Designing Climate Finance to Enhance Low-Carbon Investment through Local Intermediaries: Applying a Concept of Direct Access to Climate Finance

Working Paper
Designing Climate Finance to Enhance Low-Carbon Investment through Local Intermediaries: Applying a Concept of Direct Access to Climate Finance

Investment in low carbon technologies has been growing over the past few years. However, in order to replace conventional high energy/high carbon intensity technologies with low carbon ones and reduce GHG emissions, innovative financial schemes are needed in order to effectively utilise limited global financing resources. Such limited financial resources should be provided as incentives or back-ups to actors within low-carbon investment such as investors, lenders and enterprises, rather than provided directly to low-carbon projects, for scaling up financing and escalating the speed of low-carbon technology disseminations. At the same time, small-scale enterprises (small- and medium-sized enterprises; SMEs) comprising more than 80% of all enterprises in some developing countries play an important role in disseminating low carbon technologies and advancing low carbon development. Thus, innovative financial mechanisms and national policies are needed to enhance the activities of SMEs and mitigate barriers and risks associated with low carbon technologies, including those specific to SMEs. The combination of public and private finance that effectively utilises national and international financial mechanisms can build up more robust national financing schemes while strengthening the capacity of local financial institutes. Some good examples of national based financing schemes already exist. This paper examines the best options among innovative national financing schemes to enhance low carbon investment by identifying and examining the barriers and benefits of low carbon investments and multi level financing mechanisms.

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