Case study: Public-private partnerships & climate governance — a startup-to-enterprise scale story

In 2024, public-private partnerships (PPPs) in climate governance mobilized over $98 billion in emerging markets—a 34% increase from 2022—yet fewer than 18% of these initiatives achieved their stated emissions reduction targets within the first three years. This paradox defines the central challenge facing sustainability professionals today: capital is flowing, frameworks exist, but execution at scale remains elusive. This case study examines the journey from pilot-stage climate governance partnerships to enterprise-scale implementations, dissecting the unit economics that determine viability, the adoption blockers that stall progress, and the strategic inflection points that decision-makers in emerging markets must monitor through 2025 and beyond.

Why It Matters

The urgency of climate action has transformed public-private partnerships from optional collaboration mechanisms into essential infrastructure for achieving Nationally Determined Contributions (NDCs). According to the Climate Policy Initiative's 2024 Global Landscape of Climate Finance report, emerging markets require an estimated $2.4 trillion annually by 2030 to meet Paris Agreement commitments, yet current flows reach only $550 billion—a financing gap that neither public budgets nor private capital alone can bridge.

Emerging markets present a distinct governance context. Unlike OECD economies with established regulatory frameworks and deep capital markets, countries across Sub-Saharan Africa, Southeast Asia, and Latin America must simultaneously build institutional capacity while deploying climate solutions. The World Bank's 2024 assessment found that 67% of emerging market governments lack dedicated climate finance units, and 73% report insufficient technical expertise to structure bankable PPP transactions.

The statistics underscore both opportunity and risk. BloombergNEF's 2025 projections indicate that emerging market renewable energy investment could reach $270 billion annually by 2027 if PPP frameworks mature appropriately. However, the International Finance Corporation (IFC) reports that 42% of climate PPP projects in these regions experience delays exceeding 18 months, with cost overruns averaging 23% of initial budgets. These figures reveal that scaling from startup pilots to enterprise deployment requires more than capital—it demands governance architectures that align incentive structures, allocate risks appropriately, and establish credible monitoring systems.

For procurement professionals, the implications are direct: vendor selection, contract structuring, and performance management in climate PPPs differ fundamentally from traditional infrastructure procurement. The unit economics of carbon reduction projects hinge on variables—carbon credit pricing, technology learning curves, regulatory stability—that introduce volatility rarely encountered in conventional public works.

Key Concepts

Public-Private Partnerships (PPPs): Contractual arrangements between government entities and private sector organizations that allocate risks, responsibilities, and rewards across project lifecycles. In climate governance, PPPs typically combine public sector convening power and regulatory authority with private capital, technology, and operational expertise. The defining characteristic is shared risk—unlike pure procurement, PPPs transfer meaningful downside exposure to private partners in exchange for upside participation.

Traceability: The capacity to track physical and financial flows across value chains with verifiable documentation. In climate PPPs, traceability encompasses emissions accounting, supply chain transparency, and fund disbursement monitoring. Blockchain-based solutions and IoT sensor networks have reduced traceability costs by approximately 60% since 2020, enabling compliance verification that was previously cost-prohibitive for smaller projects.

OPEX (Operating Expenditure): Ongoing costs required to maintain operations, distinct from capital expenditure (CAPEX). For climate PPPs, OPEX ratios critically determine long-term viability. A solar microgrid PPP, for instance, may achieve favorable CAPEX through concessional finance, but unsustainable OPEX—maintenance, grid management, customer service—can undermine financial sustainability within three years. Industry benchmarks suggest OPEX should not exceed 35% of revenues for climate infrastructure PPPs to achieve commercial viability.

Industrial Policy: Government strategies that direct economic activity toward targeted sectors through subsidies, regulations, standards, and procurement preferences. The resurgence of industrial policy—exemplified by the U.S. Inflation Reduction Act, the EU Green Deal Industrial Plan, and India's Production Linked Incentive schemes—has reshaped climate PPP economics. Emerging markets are increasingly deploying industrial policy tools, with 23 countries introducing new green industrial strategies in 2024 alone.

