Use of Innovative Public Policy Instruments to Establish and Enhance the Linkage between Green Technology and Finance

Abstract

The risks pertaining to the applicability and profitability of green technologies have discouraged the participation of private financial institutions in green space, and investment is mostly limited to a handful of proven green technologies. It is therefore imperative to explore how appropriately designed public policy instruments could unlock private investment in green technologies. The first part of the chapter introduces the term “green technology financing”, after which it introduces three national green technology financing schemes, one each in Malaysia, the Netherlands, and the Republic of Korea, and each layered with an appropriately designed certification scheme. Next, the chapter discusses innovative aspects of these schemes, and introduces an institutional case from the Republic of Korea that has addressed some of the limitations of those schemes and that has largely helped mitigate real and/or perceived risk associated with green technology projects on the part of private financiers. Finally, the chapter makes policy recommendations specific to developing countries for attracting private finance to green technologies.