Mobilizing climate finance to support energy efficiency

Panel: 1. Foundations of future energy policy

This is a peer-reviewed paper.

Authors:
Benoit Lebot, International Partnership for Energy Efficiency Cooperation (IPEEC), France
Jurei Yada, IPEEC
Zoe Lagarde, IPEEC
Ailin Huang, IPEEC
Enrui Zhang, International Partnership for Energy Efficiency Cooperation (IPEEC)

Abstract

Energy efficiency investments need to be significantly scaled up in all economies. Energy efficiency can contribute up to a third of emission reductions necessary for the 2°C goal. Yet, energy efficiency is not happening as quickly and broadly as it should. Under the Kyoto Protocol, international mechanisms failed to tap into the energy efficiency potential in a significant manner. Part of this is due to the fact that energy efficiency does not come easily.

For energy efficiency to work, the right enabling environment needs to be in place: a range of upstream policy, regulatory, financial, knowledge and human measures, all important to stimulate efficiency investments to the level where energy efficiency will truly take off. Such a conducive framework has a cost that can or should be supported by ‘transformative funding’ from the Green Climate Fund or other sources of climate finance.

This paper discusses the significant gap between the strong potential of energy efficiency to contribute to international climate goals and the level of finance currently allocated to it, especially through climate finance. The paper reviews financial mechanisms under the Kyoto Protocol that focused more on project finance rather than transformative finance. It develops arguments to increase the financial flows into transformative projects that will create an enabling environment for energy efficiency projects and strongly contribute to lowering GHG emissions in the future. In particular the GCF and other climate funds are faced with the crucial opportunity to address the financing gap and play a critical role in allocating transformative finance for energy efficiency, filling the void left by other institutions (such as governments or the private sector). The paper concludes with a series of concrete recommendations aimed at delivering energy efficiency in all economies at the levels necessary to realise the climate goal of the Paris Agreement.