Financial Barriers to Development of Renewable and Green Energy Projects in Asia

Abstract

The expansion of green renewable energy has been very limited in all the Asian countries despite their various differences. The contributing factors are numerous, but the financial factor has been the major single one determining whether or not they opt for such energy. This is notwithstanding their awareness about the unsustainability of their fossil energy-dominated energy mixes both for environmental and economic reasons. The main culprit is Asia’s bank-dominated financial system with its underdeveloped capital market, which leaves Asian banks as the major source of funding for green renewable energy projects. Considering these projects as very risky with low rate of return on their invested capital, their reluctance to finance them has been the major barrier to the expansion of green renewable energy in Asia. Addressing the financing challenge is both possible and necessary to remove the barrier to green energy expansion in Asia.