MRV (Measurement, Reporting, and Verification): Systematic processes to quantify emissions reductions, document climate actions, and independently verify claims. MRV infrastructure determines whether PPP outcomes translate into carbon credit revenues, regulatory compliance, and reputational benefits. The voluntary carbon market's integrity crisis in 2023-2024 has elevated MRV requirements, with buyers increasingly demanding satellite-verified, third-party audited claims.

What's Working and What Isn't

What's Working

Blended Finance Structures with Clear Risk Tranching: The most successful emerging market climate PPPs employ layered capital structures that match risk appetite to investor type. The Green Climate Fund's experience in Southeast Asia demonstrates this approach: first-loss tranches absorb initial defaults, enabling commercial banks to participate at acceptable risk premiums. Vietnam's Just Energy Transition Partnership mobilized $15.5 billion through such structures, with development finance institutions absorbing currency risk that would otherwise deter private investment.

Technology-Enabled MRV Reducing Transaction Costs: Startups deploying satellite imagery, machine learning, and automated reporting have compressed MRV costs from $15-20 per tonne CO2e to under $3 per tonne for forest conservation projects. Pachama's work across Latin American reforestation PPPs demonstrates that digital MRV not only reduces costs but accelerates credit issuance timelines from 24 months to under 8 months, dramatically improving project IRRs and attracting private capital that previously avoided long verification delays.

Standardized Contract Templates Accelerating Replication: The Global Infrastructure Hub's PPP contract library and the World Bank's PPIAF resources have enabled emerging market governments to structure climate PPPs without incurring full legal advisory costs. Kenya's Last Mile Connectivity Program adapted template documentation from regional peers, reducing transaction advisory fees by 40% while achieving financial close 11 months faster than comparable bespoke transactions.

Outcome-Based Payment Mechanisms Aligning Incentives: Results-based financing, where payments trigger upon verified emissions reductions rather than activity completion, has improved PPP performance. The World Bank's Emission Reductions Payment Agreements across 15 countries demonstrate that linking 30-50% of payments to outcomes increases average emissions reduction achievement from 64% to 87% of targets.

What Isn't Working

Currency Mismatch and Hedging Costs: Climate PPPs in emerging markets typically generate revenues in local currency while requiring equipment imports priced in dollars or euros. Hedging costs consume 3-7% of project revenues annually in volatile currency environments, eroding returns that were marginal at project inception. Argentina's renewable energy PPP wave in 2018-2020 saw multiple projects enter distress when peso depreciation exceeded hedging capacity, despite operational performance meeting technical targets.

Institutional Fragmentation Causing Approval Delays: Climate governance responsibilities frequently span environment, energy, finance, and planning ministries without clear coordination mechanisms. Indonesia's experience with the JETP implementation illustrates this challenge: agreements require sign-off from seven ministries, each with different priorities and timelines. Projects report average approval delays of 14 months attributable to inter-ministerial coordination failures.

Inadequate Technical Capacity for Contract Management: While governments can attract advisory support for transaction structuring, ongoing contract management requires internal expertise that many emerging market agencies lack. The African Development Bank's post-completion audits found that 56% of climate PPPs experienced contract management failures—missed performance milestones, delayed payment processing, inadequate dispute resolution—stemming from insufficient government capacity rather than private partner underperformance.

Carbon Price Volatility Undermining Revenue Projections: Climate PPPs structured around carbon credit revenues face extreme uncertainty. Voluntary carbon market prices collapsed from $15/tonne in early 2023 to $4/tonne by late 2024 for nature-based solutions, rendering numerous project financial models unviable. PPPs without guaranteed offtake agreements or price floors have experienced investor exits and project suspensions.

Key Players

Established Leaders

International Finance Corporation (IFC): The World Bank Group's private sector arm has committed $4.4 billion to climate PPPs in emerging markets during FY2024, establishing the benchmark for blended finance structuring and providing anchor investments that catalyze commercial participation.

Asian Development Bank (ADB): ADB's Climate Change Fund and technical assistance programs have supported PPP frameworks across 25 Asian countries, with particular strength in energy transition projects and climate-resilient infrastructure.

African Development Bank (AfDB): Through the Africa Climate Change Fund and Desert to Power initiative, AfDB has structured landmark solar PPPs across the Sahel, mobilizing $8.5 billion for renewable energy infrastructure.

European Investment Bank (EIB): As the EU's climate bank, EIB has expanded emerging market operations through the Global Gateway initiative, providing concessional finance and guarantee products that reduce private sector risk in climate PPPs.

Convergence: This blended finance network has facilitated over $10 billion in climate PPP transactions by matching development finance with commercial capital, maintaining the largest database of blended finance deal structures.

Emerging Startups

Pachama: Leveraging satellite imagery and AI for forest carbon project verification, Pachama has reduced MRV costs by 80% while increasing accuracy, enabling previously unbankable conservation PPPs.

Sparkfund: This climate finance platform structures energy efficiency PPPs through innovative performance contracting, deploying $200 million across emerging market commercial buildings.

Sylvera: Providing carbon credit ratings and due diligence, Sylvera has become essential infrastructure for PPPs relying on carbon revenues, with coverage of 700+ projects globally.

Odyssey Energy Solutions: Offering distributed energy planning software, Odyssey enables governments and developers to model microgrid PPPs with granular techno-economic analysis.

CarbonChain: Specializing in supply chain emissions tracking, CarbonChain provides the traceability infrastructure that industrial decarbonization PPPs require for credible reporting.

Key Investors & Funders

Green Climate Fund (GCF): The world's largest dedicated climate fund, GCF has committed $13.5 billion to date, with 60% directed to emerging markets through PPP and blended finance modalities.

Climate Investment Funds (CIF): Managed by multilateral development banks, CIF has mobilized $72 billion for climate action in 72 countries, pioneering risk mitigation instruments for climate PPPs.

Breakthrough Energy Ventures: Bill Gates' climate investment fund provides patient capital for deep technology commercialization, seeding innovations that later scale through PPP deployment.

Meridiam: This infrastructure fund manages $20 billion with explicit focus on sustainable PPPs, bringing 20-year patient capital to emerging market climate projects.

British International Investment (BII): The UK's development finance institution has committed £3 billion to climate finance through 2026, with emphasis on blended finance PPP structures across Africa and South Asia.

Examples

1. Morocco's Noor-Ouarzazate Solar Complex: This 580 MW concentrated solar power facility represents one of the largest climate PPPs in emerging markets. Structured through a build-own-operate-transfer model, the project attracted $2.4 billion from development finance institutions, commercial banks, and climate funds. Unit economics proved viable through a 25-year power purchase agreement with guaranteed tariffs, eliminating revenue uncertainty. The project delivers power at $0.14/kWh—competitive with fossil alternatives—while displacing 760,000 tonnes of CO2 annually. Key lessons include the importance of sovereign guarantees for currency conversion and the value of phased development enabling learning across project stages.

2. Indonesia's Energy Transition Mechanism (ETM): Launched in 2024, the ETM Country Platform represents a new PPP archetype: accelerating coal plant retirement through blended finance. The mechanism aggregates $20 billion from public and private sources to acquire coal assets, retire them early, and refinance replacement renewable capacity. Early transactions demonstrate unit economics requiring $25-30 per tonne CO2 abatement cost—within carbon credit value thresholds if prices recover. Adoption blockers include workforce transition planning and grid stability concerns. Decision-makers should watch whether the model can replicate across Vietnam and the Philippines as planned.

3. Kenya's Geothermal Development Company PPPs: Kenya has deployed PPPs to develop 1,200 MW of geothermal capacity, representing 45% of national electricity supply. The government's Geothermal Development Company assumes exploration risk—the highest-risk phase—then transfers proven resources to private developers through competitive PPP tenders. This risk allocation innovation has attracted $5 billion in private investment. OPEX optimization through local workforce development and spare parts manufacturing has achieved operating costs 30% below regional benchmarks, demonstrating that emerging market PPPs can achieve cost competitiveness through deliberate capability building.

