Money makes the wind farms go round

By Mike McDonough

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“There is enough capital in the world to finance de-carbonisation, but stopping pollution from being free would be a good start.”

That’s how clean energy investment specialist Aygen Yayikoglu summed up his view of the state of climate finance in the EBRD region at a panel discussion in Astana on 21 May. The debate was moderated by Tae-yong Jung, Deputy Executive Director of the Global Green Growth Institute.

Mr Yayikoglu set up equity fund Crescent Capital in his native Turkey to help stimulate investment in the low-carbon power sector. A former EBRD banker, he said putting a price on pollution and developing carbon markets would massively boost the attractiveness of green investments.

“One of the reasons people need subsidies for renewables is because polluting is free today. Carbon markets are implicitly very central to this,” he said. “When you have efficient carbon markets that tax thermal power the relative valuation of renewable assets goes up.”

Fellow panellist Xing’an GE from the China Beijing Environmental Exchange (CBEEX) said carbon markets presented two major advantages over other policy instruments in the field of clean energy financing.

“First it guarantees the amount of reduction for carbon dioxide: you set up a cap and total emissions cannot exceed the cap,” he said. “Second a carbon market is the most efficient way for companies to reduce carbon emissions because the incentive mechanism is the strongest.”

Setting up carbon markets, however, can be very difficult, cautioned Jurgen Keinhorst from Germany’s Federal Ministry for Environment. “The European Union has the advantage of big markets and a very strong institutional framework, so it’s easier to manage such a system.”

Germany’s use of feed-in tariffs to stimulate investment in renewable energy is widely considered a model, but Mr Keinhorst suggested it was one that not every country could replicate.

“Feed-in tariffs are not the first choice in terms of pure economic theory,” he said. “We created an incentive system that was followed by a dramatic increase in investments in this area, generating economies of scale which we didn’t expect in advance. But you can’t copy the system everywhere.”

Ruslan Bultrikov from the Kazakh Ministry of Environment Protection said his government was keen to encourage low-carbon development as a means of stimulating the technology sector and creating “green” jobs.

“We have developed amendments to legislation which will create the legal framework for carbon markets,” Mr Bultrikov said. “Our energy efficiency levels are much lower than the world average. Next there is waste management, which is tied to gas emissions and is also one of the biggest problems in our country.

“In order to facilitate investments in these areas, we are just at the beginning of the path. We have a lot to do, but we will do it.”

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