The unprecedented commitments made through Nationally Appropriate Mitigation Action (NAMA) show that Asian economies aim to implement low- carbon green growth policies as they offer substantial co-benefits. The constraint for achieving NAMA targets is not only the availability of appropriate technology, but the cost of accessing finance to bridge the viability gaps in adopting the best available green technologies.
The ADB-ADBI-JBIC seminar gathered together policymakers and experts from the research community, the private sector and multi-lateral financial institutions to discuss several reformative measures to accelerate green growth.
In his opening address, ADB President Haruhiko Kuroda underscored the need of a three-pronged approach for hastening green finance, namely reforming the policy framework for accelerating green investment, a changing role of government and business, and developing synergy between international financial institutions to optimize modalities of investment. The goal should be to build a bridge between policymakers in finance, economy, trade, and the environment, and work across the board on all macro and structural issues, which are crucial for facilitating accelerating public and private investment in green projects.
With limited public finance sources, mobilization of private sector resources was highlighted as a very important component for the future agenda. Hiroshi Watanabe, CEO and executive managing director of Japan Bank for International Cooperation, emphasized the need for appropriate measurement, reporting and verification systems and integrating them into project financing, to improve environmental performance for infrastructure projects, and effectiveness of policy reforms.
The government and the private sector must do more to incorporate environmental and other externalities into economic growth. It will also be a basis upon which the policy reforms can address market uncertainties and strengthen regional cooperation. Bindu Lohani, vice-president of ADB, exemplified how cross-border financing initiatives could be beneficial using an example of renewable energy trade between Lao PDR and Thailand that provides clean energy and also helps to tackle climate change. He also underlined the importance of carbon market initiatives as a means of facilitating financial cooperation in the region.
Private financial markets and market based mechanisms, such as clean development mechanisms, behave rationally and require adequate returns factoring in the various country and institutional risks. These hurdles are especially high in developing countries if there is institutional and regulatory governance weakness. Under these circumstances, the private sector does not possess the incentives to mobilize financing to the required scale. The private sector, instead, needs a collaborative effort and support from public finance as well as from international donors if the requisite magnitudes of financing are to flow into low-carbon green growth investments. Naoko Ishii, CEO and chairperson of Global Environmental Facility (GEF), acknowledged that a solution for huge financial demand could be attained by a combination of public and private funds, and with catalytic financial resources available with multi-lateral institutions such as GEF. They could be combined for maximum effect.
The integration of a co-benefit approach in financing low-carbon projects was emphasized by T.C.A. Ranganathan, chairman and managing director of Exim Bank of India. He made the argument that developing countries with low levels of per capita emissions and energy use also face the same level of financing constraints. He emphasized that many aspects of green financings are public goods and financial intermediaries must behave in a manner that is consistent with maximizing social welfare with or without the presence or absence of public intervention.
The conference participants also discussed the capacity building needs to develop a portfolio of policy tools that catalyze sufficient investment into climate change mitigation, adaptation, and green technology. Starting a regional level dialogue process to share good practices, maximize synergy, and accelerate green investment at a scale required are recommended.