Banks holding back energy efficiency gains – World Bank, UN

London, 1 June: China, India and Brazil could cut their energy use by 25% by installing cost-effective energy efficiency measures in industrial facilities and public buildings, according to a new report. However, financial institutions are unwilling to lend money for these projects, says the study by the World Bank and UN Environment Programme^*.

Installing advanced technologies could reduce projected growth in energy use by a further 10%, and reduce growth in CO2 emissions by 16%, the report says. China, India and Brazil are expected to double their energy use by 2030, much of which will be achieved by building coal-fired power plants.

"Many energy efficiency projects quickly pay for themselves, with typical returns on investment of 20-40%," said Chandra Govindarajalu, a senior environmental specialist for the World Bank.

"Despite the demonstrated benefits, though, companies often cite other, more immediate investment and borrowing priorities. Meanwhile, commercial banks in these countries are generally unfamiliar with financing projects designed to achieve cost savings, rather than develop new product lines or other tangible assets," he added.

A lack of awareness of newer, more efficient technologies, high transaction costs for smaller projects, high perceived risks, and a lack of personnel with both technical and financial skills are also holding back investment in energy efficiency projects, the report says.

It suggests that banks could lend money to energy service companies to install efficient lighting, air conditioning, boilers and waste heat recovery systems. The costs and profits could then be recovered through an extra charge on a company's utility bill.

* For an executive summary of Financing Energy Efficiency see the UN Environment Programme.