Developing Eligibility Criteria for Electricity Utilities: Accelerating the Green Energy Transition
The electricity sector plays a central role in global efforts to combat climate change, accounting for a significant portion of global greenhouse gas emissions. In response to this challenge Climate Bonds is currently developing eligibility criteria for electricity utilities companies to access sustainable financing.
These criteria, currently under development, aim to set science-based requirements that utilities must meet to be eligible for inclusion in certified climate instruments or entities. By aligning financial instruments with the Paris Agreement's goals and limiting global temperature rises, these criteria will accelerate the transition to a low-carbon resilient future.
The Need for Eligibility Criteria
The electricity sector has emerged as the largest contributor to global greenhouse gas emissions, accounting for approximately 42% of energy-related CO2 emissions in 2020, according to the International Energy Agency (IEA). With the increasing share of electricity in total final energy, projected to exceed 50% in the IEA NZE 2050, the sector's role in decarbonizing the global energy system is crucial. Consequently, electricity utilities bear significant responsibility for achieving net-zero targets set by countries and companies worldwide.
These criteria provide a framework for assessing both mitigation requirements, which focus on emission reduction strategies, and adaptation and resilience requirements, which address the sector's preparedness for climate impacts.
Accelerating the Energy Transition
By establishing eligibility criteria for electricity utilities, we can catalyse the transition to a low-carbon energy system. Electricity Utilities are aiming to achieve net-zero emissions by 2040 as the global energy system is called to reach net-zero emissions in 2050. The criteria will guide utilities in aligning their operations with the overarching goal of reducing unabated fossil fuel use and increasing renewable energy generation capacity.
Renewable electricity generation, particularly wind and solar power, must see a significant expansion to meet climate goals. The capacity of renewables needs to increase from 2600 TWh in 2021 to 3500 TWh by 2050. Without accelerated current investment pace, this transition would take 90 years, far exceeding the urgency dictated by the need to limit global temperature rise to 1.5°C.
The Electricity Utilities Criteria are essential to expedite the transformation, facilitating increased renewable energy deployment and reducing reliance on fossil fuels.
Supporting Financial Decision-making
The development of eligibility criteria for electricity utilities not only guides operational changes but also supports critical financial decisions. These criteria provide a clear pathway for utilities to pursue intensive decarbonisation measures in line with the climate goals set by the Paris Agreement.
By aligning financial instruments such as bonds, loans, and other debt instruments with the eligibility criteria, investments in eligible entities, assets, and activities can be made with confidence. This alignment ensures that financial flows support the transition to a low-carbon resilient economy, reinforcing the global commitment to keep temperature rises below 1.5°C.
Criteria Development Working Groups
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Ana Diaz Technical Lead, Climate Bonds Initiative |
Paco Moreno Energy Analyst Climate Bonds Initiative |
Cristóbal Budnevich Portales Policy Officer and Data Analyst (TPI) |
Wu Di Senior Power Sector Analyst at the Institute of Energy, Peking University |
Catalin Dragostin Director Energy Serv Vice-President Excorom |
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Ryan Foelske Manager on RMI’s Utility Transition Finance Team |
Run Zhang Agora Energiewende |
Tom Luff Energy Strategy and Policy Expert Energy System Catapult |
Steve Pye Associate Professor of Energy Systems UCL |
Shuling Rao Senior Researcher The Institute of Finance and Sustainability |
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Kae Takase Renewable Energy Institute |
Tetsuo Saitou Senior Research fellow Renewable Energy Institute |
The Last Word
The development of eligibility criteria for electricity utilities represents a significant step toward decarbonising the global energy system. With the electricity sector accounting for a substantial share of greenhouse gas emissions, these criteria provide a framework to address the pressing challenges of mitigating climate change and building resilience.
By setting science-based requirements, the criteria accelerate the adoption of low-carbon technologies, prioritise renewable energy investments, and reduce reliance on fossil fuels. Additionally, they guide utilities in making financial decisions that align with the goals of the Paris Agreement.
Through the concerted efforts of governments, utilities, and financial institutions, these eligibility criteria will play a crucial role in unlocking the full potential of the electricity sector to achieve a sustainable, low-carbon future.
If you would like to get in touch regarding certified issuance or collaboration please reach out at standards@climatebonds.net.
‘Til Next Time,
Climate Bonds.
