Innovative Climate Financing Mechanisms Involving Public-Private Partnerships

Infrastructure investments are an important step to enable low-carbon growth initiatives, however, data suggests that if governments are to meet their low-carbon growth plans, most of the capital needed must come from the private sector. As a result, governments around the world have started to develop innovative funding mechanisms, designed to attract the additional private capital needed for low-carbon infrastructure development.

This Capstone project was requested by the China Clean Development Mechanism Fund (China CDM Fund), Ministry of Finance in China. The Fund’s financial sustainability and thus its ability to support climate-friendly business in China has recently been challenged by declining carbon markets.  In this context, the overarching objective of the Capstone project was to gain a better understanding of international best practices to design climate funds that effectively leverage private capital for low-carbon infrastructure development.

To reach this objective, the project team conducted four case studies designed to understand how public or quasi-public institutions enable climate-finance public/private partnerships, and how effective the different models are in terms of leveraging additional private finance and having the desired ‘green’ impact. The four case studies are the Green Investment Bank (UK), the Climate Public Private Partnership Initiative (CP3), the Connecticut Green Bank (US), and the Overseas Private Investment Corporation OPIC (US).