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Harnessing financial markets and institutional investment to increase the penetration of clean energy in Asia and the Pacific
Climate change and energy poverty are just two of the key global challenges that the world is currently facing. From rising sea levels that increase the risk of catastrophic flooding and extreme weather patterns that impact the quality and quantity of food production, climate change threatens humankind’s very existence. At the same time, billions of people around the world live without access to electricity, a fact that negatively impacts their well-being, health and economic growth and exacerbates social inequality. In Asia and the Pacific alone, more than 420 million people lack access to adequate electricity. Clean energy investment could address the increasing demand for electrification mitigating the negative effects of using fossil fuels.
While renewable energy technology is recognised as a potential solution for addressing both climate change and energy poverty in the Pacific, investors are reluctant to commit funds for fear that their investment will not yield the desired outcomes.
A team of researchers, led by Emeritus Professor Neil Gunningham, a leading expert in environmental and energy law, say the root of the problem lies in the failure to see climate finance as a cycle in which the existence of effective climate finance regulation and governance play a vital role.
“Even when funds are available and new technologies are cleaner, smarter and cheaper, dysfunctional governance blocks their implementation,” Professor Gunningham said.
“The challenge therefore is not necessarily ‘mobilising’ funds, rather it is the lack of conducive regulation and governance capable of enabling finance to flow,” he added.
In this context, Emeritus Professor Neil Gunningham, working with Associate Professor Christian Downie, Dr Abidah Setyowati and PhD scholar Kirsty Anantharajah, spearheaded a research project aimed to address this challenge in Fiji and Indonesia.
Their DFAT funded project titled ‘Harnessing financial markets and institutional investment to increase the penetration of clean energy in Asia and the Pacific’, which is part of RegNet’s Climate Finance Initiative, sought to build capacity within government and the private sector in order to identify opportunities for private sector finance, develop innovative governance mechanisms, reduce informational asymmetry and improve clean energy literacy.
“Overall, thanks largely to Kirsty and Abidah’s exhaustive fieldwork, we found that intervening in the governance stage of the climate finance cycle results in improved investment quality,” Professor Gunningham said.
“In Fiji, lack of capacity and weak governance, and in Indonesia, inconsistent policies, a difficult investment environment and lack of transparency discourage investment. Our research-informed framework, dialogues and consultation helped stakeholders overcome governance obstacles in both countries.
“We were also able to identify the impediments and opportunities for advancing renewable energy solutions in areas the electricity grid is never likely to reach and for mobilising climate finance for rapid adoption of renewable energy solutions.
“Not least we provided a number of roadmaps to our partner agencies, made proposals for innovative governance arrangements to overcome to seemingly intractable problems, identified opportunities for sustainable engagement with stakeholders and participated in a variety of capacity-building initiatives.”
Emeritus Professor Gunningham said that over the course of the project the team developed partnerships and pathways to increase commitment and leverage resources, tap into climate financing networks to boost knowledge and capacity and access finance from external sources.
“In Fiji, we received support from the Reserve Bank and the Department of Energy, where our dialogues and capacity building activities have been targeted, and from the University of the South Pacific,” he explained.
“Our work in Indonesia has generated support from multiple stakeholders and close collaboration with key stakeholders. For example, we have carried out capacity and public engagement activities in close collaboration with several institutions such as a state-owned infrastructure finance company, PT SMI and the Ministry of Finance (sustainable finance section).
“I feel we achieved a lot, thanks largely to our two excellent researchers - Dr Abidah Setyowati and Kirsty Anantharajah - who conducted fieldwork in Indonesia and Fiji,” Professor Gunningham concluded.
Over the course of this project, a total of 164 consultations were carried out in these countries, generating important insights. Additionally, four training sessions and 22 other public engagement activities (e.g. public lectures, policy workshops, focus group discussions) were delivered, involving multiple stakeholders across both countries. The project also generated a substantial number of peer-reviewed journal articles, editorials, working papers and policy briefs targeting academic, policy and public audiences.
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Image by Zbynek Burival on Unsplash
