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De-carbonisation, guaranteed: realising affordable, equitable and long-term financing for industrial SME projects

Panel: 5. Business models, finance and investment

This is a peer-reviewed paper.

Winfried Braumann, REENAG Holding GmbH, Austria
Jason Erwin, Borg & Co AB, Sweden


Using an investment simulation model, the authors compare the financial viability of three renewable energy technologies with natural gas based industrial process heat generation under different scenarios. The main burden of long-term decarbonisation investments to replace natural gas with renewable technologies has to be shouldered by private companies.

For debt financing, the inherent long-term credit risk has a decisive impact on the availability and on the risk premium included in the cost of debt. Therefore, public guarantees designed to address long-term credit risk can be highly impactful when compared with e.g., subsidies for CAPEX or high carbon prices/ taxes. The authors find that the use of long-term public guarantees will be necessary to support small and medium sized companies’ (SMEs) access to bank loans. Further, such guarantees render renewable technologies with high initial investment requirements financially viable by reducing risk premiums and thus financing cost.

In conclusion, the authors suggest linking support for decarbonisation initiatives to the amount of CO2 reduced or substituted (the concept of “climate guarantees”).

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Download this paper as pdf: 5-012-20_Braumann.pdf