SAccording to the Intergovernmental Panel on Climate Change (IPCC), investments to decarbonize our economies must be multiplied by a factor of three to six, particularly in developing countries. However, in 2021-2022, China excluded, they only received 15% of climate investments while their share should be two to four times higher. They are building most of their infrastructure capital and, if they do not do so using low-carbon options, they will have no other choice but to adopt development trajectories that will make the compliance with the objectives of the Paris Agreement.
Development practitioners know that the barrier of technical costs is not the most critical, as there is vast untapped potential at low costs. After decades of progress, many green technologies are competitive today – the solar kilowatt, which cost seven times more than the coal kilowatt in 2010, was 29% cheaper in 2022.
The problem lies on the side of financial risks: low-carbon and resilient infrastructures have high construction costs and low usage costs (no fuel purchase). Their financial viability therefore depends on the cost of money to finance additional construction costs in already capital-intensive sectors (renewable energy, roads, buildings, ports resilient to extreme events). This cost depends on the investment risks.
Too many viable projects are thus not launched because they tie up significant sums for long periods and present a range of risks which discourage taking initiative for fear of not being able to repay creditors (asset managers, funds pension, banks). To the uncertainties on the markets and on the performance of less mature techniques are added, from the preparation of the projects, those which come from unsuitable regulations, the apprehensions of the populations and the insufficiency of pre-existing infrastructures.
Experiences in removing obstacles
The development of an offshore wind project can take twelve years due to delays in approving building permits and connecting to the network. Investments in developing countries are even more penalized, because financial markets overweight the risks linked to the macroeconomic fragility of countries and their level of debt. For example, the levelized cost of solar electricity is three times higher in Sudan than in Switzerland due to the prohibitive cost of money.
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