Free market mechanisms are failing to attract the private capital needed to develop clean energy projects in Latin America and the Caribbean.
According to Bloomberg New Energy Finance and the Inter-American Development Bank’s multilateral investment fund (IMF), last year global investment in clean energy projects reached $260 billion, with Latin America and the Caribbean only receiving seven percent of that sum, despite the incredible renewable energy potential that the region boasts.
The MIF created the new business index called Climatescope in order to encourage private investors to devote $9.4 billion in green energy sector for Latin America and the Caribbean; however this amount is significantly below the desired level of investment that the rapidly growing region requires. MIF suggests that it is about half of the level that they should be attracting.
Analysts and commentators have long talked about the huge potential for clean energy development in the area; from the solar energy opportunities in the Atacama desert, to the many suitable sites for wind, hydro and wave power. However there are many obstacles facing renewable energy projects in Latin America and the Caribbean, such as the availability of local capital and the absence of supply chains for clean energy technology, which threaten to leave the vast potential untapped.
In the rest of the world about 60% of finance invested in low-carbon projects is private, and this private finance is vital to the growth of the green energy sector and the success of initiatives such as the UN’s Reducing emissions from deforestation and forest degradation (Redd), which needs up to $30bn a year. Governments alone cannot supply this amount of money, and therefore private investors are imperative to changing the world to a low carbon economy.
By. Charles Kennedy
Charles is a writer for Oilprice.com