Financing the Energy Transition in Difficult Times

IDDRI Press Release [13.06.18]

Paris, 18 June 2013 - The Caisse des Dépôts et Consignations (CDC) and the Institute for Sustainable Development and International Relations (IDDRI) organized on 14 June a high level round table to reflect on the role of public banks in financing the energy transition.

European Member States are currently faced with multiple challenges. Exiting the economic crisis is currently the highest priority; at the same time, energy consumption and production must be modernized and decarbonized, in order to ensure continued energy security, affordable energy, and the achievement of EU’s climate change goals. Private banks and big companies are unable to invest at sufficient scale, restrained by policy uncertainty, by high levels of debt, and new financial sector regulations. How can the energy transition be financed in difficult times? To what extent can this be part of a green exit to the crisis? And what should be the role of public banks in triggering this process?

IDDRI and CDC addressed these issues within the framework of a high level round table, in order to exchange experiences with three leading institutions: the Green Investment Bank (UK), the European Investment Bank (EIB), and the KfW (Germany). On this occasion, Laurence Tubiana declared: ‘Financing is the key challenge to launch the energy transition. The numbers are there: between 20 and 30 billion euros per year are needed in France alone. This could be a great levy for a green economic recovery. It’s a winning bet but how to bear the costs in the short term?’

Underlining the crucial role that public banks have to play, she added: ‘In order to upscale the investments in the energy transition, public banks have a catalyzing role to play. But they cannot do it on their own: other stakeholders, including private investors, have to be involved in that effort.

Participants underlined the crucial role of public banks in generating trust in the market. In this regard, Rob Mansley, Managing Director Capital Markets from the Green Investment Bank stated: ‘Especially for relatively new investment opportunities, the commitment of public banks can create a demonstration effect, facilitating the involvement of other investment partners. We have to make it real. By demonstrating success the market will support ongoing investment on a larger scale’.

'The current context means that we do need to consider new tools, new financial instruments. As an example, we need to look at how to develop covered bonds and securitization for renewable energy assets' added Christopher Knowles, Head of climate change and Environment Division at the European Investment Bank.

Moreover, the challenge of financing the energy transition will be met only if it is led by a vision: ‘Green economy is more than a smart idea […] We need a robust narrative about green economy, that meets the economic and employment agenda’ emphasized Jochen Harnisch, Head of Division Climate and Environment at the German KfW.

Finally, Pierre Ducret, Chairman and CEO of CDC Climat, explained: ‘The Green Investment bank and the KfW are very inspiring for the recommendations we provide to the French government regarding the financing of thermal renovation of private housing. We think this has to be financed by private capital.