Energy efficiency project finance

Abstract

Lack of financing mechanism in the market is a barrier to energy efficiency in many developing countries. Government policy can create effective financial mechanisms in the market to unlock this barrier. These effective financial mechanisms can be in the forms of rebates, grants, or low-interest loans for energy efficiency improvements, direct income tax deductions for individuals and businesses, and exemptions or reduced sales tax on eligible products. Incentives offered by national governments are generally in the form of tax incentives. Utilities can rebate energy-efficient appliances and equipment for any energy end users in the system, which facilitates energy efficiency investments. Private sector-based ESCOs and individual energy end users or customers are beneficiaries of governments’ and utilities’ financial mechanisms.