Research-based
policy recommendations
for the G7

Financing a Green Future: The Energy Transition Mechanism (ETM) and the Green Impact Fund for Technology (GIFT)

Abstract

The G7 should consider (i) an Energy Transition Mechanism (ETM) and (ii) a Green Impact Fund for Technology (GIFT) to accelerate the transition from fossil fuels to low-carbon technologies in developing countries.  ETM is a scalable, collaborative initiative led by the Asian Development Bank (ADB) in partnership with developing countries that will leverage a market-based approach to accelerate the transition from fossil fuels to clean energy. It funds early retirement of coal power plants in developing countries using the proceeds from ETM purchased coal plants for low-carbon technologies. Pilots of ETM have been launched in Indonesia, the Philippines and Viet Nam. GIFT would reward emission reductions achieved in specified developing countries with any patented green technology whose monopoly privileges in this “GIFT Zone” are waived. To prepare for GIFT initiative, the G7 should immediately fund a pilot project featuring a single reward pool to be split among preselected green innovators in proportion to the emission reductions they achieve with their respective innovations, affordably priced, in a self-selected region of the GIFT Zone over a 2-year period. With preparation and assessment, a meaningful pilot could be completed for €35 million per annum over four years. These proposals complement to each other. ETM stimulates demand and GIFT reduces the cost to implement low-carbon technologies.