| Summary: | As the world economy grows, so does the demand for energy. Investments in clean energy projects are increasingly important to meet these growing energy needs. A large part of clean energy sources in the world are located in emerging market economies. Investors in those markets often face higher risks than those investing in high income developed economies with a more favorable business climate. Higher risks in turn reduce capital flows to emerging markets. This is especially true during times of crisis. At the same time energy projects tend to be large, capital intensive with long repayment periods. Those projects also often require partnership between the public and the private sector i.e. public private partnerships (PPPs). Efficient allocation of risks among the different partners in PPPs is the key to success, and generally results in more profitable projects that are more likely to benefit each of the parties involved. This article will discuss public-private partnerships in the energy sector in emerging market economies. The focus will be on cross border investments for investors from small states where Iceland is discussed as a case. The characteristics of emerging markets will be discussed, the risk faced by investors and risk mitigation instruments offered by international financial institutions (IFIs) and export credit agencies (ECAs) to manage those risks. Nam Theun 2 is finally discussed to show how those instruments have been applied in practice. public-private partnerships (PPPs); clean and renewable energy; emerging markets; international financial institutions (IFIs); export credit agencies (ECAs) and risks and risk mitigation instruments.
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