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Risk, Market Failure and Government: Case for a Social Impact Bank?
Last week, I attended the All-Energy Australia Conference because of my interest in renewable technologies and energy efficiency. A couple of speakers from the Clean Energy Finance Corporation (CEFC) were highlights for me. The CEFC is an Australian Government-owned financial corporation that was established to address financial impediments to private financing of renewable energy, energy efficiency and low emissions projects and emissions – i.e. it addresses a market failure in clean energy financing. It does this by developing innovative financial products and working with private financiers, principally aimed at reducing risk which in turns reduces the risk premium charged to clean energy projects and companies. Furthermore, it does so by actually generating a profit for the Australian Government; it provides loans and equity on a commercial basis and doesn’t provide grants. It seemed to me that basic model of the CEFC would be useful in catalysing private capital in other policy areas, such as reducing social disadvantage. This blog post will go through my thinking on how a ‘Social Impact Bank’ could work along CEFC lines.
Ebola and Market Failure
You have probably heard about the deadly progress of the Ebola virus in West Africa. It is spreading at an alarming rate and does not appear to have any cure. To make matters worse, Ebola has a high fatality rate of 70% according to the most rigorous statistical studies. So far, it has claimed over 2000 lives and has now spread into Africa’s most populous nation of Nigeria. There may be unconfirmed reports that Ebola has found its way into Australia. According to the Oxford University professor, Adrian Hill, a vaccine is “doable” but ‘Big Pharma’ has not developed a vaccine because there was no business case. This situation sounds like a classic case of market failure. (more…)