Scaling Grid Infrastructure

Infrastructure that brings renewable energy to users in developing countries needs more investment than it’s getting. This paper presents a new framework for how governments and private sector actors can use Article 6 of the Paris Agreement to fund grid infrastructure in developing countries. The proposed methodology, centered on a Weighted Average Cost of Capital (WACC)-based allocation system, addresses the critical issue of dividing emissions reductions between energy generation and grid components. This approach can not only promote more accurate and equitable allocation of emissions credits but can also incentivize investment in challenging, high-impact projects that are crucial for accelerating the transition to clean energy. This model has the potential to align investor incentives with the goals of the Paris Agreement, encouraging the flow of funds to areas where they can have the most significant impact on climate change mitigation.