Italy's central bank backs helping poorer countries fund energy transition

ROME (Reuters) - Italy's Central Bank governor Fabio Panetta on Monday threw his weight behind a plan to help poorer countries reduce their carbon emissions, saying it would ultimately reduce the overall cost of the energy transition.

Panetta, who is also a member of the European Central Bank governing council, said net flows into sustainable investment funds have lost momentum with some countries facing a "political backlash" against climate initiatives.

Developing countries face mounting difficulties in raising the capital needed to phase out cheap coal-fired power plants and switch to clean energy and financing has long been one of the most contentious issues at U.N. climate talks, which next take place in November in Baku.

"Financing transition projects in emerging market and developing economies (EMDEs) can be twice as expensive as in advanced economies," Panetta told a G7 International Energy Association (IEA) conference in Rome.

The scheme he favoured would allow countries with higher per capita emissions to compensate countries with relatively low emissions.

The resources transferred into it "would be more than offset by the economic damage avoided from the climate change they would suffer if the transition effort failed," he said.

Prime Minister Giorgia Meloni's government in January pledged to support developing countries and in particular Africa's efforts to grow its economy, while introducing low carbon technologies.

(Reporting by Giselda Vagnoni, writing by Sara Rossi, editing by Barbara Lewis)