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The effect of financial constraints on energy-climate scenarios

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  • Ekholm, Tommi
  • Ghoddusi, Hamed
  • Krey, Volker
  • Riahi, Keywan

Abstract

In this paper, we discuss the implications of financing constraints for future energy and climate scenarios. Aspirations to improve energy access and electrification rates in developing countries, while simultaneously reducing greenhouse gas emissions, can be seriously hindered by the availability of low-cost capital for the necessary investments. We first provide a brief description of the theoretical foundations for financing constraints in the energy sector. Then, using a broad range of alternate assumptions we introduce capital supply curves to an energy system model for Sub-Saharan Africa, with a specific focus on the power sector. Our results portray the effect of capital cost on technology selection in electricity generation, specifically how limited capital supply decreases investments to capital-intensive zero-emission technologies. As a direct consequence, the emission price required to meet given emission targets is considerably increased when compared to case that disregards the capital constraints. Finally, we discuss possible policy instruments for resolving the constraints.

Suggested Citation

  • Ekholm, Tommi & Ghoddusi, Hamed & Krey, Volker & Riahi, Keywan, 2013. "The effect of financial constraints on energy-climate scenarios," Energy Policy, Elsevier, vol. 59(C), pages 562-572.
    • Handle: RePEc:eee:enepol:v:59:y:2013:i:c:p:562-572
    DOI: 10.1016/j.enpol.2013.04.001
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    9. Rabab Mudakkar, Syeda & Zaman, Khalid & Shakir, Huma & Arif, Mariam & Naseem, Imran & Naz, Lubna, 2013. "Determinants of energy consumption function in SAARC countries: Balancing the odds," Renewable and Sustainable Energy Reviews, Elsevier, vol. 28(C), pages 566-574.
    10. Timmons, D. & Dhunny, A.Z. & Elahee, K. & Havumaki, B. & Howells, M. & Khoodaruth, A. & Lema-Driscoll, A.K. & Lollchund, M.R. & Ramgolam, Y.K. & Rughooputh, S.D.D.V. & Surroop, D., 2019. "Cost minimization for fully renewable electricity systems: A Mauritius case study," Energy Policy, Elsevier, vol. 133(C).
    11. Adedayo Emmanuel LONGE & Tolulope Oluwatosin BOLAJI & Caleb Olugbenga SOYEMI & Emmanuel Olajide ADEBAYO, 2020. "Dynamic Links Between Financial Development and Carbon Emission in Nigeria," Business & Management Compass, University of Economics Varna, issue 2, pages 214-229.
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    13. Dumisani Chirambo, 2014. "The Climate Finance and Energy Investment Dilemma in Africa," Journal of Developing Societies, , vol. 30(4), pages 415-440, December.

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