Economic Instruments to Leverage Clean Energy Investment

The report analyzes the role of economic instruments in mobilizing private investment for clean energy in Indonesia, Mexico, and India. It examines specific mechanisms such as Indonesia's fossil fuel subsidy reforms, Mexico's Clean Energy Certificates (CELs), and India's Goods and Services Tax (GST), highlighting how these policies can either facilitate or obstruct the transition to renewable energy.

• Indonesia's current renewable energy pricing regime, specifically the 'BPP rule', creates a financial disadvantage for clean energy by capping tariffs at or below the cost of existing, often coal-based, electricity supply.
• Indonesia has a history of significant fossil fuel subsidies; while 2014 reforms in gasoline and diesel provided massive fiscal savings of IDR 211 trillion (USD 15.6 billion), recent trends suggest a return to unstable fuel pricing.
• Mexico's Clean Energy Certificates (CELs) create a market for clean electricity by obligating suppliers and large consumers to procure a minimum percentage of clean energy, though a lack of transparent pricing currently limits their incentive value.
• Mexico utilizes a combination of economic instruments, including a carbon tax introduced in 2014 and a planned emissions trading system (ETS) to be launched by 2021, to complement the CEL mechanism.
• The introduction of the Goods and Services Tax (GST) in India in 2017 generally increased the capital and operational costs for solar and wind projects by eliminating previous tax exemptions.
• India's GST reform may have inadvertently improved the relative competitiveness of domestic coal by reducing its tax burden compared to the previous regime.
• India's transition to GST resulted in the termination of the National Clean Energy and Environment Fund (NCEEF), redirecting coal cess revenues to compensate state governments for tax losses rather than funding clean energy R&D.
• Across the studied countries, the report argues that international climate finance should be used strategically to de-risk investments and support the design of domestic economic policies rather than just funding discrete projects.

APA

Gagnon-Lebrun, F., Gass, P., Sharma, S., Sanchez, L., Beaton, C., Echeverría, D., & Suharsono, A. (2018). Economic Instruments to Leverage Clean Energy Investment. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/economic-instruments-clean-energy.pdf

Chicago

Gagnon-Lebrun, Frédéric, Philip Gass, Shruti Sharma, Lourdes Sanchez, Christopher Beaton, Daniella Echeverría, and Anissa Suharsono. Economic Instruments to Leverage Clean Energy Investment. International Institute for Sustainable Development, 2018. https://www.iisd.org/system/files/publications/economic-instruments-clean-energy.pdf.

Wikipedia

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BibTeX

@techreport{gagnonlebrun2018economic, author = {Gagnon-Lebrun, Frédéric and Gass, Philip and Sharma, Shruti and Sanchez, Lourdes and Beaton, Christopher and Echeverría, Daniella and Suharsono, Anissa}, title = {{Economic Instruments to Leverage Clean Energy Investment}}, institution = {International Institute for Sustainable Development}, year = {2018}, month = aug, url = {https://www.iisd.org/system/files/publications/economic-instruments-clean-energy.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }