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Developing countries have increased investment in renewable energy, accounting for one-fifth of the world's total last year, according to a report by the United Nations Environment Program (UNEP) released today (21 June).

The report states that investment in developing countries rose from 15 per cent in 2004 to 21 per cent in 2006.

"[Renewable energy] is a traditional sector in Europe and the United States, so it is quite a change globally to see a fast uptake in developing countries," Eric Usher, head of renewable energy finance at UNEP, told SciDev.Net.

The increase happened largely in Brazil, China and India with significant funding of solar, wind and biofuel sectors.

Nine per cent of the investment occurred in China last year alone, with wind, biomass and waste sectors the most dynamic. India came second behind China but was the largest buyer of renewable energy companies abroad in 2006, the report says.

Chris Greenwood, director of operations at New Energy Finance — the company that co-authored the report — said that both China and India put more money into local biofuel plants, which are already successful in Brazil. 

Latin America accounted for five per cent of last year's investment, most of which financed Brazilian bioethanol plants.

But sub-Saharan Africa still lagged behind other regions in investment.

Li Junfeng, secretary general of the Chinese Renewable Energy Industries Association, explained that global investors are reluctant to put money into poorly developed and politically unstable African and South-East Asian nations. 

"But the whole trend is positive and will benefit developing countries in many ways," Li told SciDev.Net.

The Chinese government's incentives to ensure more independence in developing renewable and low-carbon technologies would spur a continual growth of investment over the next few years, he added.

The UNEP report states that the world's total investment in sustainable energy climbed from US$80 billion in 2005 to a record US$100 billion last year — with research and development in the field rising by 25 per cent to $16.3 billion.

It also reflects the scale of investment — just two per cent of the world's energy comes from renewable sources, yet renewables have captured 18 per cent of the world's investment in energy generation.

Small-scale projects, such as solar roof panels and micro turbines, are attracting increasing interest, says the report, partly from growing opportunities in developing countries.

The report attributes the growth to global concerns over climate change and increasing energy demands and energy security, in addition to a persistently high oil price, growing consumer awareness of energy efficiency and government incentives.