Tearing down the currency wall
Most of the world seems to misunderstand why global capital is not financing the developing world’s climate transition.
The global capital market is failing to finance developing economies' climate transition due to a currency wall. Despite the presence of ample long-term savings and numerous commercially viable climate projects, the connection between these two is obstructed. Solar parks in India, wind programs in South Africa, and electric-bus fleets in Latin America are deploying proven technologies through competitive bidding, with domestic investors profiting.
However, the core issue lies in the structure of price formation, which is project-based rather than market-wide. This leads to higher hedging costs for investors, making hard-currency capital less competitive in auctions. As a result, global funds earning a mere 8-9 percent return in dollars fall short of the international investors' requirements.
Once a locally funded developer secures an auction, the price becomes a benchmark, making it difficult to renegotiate and leading to persistently high hedging costs.
Written by urgent.news from The Jakarta Post Academia's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
This story
This is one outlet's version. Read the fullest account.
- Tearing down the currency wall thejakartapost.com
