Host country characteristics attracting climate projects through public-private partnerships

Abstract

Climate technology transfer to developing countries face a range of challenges stemming from the capacity of destination or host countries. Access to finance has been identified as a major barrier in academic literature as well as by the donor community, and efforts were made to not only fill some of the gap, but also to reduce local hurdles and usher in private sector investments. This latter phenomenon has not gained similar scrutiny as projects under carbon finance schemes or technical assistance projects of international development organizations. This paper offers an outcome evaluation of a public-private partnership as it relates to climate finance & technology investment in developing countries. The analysis focused on the activities of Private Financing Advisory Network (PFAN), which works through open solicitation of projects sought from developing countries. Therefore, it would be expected that some countries are better equipped to attract investments than others. Using cross-sectional country characteristics data, negative binomial regression was used to associate the characteristics with the count of projects in host countries. Results show that key characteristics associated with the respective number of projects are the size of the market, and a composite score measuring health of the financial sector in host countries. It reaffirms the pattern that private-sector driven initiatives tends to tilt towards destination where the returns of investments are greatest, or the risks of investments are lower. The findings highlight the question of additionality of climate technology investments, and whether the public-private partnership address the barrier of access to finance.

Keywords

• financial markets
• clean development mechanism (cdm)
• getting credit distance to frontier
• outcome evaluation
• additionality