IKEA and the Rockefeller Foundation announced that each company will release $500 million towards cleaner energy in developing countries. According to the United Nations, about 2.8 billion people worldwide do not have access to reliable energy sources.
Foundations estimate that the released money should power a billion of them in the next decade.
The companies expect their contribution to reduce carbon emissions by one billion tons. Because they intend to offer an alternative to societies that normally depend on fossil fuels for energy production.
The company is trying to attract more investors
Both companies said their money would go to reduce project risks that private capital typically avoids.
“When it comes to providing poor countries with renewable energy, nothing has ever happened to this extent. The investment will help increase the leverage effect of developing countries through private companies and international development agencies,” Rajiv Shah, president of the Rockefeller Foundation, told Bloomberg.
“We have to be honest and realize that the current approach is not having the impact the world needs today. We are primarily interested in speeding up the process,” Per Higgins, CEO of the IKEA Foundation, told Bloomberg.
The Group of Seven did not fulfill its promise
Rich countries are currently under pressure from an old climate promise. In 2009, they promised to release $100 billion annually by 2020 to help developing countries deal with the worst effects of climate change. Great powers have also pledged to invest in green technologies.
However, at the meeting only last week, the G7 leaders confirmed that they wanted to reach a milestone, even though it was supposed to happen last year. According to the latest figures from the Organization for Economic Co-operation and Development, investments amounted to $78.9 billion in 2018, which is relatively far from the agreed upon $100 billion.
Developing countries say they need financing help if they are to step up their ambitions to reduce carbon emissions and invest in the technologies needed for a zero-emissions future. Investment distribution is particularly challenging after a pandemic, as rich countries invest trillions of dollars in reviving their economies, while poor countries struggle to recover.
20 billion of energy from China
China has been the financial support of developing countries for more than a decade, investing heavily in its energy production. According to the think tank The American Enterprise Institute, it poured more than $20 billion into energy projects in developing countries in 2019 and 2020 alone. Investments included coal and renewable energy projects in the areas of solar, hydro and nuclear energy, as well as financing for distribution systems.
“Our contribution is primarily seed capital. We want to incentivize others to make more commercially oriented investments so that they can take on projects in countries,” said the Rockefeller Foundation chairman.
He pointed to India, for example, where the Rockefeller Foundation spent ten years financing two hundred micro-solar networks serving remote villages. Once the contract was processed, India’s Tata Power agreed to expand the project to 10,000 networks.
The planned projects will cover India, Africa and Latin America.
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