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The environmental argument behind fossil fuel subsidy reform is strong, particularly among international finance institutions wishing to support 'transformational' low-carbon development. However, supporting reform in practice has often met methodological and political barriers. Instead, a large share of international climate finance has flowed to national policies and measures that incentivize the deployment of low-carbon technologies such as renewable energy technologies. In this paper, we propose that 'hybrid' policies that package fossil fuel subsidy reform with low-carbon technology deployment policy offer an opportunity for donors to support mitigation activities that achieve both concrete environmental impacts as well as longterm structural change. Specifically, we model the abatement cost, fossil fuel subsidy savings, and generation cost resulting from combining wind and solar photovoltaic deployment policy with fossil fuel subsidy phase-out in four country case studies. Our results not only show the extent to which fossil fuel subsidies can undermine the financial viability of low-carbon energy technologies, but also how cost uncertainties can be buffered by combining fossil fuel subsidy reform with renewable energy deployment. Furthermore, we assess the proposed hybrid policy against typical climate finance criteria and thus contribute to debates surrounding donor strategies to support low-carbon development. ; ISSN:1748-9326 ; ISSN:1748-9318

Like many emerging markets, the Arab Republic of Egypt is keen to promote distributed solar, defined here as systems below 500 kilowatts, but has struggled to create conditions for growth in the sector. The aim of this paper is to identify policy actions to unlock the distributed solar market for on-grid and off-grid applications, using Egypt as a case study. The paper calculates the rate of return on investment for different distributed solar applications, identifies nonfinancial barriers to scaling up distributed solar, and derives policy implications. For on-grid applications, the analysis finds that neither net metering nor the feed-in tariff makes distributed solar financially attractive, despite recent reductions in electricity subsidies and adjustments of feed-in tariff levels in October 2016. For off-grid applications, the profitability of distributed solar depends highly on the local price of diesel: distributed solar is viable only in areas where diesel is not available at the official (subsidized) price. In addition, several nonfinancial barriers limit the scalability of the distributed solar market. These findings indicate that the distributed solar market in Egypt will remain a niche market in the next few years without strengthened government support. First, for on-grid applications, the net metering scheme should be kept in place until a bankable feed-in tariff has been established. Second, for off-grid applications, the government should explore interventions to unlock opportunities in the agriculture and tourism sectors. Third, the government should strengthen private-sector activity in the sector, including by addressing nonfinancial barriers, such as transaction costs and gaps in the availability of data, and by building capacity among users, suppliers, and financial institutions.

AbstractAs renewable energy supply chains have grown increasingly globalized, national clean energy transitions have become highly influenced by international dynamics. However, these dynamics are themselves collectively shaped by domestic policy that drives the deployment of renewables. While spatial spillovers of domestic renewable energy policies have been studied on an aggregate level regarding policy diffusion or the flows of technology across countries, implications on an actor-level have been largely neglected. This article addresses this gap by analyzing global patterns of market openings for wind, solar PV, and biomass, focusing on the role of private project developers in developing countries. We use a mixed method design, based on a newly merged dataset encompassing eighty countries, and on interviews with pioneering project developers. Results highlight how patterns in market openings are shaped considerably by technology characteristics. Further, empirical results show international private developers are a key first mover in many developing countries. We explore drivers for this internationalization trend, including the impact of international developers' home country policies and the accumulation of tacit knowledge from home country markets for market openings abroad. Finally, we discuss implications for industrial policy and argue for further research on global spillovers of national policies on the actor-level.