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SUFI: Sustainable Climate Finance and its Impact

A Solar Panel in the Sun
Photo: Marco Nilgen

Contact: Marco Nilgen and Björn Vollan

Globally, still more than 1 billion people lack reliable access to electric power or even have no access at all. Being able to use electricity is generally regarded as an important requirement for socioeconomic development and therefore, the provision of access to electricity is one of the United Nation’s (UN) Sustainable Development Goals. This is further underlined by the implementation of the UN’s Sustainable Energy for All initiative, which aims to establish universal access to electricity by 2030. A major obstacle to reaching this goal is, of course, the sizeable investment costs associated with it, estimated to be at around 640 billion US$. In this light, providing electricity with the help of solar-based systems has become a viable alternative to e.g. extending grid electrification in recent years, mainly due to its low-cost appeal in combination with zero emissions in electricity production.

However, despite the consensus on electricity’s potential with regards to socioeconomic development, there is a lack of scientific evidence on the question whether this belief also holds as generally for small-scale options like solar home systems or solar mini-grids. The scarce literature on this question provides mixed or no evidence at all on several important topics, all of which are important to build a more robust basis for development policy-making: e.g. can solar-based energy solutions unfold a development potential comparable to more potent options if they are only able to power basic home appliances? How does the (oftentimes subpar) performance of solar products affect rural households’ future willingness to pay for such products, and which product features are the most important to them? What are barriers or necessary preconditions to motivate rural communities to jointly invest in more advanced solar products?

In trying to make a valuable contribution to answering these questions, the Research Group Sustainable Use of Natural Resources, in a joint project with the Frankfurt School of Finance & Management, plans to conduct a multi-staged research project in three districts in the coastal region of Sindh, Pakistan. In these districts, electrification rates range low from 25-35%, coupled with high poverty rates – exemplary for rural regions in Pakistan and other Southern Asian countries. However, national NGOs began implementing solar electrification projects in our study region already ten years ago, generating potentially valuable insight into the long-term impact of solar installations. In tackling the above-mentioned topics, we aim to employ a diverse set of tools, including e.g. quasi-experimental impact evaluation methods, as well as discrete choice and economic field experiments.

External collaborators:
Prof. Dr. Andreas Landmann - University of Göttingen
Prof. Dr. Oliver Schenker – Frankfurt School of Finance and Management
National Rural Support Programme (NRSP)

Link to the official project website: www.sufi-project.de

The SUFI research project is organized under "Dialogue on the Economics of Climate Change" - a project financed by the German Federal Ministry of Education and Research within the focal point of support entitled "Economics of Climate Change II". This point of support aims at expanding the competencies in the field of climate economics, thereby providing well-grounded and outcome-oriented knowledge. To support this transfer of knowledge and intensify the exchange between research and practice, the point of support is accompanied and supported by the project "Dialogue on the Economics of Climate Change".

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