Aligning Electricity Transmission and Distribution Investments with a Paris Agreement Pathway

Parties to the Paris Agreement committed to “making finance flows consistent with a pathway towards low GHG emissions and climate-resilient development (Article 2.1c).” It is especially critical that energy-sector infrastructure is Paris aligned, given the large carbon lock-in potential of investments and the scale of investment needed in the coming years in the developing world. While there have been some recent efforts to assess the alignment of energy-sector investments with two-degree pathways, previous assessments have not seriously delved into electricity transmission and distribution (T&D). The purpose of this paper is to propose a credible and rigorous methodology for assessing Paris Agreement alignment of T&D investments. Our long-term goal is not only to provide a methodology that can be used to screen investments externally at the project level, but also to mainstream this methodology into development finance institutions’ investment decisions and energy portfolios.