Introduction
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Further private sector participation in the provision of basic services, such as water and electricity, may be forthcoming, if the components of provision of such goods to be financed by the private sector are unbundled from the components to be financed by the government. For example, investments in the establishment or upgrading of a water treatment plant can be separated from both the piped water delivery network and the infrastructure that provides the water at the point of source or collection, such as a reservoir or well. This allows private sector transactors to calculate rates of return on each component individually, and thus to invest in individual components to their liking, and to avoid investment in components that are appropriate to government provision.
Funding Green Investments While supplemental financing for environment-friendly projects that complements conventional financing rarely covers the full investment cost of a project, such supplemental financing often allows otherwise nonviable projects to become financially viable. The following are examples of such supplemental financing: s
The Clean Development Mechanism (defined in the Kyoto Protocol), which funds projects that reduce GHG emissions through energy efficiency or through bilateral cap-and-trade systems, such as Japan’s New Domestic Clean Development Mechanism or the Republic of Korea’s Emission Reduction Scheme.
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Climate Investment Funds that finance improvement in fuel economy standards, acceleration of fuel-switching initiatives, and shifts toward environment-friendly operations in public transport systems in metropolitan areas.
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The Global Environment Facility, a partnership of 182 countries and international institutions, nongovernment organizations, and private sector entities, that addresses global environmental issues. Since 1991, this facility has allocated $9.2 billion to such investments, this amount being supplemented by more than $40 billion in cofinancing.
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The Clean Energy Financing Partnership Facility, which helps developing countries achieve significant, measurable changes in energy consumption as a means of securing a low-carbon future for the earth as a whole. This facility finances investments in energy efficiency, funds some technology transfer costs, and provides grant assistance for environmentfriendly activities such as development of green technologies.
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Ethical funds, which pool the money of hundreds of investors into a single fund that makes stock market investments, the resulting overall portfolio being influenced by social, environmental, and other ethical