The world needs to replace fossil fuels through an unprecedented expansion of renewable energy and green hydrogen. For this to happen quickly in developing and emerging economies, public development finance institutions (DFIs) hold the key.
At the COP27 UN Climate Conference, development finance institutions signaled their readiness to work with industry and host and donor governments to finance and enable large scale green hydrogen projects.
The Roundtable of Development Finance Institutions for Green Hydrogen which is coordinated by GH2 identified the following priority actions where DFIs can make a difference in a report launched at COP27:
Create an enabling environment for green hydrogen investments. Support government policies to develop green industry clusters, and provide technical assistance to government and civil society stakeholders in emerging and developing economies.
Scale up innovative financing instruments to catalyse green hydrogen investment, including through a combination of concessionary, blended, innovative climate financing mechanisms and guarantees, insurances and risk alleviation tools.
Bridge the price gap between green and fossil fuel hydrogen and mitigate offtake risks by reducing fossil fuel subsidies and pricing carbon emissions, and facilitate trade, public auctions and contracts for difference.
Promote consistent global standards on procurement, environmental and social procedures, clear emissions thresholds and sustainable development requirements.
For the first time the report also brought together the plans for scaling up green hydrogen investments among leading DFIs working in developing and emerging markets.
Several announcements were made by DFIs at COP27, with highlights including:
The European Bank for Reconstruction and Development (EBRD) will provide a USD 80 million loan to Egypt Green to develop the country’s first green hydrogen facility. EBRD has also supported the Egyptian government in developing a low carbon hydrogen strategy which was launched at COP27.
KfW launched the world's first promotional platform for financing green hydrogen, the PtX Development Fund and the PtX Growth Fund. Germany will make EUR 550 million available to help establish green hydrogen projects in developing countries, and the ministry of economy will additionally create a EUR 300 million fund for German and European companies that seek to be project partners.
For Namibia, the SDG Namibia One Fund, an innovative blended finance platform was launched to facilitate and accelerate the development of a green hydrogen sector and economy in Namibia. The fund has been created through a partnership between the Environmental Investment Fund of Namibia (owned by the Namibian Government), Climate Fund Managers and the Dutch Invest International. The European Investment Bank (EIB) also signed a joint declaration with the Namibian government on a potential loan of up to €500 million financing renewable hydrogen and renewable energy investments.
The World Bank launched the Hydrogen for Development Partnership (H4D) to boost the deployment of low-carbon hydrogen in developing countries. The partnership will raise and allocate blended finance for low-carbon hydrogen production and distribution projects and foster capacity building and regulatory solutions, business models, and technologies toward the roll out of low-carbon hydrogen in developing countries. GH2 will work to ensure green hydrogen is prioritized within this new programme.
The moment is now for first movers in the public, private, and development finance sectors to join forces, drive the shift to a net zero economy, and achieve sustainable development with green hydrogen. In their emerging work on green hydrogen, leading DFIs are showing what climate finance is about.
“The DFIs and multi-lateral development banks like the AIIB have been key enablers of solar and wind adoption in the past. I believe we can play a similar enabling role to support green hydrogen, utilising the variety of tools we have at hand.”
Sir Danny Alexander, Vice President Asian Infrastructure Investment Bank.
The Green Hydrogen Organisation and the Roundtable of Development Finance Institutions for Green Hydrogen will expand its efforts to bring together public and private finance actors and catalyse investment in emerging economies. This work is part of a package of measures led by GH2 to assist low- and middle-income countries to thrive in the green hydrogen economy. Other measures include work on good green hydrogen contracting and fiscal regimes as well as supporting regional groupings such as the Africa Green Hydrogen Alliance which made clear at COP27 that GDP in 6 key countries could rise by 12% if adequate investment is made.
The Roundtable of Development Finance Institutions for Green Hydrogen, coordinated by the Green Hydrogen Organisation, is an informal exchange between international financial institutions, multilateral development banks, and development actors to consider how to rapidly increase support for renewable energy and green hydrogen production in developing and emerging economies. Participants include the African Development Bank, the Asian Development Bank, the Asian Infrastructure Investment Bank, British International Investment, BNDES, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), European Bank for Reconstruction and Development, European Investment Bank, KfW, Inter-American Development Bank, Industrial Development Corporation of South Africa, International Finance Corporation (IFC), Norad, Norfund and the World Bank.