Industry Background, Project Aims, and Impact
The investment needed by the Indian clean energy sector is estimated at $869 billion to $1.1 trillion between 2010-2030, with the goal of reducing 2.8-3.6 billion tons of CO2 per year by 2030. The project intends to provide the contract and legal tools needed to facilitate clean energy investment. By creating and providing standard templates for free download, the project aims to facilite a reduction of 2.8-3.6 billion tons of CO2 per year.
Clean Energy: Industry Background
The investment needed by the Indian clean energy sector is estimated at $869 billion-$1.1 trillion between 2010-2030, with the goal of reducing 2.8-3.6 billion tons of CO2 per year by 2030, according to the 2009 McKinsey Report on Environmental & Energy Sustainability: An Approach for India. This reduction in India’s emissions by 30-50% by 2030 could be achieved by using technologies commercially available today.
- An estimated $333 billion (or a third of the $869 billion Indian clean energy market) will result in cost savings for industry, making them financially attractive investments.
- “Time is of the essence,” said Sahana Sarma, a McKinsey & Company partner and co-author of the report. “Even a five-year delay in making the necessary investments could result in a loss of one-fourth of the identified abatement potential.”
- The difficulty of structuring workable contracts has been a key barrier to foreign investment in energy efficiency initiation. According to a World Bank study in 2008 on Financing Energy Efficiency Lessons: From China, Brazil, India and Beyond, over $3.5 billion cost-saving projects remain uninitiated in existing plants alone.
In other words, since contracts for clean energy loans are not readily available, the only option would be for parties to incur the high transaction costs of drafting individual contracts from scratch for each project (rather than to adapt the standard financial and legal products for fossil fuel projects). The challenges of drafting project finance contracts for clean energy have so far impeded the access to capital necessary for clean power initiation.
Aims and Impact
The project intends to address this specific barrier and to provide the contract and legal tools needed to facilitate clean energy investment. By creating and providing standard templates for free download, the project aims to facilite a reduction of 2.8 billion toms to 3.6 billion tons of CO2 per year. It will:
- Enable US equipment manufacturers to access India’s burgeoning market as India commences installing the 80% of additional power capacity required to meet its projected 2030 needs.
- Enable US banks and investors to earn profits through clean energy investment while fulfilling compliance requirements. For example, the Export-Import (Ex-Im) Bank of the United States and the Overseas Private Investment Corporation (OPIC) have entered into judicially approved settlement agreements to each establish a $250 million facility devoted to renewable energy projects. Pursuant to its Settlement Agreement, the U.S. Ex-Im Bank is required to provide the full range of its financial products to promote renewable energy projects under this fund. Pursuant to the other Settlement Agreement, OPIC is required to apply preferential financing terms, including (but not limited to) adjustment of fees, tenor, and interest rates to facilitate approval of renewable energy transactions, and other methods to attract investment in developing markets.
- Facilitate access to $1.1 trillion in investment needed by India to install clean power and reduce substantial CO2 emissions.
* The project shall draft and make templates available for download without charging potential Users (any business or persons engaged in clean energy investment in U.S. and/or India, each a User. Such Users may be drawn from various related sectors, including but not limited to industry, financial and/or government sectors). No part of the legal templates, documents or any other communication may be interpreted as professional ‘legal advice, counsel or service’ or the establishment of any contractual, professional service or fiduciary or relationship of any other sort between the User and the project (including the Columbia University, Law School, Sabin Center for Climate Change Law, Project Sponsor, their staff and/or related affiliate or person). Furthermore, any potential User agrees he/she is responsible for obtaining legal counsel prior to signing any contract utilizing project documents in whole or in part.
- US Industry & Bank Impact
- Indian Industry Impact
- Benefits of Signing Up
To sign-up for updates and notifications from the project and the symposiums (aimed at generating an industry-level dialogue to plot loan impediments and precise difficulties in structuring contracts and to showcase project tools), click here. Please note this is to only receive updates and notifications from the project, and does not entail any other commitment, or relationship, legal or otherwise.
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