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Financing energy efficiency - good for the environment and good for development

The promotion of environmental global public goods is one of the most pressing global challenges, with a profound impact on development. A look at the literature reveals that global public goods tend to be underprovided. And when it comes to climate change, polluting countries do not pay enough, while some actors ‘free ride’ when they enjoy the benefits of clean environment without bearing the costs. Investment in energy efficiency represents one of the most promising avenues to address climate change – such measures represent a win-win situation, reducing emissions while safeguarding productivity and incomes in poor countries. However, market failures prevent investment in energy efficiency from happening sufficiently and efficiently.