Financial Resources for Investing in Sustainable Energy Projects

What will be the sources of financial resources for investing in Sustainable Energy Projects and the role of SIDS DOCK?

SIDS DOCK will facilitate funding for investment in sustainable energy projects through a combination of sources including the SIDS themselves (government, private sector, social organizations), and the global private sector and development partners, with the goal of transforming the highly inefficient and fossil fuel dependent energy sector. SIDS DOCK will seek to promote national /regional energy investment bonds. Global private sector funding will come from a variety of sources ranging from socially responsible investors, financial institutions, and project financing.

Additionally, SIDS DOCK will work with the key sponsors of the global carbon markets to securitize future emission reduction from SIDS. Success in securitizing future emission reduction will facilitate early and increased flows of financial investments into sustainable energy projects.

Public-private partnerships represent a proven mechanism for financing and/or technology transfers, and would be promoted by SIDS DOCK as a principal means of investments in sustainable energy projects in SIDS. Also, SIDS DOCK would work with bilateral donors and multilateral organizations to consider invest equity in these projects. Proceeds accruing from such investment would be available for further project financing in the SIDS.

A Memorandum of Agreement for establishing the SIDS sustainable energy initiative, SIDS DOCK, was formally signed by ten countries in December 2009: Bahamas, Belize, Cape Verde, Dominican Republic, Jamaica, Mauritius, Palau, St. Lucia, Seychelles, and Solomon Islands. In February 2010, Grenada signed on. Nations committed to signing are Barbados, Samoa, St. Vincent and the Grenadines. The following countries have projects in development: The Commonwealth of the Bahamas, Belize, Dominican Republic; Grenada and Jamaica with two projects each. The seven projects are classified in four areas:

• Biofuels Production;
• Energy Conservation;
• Energy Efficiency, and;
• Renewable Electricity Generation.

How To Generate Financial Resources for Adaptation to Climate Change

How Can SIDS Generate Financial Resources for Adaptation to Climate Change through the Energy Sector and How would SIDS DOCK Help?

GHG from the SIDS energy sector is estimated at 38 million tons of carbon annually. Based on projected carbon price of USD 20 per ton, a 25 percent reduction in carbon emissions by SIDS traded on the global carbon market would be equivalent to USD160 million per year. Acting collectively, it would be possible for SIDS to derive a significant amount of these financial flows, compared to acting individually. The main role of SIDS DOCK would be to organize the documentation and processing of the avoided carbon emission to have them certified and marketable. As many projects will be small in scale, SIDS DOCK would have to do a bundling exercise in order to reach the necessary transaction threshold.

The high level of dependence on costly petroleum fuels to provide energy services represents the major source of economic vulnerability for the majority of small islands States. In many cases, the cost of imported petroleum is more than 25 percent of foreign exchange earnings. Member States of AOSIS consume in excess of 220 million barrels of petroleum. Depending on the price of petroleum, this cost SIDS billions or tens of billions of foreign exchange each year. Minimizing dependence on petroleum fuels by increasing energy efficiency and development of the vast renewable energy sources will make SIDS less vulnerable and generate significant employment. The expansion in economic activity will mean increased financial resources for the country. Growing economies will generate increased amounts of financial resources to help meet the challenges of adapting to the adverse consequences of human-induced climate change.