US announces $1 billion loan for energy transition in developing countries

BRASILIA – US Treasury Secretary Janet Yellen on Thursday (6/10) announced a loan agreement for the Clean Technology Fund (CTF) – a multilateral trust fund that helps countries transition to low-carbon technologies.

The $950 million loan is part of Joe Biden’s pledge to provide $11 billion in climate finance to these markets.

“We believe this contribution will help move forward the Partnership’s overall plans for the Just Energy Transition, while building on the experience and engagement of multilateral development banks in these countries,” he says. Alexia LadordeauAssistant Secretary of the Treasury for International Trade and Development

According to the executive, the hope is to stimulate more climate finance to meet the decarbonisation goals of the Paris Agreement.

Rich countries have mobilized US$83.3 billion in climate finance for developing or vulnerable countries by 2020, less than US$100 billion per year pledged in 2009.

According to a new analysis by the Organization for Economic Co-operation and Development (OECD), there is a 4% increase compared to 2019, driven mainly by public incentives, but not enough to deliver on the original promise.

A commitment by rich countries to provide US$100 billion annually for climate action in developing countries must be met by 2020 and last until 2025.

But OECD projections published in October 2021 show that the USD 100 billion level could only be reached in 2023 if all commitments made by bilateral and multilateral donors were met by then.

Transition from coal

The resources announced by the US yesterday also fulfill the country’s commitment to support the CTF’s Investment Acceleration Plan for the Coal Transition made at the 2021 G7 Summit.

The loan will finance projects developed by multilateral development banks, with priority given to projects submitted by the governments of South Africa, Indonesia, India and the Philippines from October 2022.

Plans include installing new renewable energy, retiring old coal-fired power plants and rebuilding infrastructure for new uses, and projects to support new investment and jobs in communities affected by the energy transition.