Does the world need an international investment organization to battle climate change?

Abstract

Climate change is among the most challenging problems that the world has faced and the needs for investment in clean energy projects are vast. Those needs can only be met if financial resources are pooled from different sources, including public and private, as well as bilateral and multilateral donors. This is especially true for capital intensive activities such as geothermal and hydropower projects. While government funds are important, many developing and emerging countries that control clean energy sources do not have the tax base to fund large, capital intensive, long term projects. International financial institutions (IFIs) such as the World Bank Group (WBG) and the regional development banks can help with capital mobilization for clean energy projects and facilitate cooperation with the private sector. An important obstacle in scaling up clean energy projects today is that no comprehensive multilateral agreement on foreign investments exists. No multilateral institution is engaged in cross border investments in the same way as the World Trade Organization (WTO) does for cross border trade. This is an obstacle for global efforts to promote cross border climate friendly investment and an impediment for private sector flows to fund clean energy investments.

Keywords

• clean energy investments
• climate change
• international financial institutions (ifis)