Norway Allocates $1.2 bn for RE Projects in Developing Nations

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The Norwegian government has announced the allocation of $1.16 billion over five years for a new fund that will invest in renewable energy in developing countries with the aim of reducing greenhouse gas emissions.

Speaking about the new fund, Minister of International Development Dag-Inge Ulstein said, “It is part of the solution to some of the major challenges we are facing and that are having a particularly severe impact on the world’s poor. We know that even if all countries spend 1 % of their GNI on aid, it will still not be enough to solve global challenges such as climate change.”

The climate fund, administered by the Norwegian Investment Fund for developing countries, Norfund, will from next year support projects to reduce dependence on fossil-fuels, especially coal. NOK 1 billion from Norfund and NOK 1 billion from the national budget will be allocated to the fund annually over the next five years.

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The Scandinavian country’s government believes that eventually, the fund could mobilise around 100 billion crowns in investments via partnerships with private capital and is an essential part of Norway’s contribution to achieving the United Nations’ climate change agreement and sustainable development goals.

Mr Ulstein described the fund as the beginning of a new partnership between public and private capital that can yield returns on investments, reduce greenhouse gas emissions and increase climate finance.

“To succeed in reducing greenhouse gas emissions, particularly in Asia, we need to mobilise more commercial capital,” Prime Minister Erna Solberg said in a statement. “I urge investors to work with the climate investment fund when it is up and running.” The support is said to be in addition to the 6.3 billion crowns Norway spends per year in climate financing as part of its development aid budget.

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The modern discourse of climate equity is premised on the fact that industrialised nations, like the U.S. and Norway, largely contributed to historic greenhouse emissions to accumulate their current wealth and are therefore responsible for majorly funding the costs of the needed clean energy transition. It is also argued that poorer countries are owed damages from climate change, as well as transitioning finance, given that they lack access to technology, intellectual property and multilateral institutions governing climate action.

During the 2015 Paris climate summit, rich countries in the Organization for Economic Cooperation and Development (OECD) agreed to raise at least $100 billion annually by 2020. Only about $80 billion has been raised so far, and much of that climate finance is linked to particular investments. According to an October 2020 Oxfam report, developing countries ultimately received only $25 billion out of $60 billion delivered to them as climate finance between 2017-18, post deductions pertaining to loan repayments and interest.

80% of climate finance is delivered as a loan (e.g., for a solar energy project), rather than a grant, and is contingent on achieving specific environmental outcomes, from rainforest conservation to industrial decarbonization. Rich countries need to contribute more money and relinquish some control over how it is spent by developing nations, according to environmental analysts.