Financing FiTs in developing countries

 

A renewable energy policy like the Feed-in Tariff (FIT) is the best political mechanism to provide investment security and spread the decentralized production of renewable energy. A national policy is key to deliver both while ensuring that the greater part of the supply chain remains in the particular country. However, many developing countries have failed to implement a sound renewable energy policy because of the uncertainty about the financial costs. Furthermore, the existing Clean Developing Mechanism (CDM) has barely covered small-scale appliances of renewable energy.

To help developing countries financing a FIT without increases in electricity costs for households, the World Future Council proposes to set up a global Renewable Energy Policy Fund
. The Fund financed by industrialised countries would provide an easy-to-use, flexible and self-sustainable support mechanism. 

Structure of the proposed funding system for renewable energies; For full explanation click on the graph and read the WFC REP-Fund proposal

To finance the REP-Fund the World Future Council proposes two parallel initiatives. The first one is to use existing funds; the second proposal is to create the money needed with the help of Special Drawing Rights (SDRs) of the International Monetary Fund. Read more about the SDR proposal.