Finance

• The financial sector’s aversion to risk limits funding for novel renewable energy projects. Public finance should seek to bridge this gap to incentivise financial institutions to accept a higher degree of risk to facilitate innovation and the development of new technologies. Concessional capital and regulatory reform could also be used to bridge the gap between strategic and commercial interests as has been done successfully in India.[7]
• Increased investment may be facilitated by bringing together both export credit agencies to co-create renewable energy criteria for investment decisions, and the donor community to discuss how they can support renewable energy development for mining.
• Conversations around the role of mining in the green transition need to be happening at the level of G7 and G20 to encourage buy-in from the financial industry.
• Financial institutions should consider bringing in China as a co-funder for renewable energy projects.
• A wide range of tools should be used by public finance and MDBs to provide incentives for renewable energy and de-risk innovation in mining so the private sector can support decarbonisation efforts. This could include reformed export credit arrangements, longer repayment terms, critical mineral specific bonds, loan guarantees, renewable energy subsidies and tax incentives for reducing emissions across the supply chain and developing energy transition infrastructure.
• Encouraging OEMs to agree off-take agreements may help stabilise prices to allow for increased renewable energy development. Similarly, mining companies could use offtake agreements to secure long-term financing for large scale renewable energy projects.
• Small and medium companies often struggle to access financing. They could be brought together with investors and the donor community to ensure mining companies of all sizes can access the support and capital they need to help reduce emissions.
• Indonesia and the Philippines are heavily reliant on Chinese investment. It should be considered how to make these markets more appealing for Western investors, ensuring that public and private finance and cross-sector stakeholders work together to allocate capital and appropriate support to these countries to meet increasing standards such as those required by the US’s Inflation Reduction Act and the EU’s upcoming Carbon Border Adjustment Mechanism. In Indonesia in particular, decarbonisation will remain challenging without this funding given the country’s reliance on coal.

Genevieve Kotarska

Wilton Park | June 2024