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Developed economies with higher per-capita emissions could help developing economies to transition away from fossil fuels and accelerate clean energy rollout, Fabio Panetta, the governor of Italy’s Central Bank, said on Monday.
The plan would help reduce the overall cost of the energy transition globally, Panetta said at a G7 – IEA Ensuring an Orderly Energy Transition conference hosted by the Italian G7 Presidency and the International Energy Agency in Rome.
“Financing transition projects in emerging market and developing economies (EMDEs) can be twice as expensive as in advanced economies,” Panetta said at the conference, as carried by Reuters.
While last year’s COP28 climate summit ended with a compromise text referencing for the first time a call to all parties to transition away from fossil fuels, the nations are yet to agree on a plan for how to help poorer countries finance their transition away from coal, oil, and gas.
Panetta backs a plan to have countries with higher emissions per capita compensate countries with low emissions.
The resources transferred into such a scheme “would be more than offset by the economic damage avoided from the climate change they would suffer if the transition effort failed,” he said.
As the cost of the energy transition rises, developed countries are supposed to help developing countries with climate finance, but some have been providing loans with high interest rates instead of grants.
An investigation by the Big Local News journalism program at Stanford University revealed that G7 members of the OECD had routinely provided so-called climate finance to poor nations in the form of loans rather than grants, with market-rate interest attached to them rather than the discount interest typical of such loans. The loans also came with strings attached: the borrower had to hire companies from the lender country for the projects that were financed.
