Year: 2024
Type: article
Abstract: Climate stabilization requires the mobilization of substantial investments in low- and zero-carbon technologies, especially in emerging and developing economies. However, access to stable and affordable finance varies dramatically across countries. Models used to evaluate the energy transition do not differentiate regional financing costs and therefore cannot study risk-sharing mechanisms for renewable electricity generation. In this study, we incorporated the empirically estimated cost of capital differentiated by country and technology into an ensemble of five climate–energy–economy models. We quantified the additional financing cost of decarbonization borne by developing regions and explored policies of risk premium convergence across countries. We found that alleviating financial constraints benefits both climate and equity as a result of more renewable and affordable energy in the developing world. This highlights the importance of fair finance for energy availability, affordability and sustainability, as well as the need to include financial considerations in model-based assessments. Fair finance in the energy sector is modelled in five climate–energy–economy models. The results show that convergence costs of capital could improve energy availability, affordability and sustainability in developing countries, thereby increasing the international equity of the energy transition.
Source: Nature Energy
Institutions: RFF-CMCC European Institute on Economics and the Environment, CMCC Foundation - Euro-Mediterranean Center on Climate Change, Politecnico di Milano, AgroParisTech, CIRED, Netherlands Environmental Assessment Agency, ETH Zurich, Technical University of Munich, Joint Global Change Research Institute, Pacific Northwest National Laboratory, University of Maryland, College Park, CICERO Center for International Climate Research, Imperial College London, Utrecht University, Maastricht University, Institute of Science, Technology and Policy, University of the Basque Country, Basque Centre for Climate Change
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $12,290
Awards: ENABLING AND LEVERAGING CLIMATE ACTION TOWARDS NET-ZERO EMISSIONS, NET ZERO PATHWAY RESEARCH THROUGH INTEGRATED ASSESSMENT MODEL ADVANCEMENTS, G2120312875, G2445201018, G2466155764, European Climate and Energy Modelling Forum, Innovation pathways, strategies and policies for the Low-Carbon Transition in Europe, G434337789, Global Excellence in Modeling Climate and Energy Policies, G5096673999, NET ZERO PATHWAY RESEARCH THROUGH INTEGRATED ASSESSMENT MODELADVANCEMENTS, G6231092283, G6254744314, G764342404, Expanding Integrated Assessment Modelling: Comprehensive and Comprehensible Science for Sustainable, Co-Created Climate Action, G7831118386, Delivering the next generation of open Integrated Assessment MOdels for Net-zero, sustainable Development, G8520202306
OpenAlex ID: W4402926585