors. Three types of measures are discussed at length in view of their importance and the availability of extensive research: (i) domestic incentive measures, that may differentiate between domestic and foreign investors, such as preferential access to finance, export subsidies, preferential tax incentives, and government provision of subsidised inputs; (ii) trade remedies, such as countervailing and anti-dumping duties, which are permitted by WTO rules under specific circumstances; and (iii) technical regulations and standards. A number of other measures are also briefly discussed. These include: (i) applied import tariffs, (ii) regulatory restrictions on FDI, (iii) cumbersome administrative procedures; (iv) restricted access to the grid; (v) non-transparent procurement processes; and (vi) trade-related investment measures (TRIMS) other than LCRs. The chapter discusses the mechanisms by which these measures may adversely affect international trade and investment, and explains the implications for policy makers.

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