Policy Hub
As negotiators and policy makers look beyond the high-level politics of a global climate change deal, attention will focus on implementation, according to a paper from Chatham House published on 7 December 2009.
The paper looks at what policy needs to deliver in order to provide the conditions for scaled-up investment in renewable energy, drawing on work with leading mainstream financiers. ‘Investment grade' energy policy is a critical factor for unlocking significantly scaled-up capital flows into renewable energy and energy efficiency.
To be 'investment grade', policy must tackle all the relevant factors that financiers assess when looking at a deal. It must be embedded in wider energy policy, and be stable across the lifetime of projects.
A target, a fiscal incentive, or the availability of public finance alone will not be sufficient if there are cumulative high risks associated with other factors. Risk-adjusted returns must be commercially attractive.
Different market characteristics of renewable energy subsectors, and energy efficiency, mean that policy needs to be well designed and precise. On its own, a blanket 'low carbon' approach, or a carbon price, will not overcome specific market risks associated with differing technologies.
Unlocking finance for clean energy: The need for ‘investment grade’ policy (PDF)