Roads For Mdbs To Help To Close The Financial And Technical Gaps For Fossil Fuels Phase-out In Developing Countries

At the G20 summit in 2023, countries agreed to triple global renewable energy capacity by 2030 and achieve global net zero emissions by mid-century. Achieving these goals will require a substantial scaling-up of investment and climate finance for which Multilateral Development Banks (MDBs) are expected to play a critical role. Nevertheless, MDBs have faced scrutiny over their continuous support to fossil fuel projects and failure to consistently allocate resources to low-carbon development projects. This brief describes two main areas where MDBs can play a central role in correcting course: 1. MDBs should work on four priorities: (i) updating their Paris Alignment methodology, (ii) updating Word Bank and joint-MDB country plans, (iii) joining international initiatives like the Clean Energy Transition Partnership (CETP), and (iv) increasing the quality of clean energy finance. 2. MDBs should focus on avenues for transition finance mobilization for fossil fuel producers, in particular State-Owned Enterprises (SOEs) and their host governments, which is a blind spot of current climate finance discussions. Here, we explain three avenues to engage with SOEs and their host governments to increase their ambition in climate change mitigation by affecting their credit ratings and finance conditionality, as well as providing fiscal and regulatory assistance for transition planning and implementation.