Small and medium-sized enterprises (SMEs) in developing countries can generate significant growth and create jobs by seizing a potential $1.6 trillion market opportunity in clean technology.
Latin America and Africa are among the largest markets for SMEs in clean technology with potential market sizes of $349 billion and $235 billion respectively.
SMEs are key drivers of job creation. Clean technology jobs compare favorably to jobs in other sectors, being on average more skilled, safer, and better paid. Countries must take key policy actions to fully realize this growth potential.
A new World Bank Group report quantifies significant opportunities for small and medium-sized enterprises (SMEs) in developing countries to generate profits and create jobs by providing solutions to local climate challenges.
Much of the emphasis on climate change has been on urging countries to act to avoid environmental catastrophe. This new report, “Building Competitive Green Industries: the Climate and Clean Technology Opportunity for Developing Countries,” frames responding to climate change as an extraordinary economic opportunity, particularly in developing countries. The report, published by infoDev, a global innovation and entrepreneurship program in the Bank Group’s Trade and Competitiveness Global Practice, recommends actions by the public and private sectors to foster the growing market for SMEs in the clean technology sector.
Senior Director, World Bank Group Trade and Competitiveness Global Practice
In just the last decade, clean technology has emerged as a major global market. Over the next 10 years, an estimated $6.4 trillion will be invested in developing countries. Of the total market in developing countries, some $1.6 trillion will be accessible to SMEs, according to the report. China, Latin America and Sub-Saharan Africa are the top three markets in the developing world for SMEs in clean technology, with expected markets of $415 billion, $349 billion and $235 billion, respectively for sectors such as wastewater treatment, onshore wind, solar panels, electric vehicles, bioenergy, and small hydro.
To unlock this environmental and economic potential, more can be done to support green entrepreneurship. Clean technology SMEs face daunting challenges, particularly in accessing early and growth stage financing. Countries can help by creating targeted policy incentives to encourage their own clean technology sectors. The report provides policymakers with a range of practical instruments that help support SMEs in clean technology sectors such as innovative finance, entrepreneurship and business acceleration, market development, technology development, and the legal and regulatory framework. These policy considerations are illustrated through case studies of national programs in South Korea, India, Thailand, and Ethiopia.
The report highlights clean technology market opportunities that can have great social impact. In Kenya, for instance, the roughly 80% of the population not served by the electricity grid represents a vast market for new climate solutions. Local entrepreneurs and SMEs are deriving innovative solutions in solar and biogas technologies. This not only creates jobs and improves the environment but also provides new offerings for sustainable, off-grid electricity to the poorest 40% of the population. (Video example)
Clean technology jobs compare favorably to jobs in other sectors, requiring more skill and delivering better pay and on-the-job safety. The move towards a lower carbon and more resource-efficient economy is expected to yield a double-dividend in terms of employment and environmental improvement.
infoDev’s Climate Technology Program supports local climate and clean technology SMEs and startups through its targeted Climate Innovation Centers (CICs). To date, the Kenya CIC has helped 83 small firms whose services have provided over 8,200 people access to safer water, have given almost 49,000 people access to low carbon energy sources, and 59,675 tons of CO2 — the equivalent of the exhaust of almost 13,000 cars annually — have been mitigated.
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