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The EU’s financial instruments for access to energy in sub-Saharan Africa

By Grosse-Puppendahl, S., Bilal, S., Karaki, K. 2017. The EU’s financial instruments for access to en November 08, 2017

EU’s Financial Instruments for Access to Energy Support in remote and poor areas in Africa
By Sebastian Grosse-Puppendahl, San Bilal and Karim Karaki; November 2017

The European Union (EU) has committed to ambitious energy-related objectives that shall contribute to inclusive, sustainable development. It, therefore, has put a number of financial instruments in place that support energy access in sub-Saharan Africa. Beyond traditional grants (still the bulk of EU funding), the EU increasingly uses its Official Development Assistance (ODA) to leverage loans and private investments from Development Finance institutions (DFIs) and the private sector, as also envisioned in the recently agreed European External Investment Plan (EIP).

Through blended finance and smart technical assistance, there is a huge potential to develop and finance more energy projects that are currently (perceived) too risky and do not attract purely private investment. The EIP, through its 3-pillar approach and the setting of a dedicated ‘sustainable energy’ investment window, offers the opportunity to boost public and private investments in a more coherent, coordinated, and differentiated manner, and to foster impact investments, including towards the poor and enhancing their access to energy.

Blending is however not a silver bullet, as it only works in certain areas and conditions, and cannot compensate for a lack of bankable and economically viable projects, particularly in less developed areas, where access rates are usually the lowest and the private sector is least interested and attracted. There will, therefore, be a continued need for i) grant funding for not fully economically viable projects, including when reaching some of the remote and poorest areas, ii) the right mix of public and private support instruments depending on context and need, and iii) more patience to see results.

Besides, while many of the policy documents and instruments, most notably the EC’s Africa Investment Facility and ElectriFI, make specific reference to enhancing access to energy, there is little information on results and impact, in particular for remote areas and poor segments of the population. The lack of transparency and data makes it often difficult to identify best practice and lessons learnt.The EIP also offers an opportunity for the EC to reconsider its monitoring and reporting results framework, and adapting expectations on impact, over a longer time horizon.

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Michael Fegerl (2018-06-20 15:07:46)

New EU rules will make investors report on environmental risk.

The European Commission has released fresh proposals to ensure the financial sector contributes towards combating climate change.

The proposals build on the Commission’s ongoing work to accelerate sustainable finance within Europe. Its recent Action Plan set out an initial strategy on the issue, which aimed to ensure finance benefitted the planet and society.

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