Action Checklist

• Conduct a regulatory mapping exercise to identify all ministries and agencies requiring approval for climate PPP transactions, establishing coordination protocols before project launch
• Structure revenue models with diversified income streams—not solely dependent on carbon credits—including power purchase agreements, green premiums, and government availability payments
• Incorporate currency hedging costs into financial models from inception, with stress testing for 30% depreciation scenarios
• Establish dedicated contract management units with trained personnel before reaching financial close, not after
• Negotiate first-loss provisions from development finance institutions to attract commercial bank participation at acceptable risk premiums
• Require digital MRV systems with satellite verification capability as standard procurement specifications
• Build OPEX reserves equivalent to 18 months of operating costs to weather payment delays common in emerging market government contracts
• Include graduated performance milestones with partial payments rather than back-loaded lump sums to maintain private partner cash flow
• Engage local civil society organizations in project design to preempt community opposition that has derailed numerous climate PPPs
• Establish dispute resolution mechanisms specifying international arbitration venues to provide investor confidence in contract enforcement

FAQ

Q: What OPEX-to-revenue ratio should climate PPPs target for financial sustainability in emerging markets? A: Industry experience suggests OPEX should not exceed 35% of revenues for infrastructure-heavy climate PPPs to remain commercially viable. However, this threshold varies by technology and context. Solar PV PPPs typically achieve 15-20% OPEX ratios given low maintenance requirements, while waste-to-energy facilities often require 40-45% due to operational complexity. The critical factor is ensuring OPEX projections include realistic provisions for maintenance, insurance, personnel, and contingencies—emerging market projects frequently underestimate these costs by 30-50% in initial financial models.

Q: How can emerging market governments mitigate currency risk in climate PPPs without exhausting sovereign guarantee capacity? A: Several mechanisms exist beyond full sovereign guarantees. Local currency financing from development finance institutions—now offered by IFC, ADB, and AfDB—eliminates currency mismatch for a portion of project debt. Partial risk guarantees covering only currency convertibility (not devaluation) reduce sovereign exposure while addressing key investor concerns. Revenue indexation linking tariffs to exchange rate movements transfers currency risk to consumers but requires careful regulatory approval. Finally, strategic use of carbon credit revenues—often denominated in dollars—can provide natural hedging for projects with verified emissions reductions.

Q: What approval timelines should PPP practitioners realistically budget for in emerging markets? A: Based on IFC and World Bank data, climate PPPs in emerging markets should budget 24-36 months from concept to financial close, compared to 12-18 months in OECD contexts. Environmental and social impact assessments typically require 8-12 months; land acquisition and permitting add 6-10 months; financial structuring and government approvals contribute another 6-12 months. Projects achieving faster timelines typically benefit from prior framework agreements, repeat relationships with government counterparts, or standardized documentation from previous transactions.

Q: How are 2024-2025 carbon market developments affecting climate PPP viability? A: The voluntary carbon market's price collapse and integrity concerns have bifurcated climate PPP economics. Projects with high-quality, digitally verified credits from established registries continue to attract buyers at $8-12/tonne, while generic credits struggle to find offtakers at any price. For new PPPs, this means MRV infrastructure quality directly determines revenue potential. Additionally, compliance market developments—including Article 6 of the Paris Agreement operationalization—are creating new demand channels. Decision-makers should structure PPPs with optionality to access multiple market segments rather than depending on a single credit type.

Q: What distinguishes successful from failed climate PPP scaling attempts? A: Analysis of 40 climate PPP scaling attempts across emerging markets reveals three consistent differentiators. First, successful scaling maintains the core risk allocation from pilot transactions rather than attempting to shift risks to government at scale—private partners who demonstrated capability during pilots must retain operational responsibility. Second, successful programs invest in government capacity building concurrent with transaction support, ensuring contract management expertise exists before scale-up. Third, successful scaling preserves outcome-based payment mechanisms rather than reverting to input-based disbursement under pressure to accelerate spending.

Sources

• Climate Policy Initiative. "Global Landscape of Climate Finance 2024." November 2024.
• International Finance Corporation. "Emerging Market Climate Finance: Lessons from a Decade of PPP Experience." World Bank Group, September 2024.
• BloombergNEF. "Energy Transition Investment Trends 2025." January 2025.
• Green Climate Fund. "GCF Portfolio Performance Report 2024." December 2024.
• World Bank Private Participation in Infrastructure Database. "Climate-Tagged Transactions Analysis 2020-2024." Accessed January 2025.
• Asian Development Bank. "Climate Change Operational Framework 2024-2030." Manila, 2024.
• Ecosystem Marketplace. "State of the Voluntary Carbon Markets 2024." Forest Trends, October 2024.
• African Development Bank. "Climate Finance in Africa: Assessment and Outlook." Abidjan, 2024.