The new report “Building Competitive Green Industries” has quantified for the first time the significant market opportunity for clean-tech companies in developing countries. Over the next 10 years, an estimated US$6.4 trillion will be invested in clean technologies in the developing world. An even more promising fact is that US$1.6 trillion will represent business opportunities for small and medium enterprises (SMEs), important drivers of job creation and competitiveness in technology sectors.
The study frames climate change as an economic opportunity rather than an inevitable threat: by investing in clean technologies, countries at different levels of development can achieve stronger economic growth, advance development goals, and reduce climate risk, all at the same time.
“Creating competitive economic sectors is critical to stimulating the job growth that is indispensable to achieve the World Bank Group’s twin goals: eliminating extreme poverty and fostering shared prosperity,” said Anabel Gonzalez, Senior Director of the World Bank Group’s Global Practice on Trade and Competitiveness. “Fostering home-grown climate and clean technology industries can create a sustainable and wealth-producing sector of the economy, while simultaneously addressing urgent development priorities, such as waste management, access to clean water, and generation of clean and affordable energy.”
In Kenya, for instance, the 80 percent of the population currently not served by the electricity grid represents a vast market for new clean-tech solutions. Local entrepreneurs are launching innovative wind and solar technologies that not only create jobs and protect the environment, but also provide viable off-grid solutions to the poorest communities in the country.
Climate-smart agriculture is another important sector where clean technologies – such as highly efficient irrigation systems and climate-resilient crops – are attracting significant investments as countries seek to maintain or raise their agricultural production. The report estimates that this sector in South Asia alone could offer to clean-tech SMEs a potential market of US$ 100 billion.
Accessing these clean technology opportunities, however, comes with a number of challenges. Clean-tech entrepreneurs find it difficult to access the capital needed to grow and expand their business. Almost half of the Indian SMEs and two-thirds of the Kenyan SMEs surveyed for this report indicated access to finance as a major constraint. Inadequate government policies and unregulated markets can also be a challenge, as well as the lack of required technical capacity, especially in countries where highly skilled workforce is still nascent.
Countries that aim to be competitive in green sectors need models to address the unique challenges faced by clean-tech ventures. The report provides policymakers with a range of practical instruments to support SMEs, including specific recommendations on market development policies, financing mechanisms, and capacity building models. These policy considerations are illustrated through case studies of national programs in South Korea, India, Thailand, and Ethiopia.
With an estimated US$6.4 trillion market opportunity, countries that effectively support local clean-tech industries are poised to capture important economic and environmental benefits, while increasing agricultural output and improving access to energy and clean water.
As it turns out, fighting climate change is not a necessary cost but a very smart investment.
The report was commissioned by infoDev’s Climate Technology Program (CTP). The program supports local climate and clean technology SMEs and startups through its global network of Climate Innovation Centers (CICs), which are currently being established in Morocco, South Africa, Vietnam, Kenya, Ethiopia, Ghana and the Caribbean.