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FEATURE: 3. Plugging the Energy Efficiency Gap with Climate Finance, OECD/IEA

CFAS summary:

While energy efficiency represents 44% of global GHG abatement potential in a 2°C scenario, it has developed slowly thus far. In fact, energy efficiency represents only a small share of overall climate finance flows (estimated around 343-385 billion dollars in 2012) and is concentrated in emerging economies like China. Over 2008-2011, the IEA recorded an annual average value of finance from multilateral development banks for energy efficiency measures in Developing Countries at USD 4,9 billion and from bilateral financing institutions (BFIs) in non-OECD countries at USD 18,9 billion in 2010. If little climate finance is dedicated to energy efficiency, this is due to the market barriers (that exist in both developed and Developing Countries) to massively scaling up energy efficiency funding. If bilateral and multilateral development banks scaled up funding for energy efficiency – particularly in the poorest countries – they could help address market barriers and leverage further private finance. Although energy efficiency activities are not necessarily additional (they could be done without dedicated climate finance), the report supports using climate finance in all Developing Countries: in emerging economies to help mobilise private investments in energy efficiency and in low-income countries in the form of grants and subsidies. The IEA and OECD also support establishing an innovative financing framework for energy efficiency in Developing Countries through the Green Climate Fund. This way, the GCF could support cost-effective energy efficiency actions with important co-benefits for mitigation.

Authors: Lisa Ryan, Nora Selmet and André Aasrud (OECD and IEA)

Date: Insights series 2012



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