Balancing Energy Access and Environmental Goals in Development Finance: The Case of the OPIC Carbon Cap

Abstract 

The international community has ambitious goals for responding to climate change and increasing global access to energy services. To date, these agendas have been viewed to be largely complementary. However, policy makers are now facing more explicit interactions between environment, energy, and economic and social development objectives and associated trade-offs.

In this essay, we explore the implications of the balance between these aspirations as they manifest in the investment rules for various international finance institutions by looking closely at the U.S. government’s Overseas Private Investment Corporation (OPIC). We argue that trade-offs between emissions reductions (or limiting emissions growth) and increasing energy access are inevitable, given the present state of energy systems. Understanding these trade-offs and their consequences can help to better inform policy debates and investment decisions. We conclude with several “win-win” proposals that would exempt the poorest and least-emitting countries from certain restrictions on public finance. These proposals, including a potential political compromise, would have a positive effect on access to energy services without any significant impact on global greenhouse gas emissions.