St Peters Lutheran College Shop 45

Getting the world on track for net zero emissions by 2050 requires clean energy transition-related investment to accelerate from current levels to around USD 4 trillion annually by 2030. The APS sees progress on this front, but the level of investment required in the NZE is three-quarters higher. This expansion is driven by a USD 1.1 trillion increase, relative to the APS, in annual investment in clean power generation and electricity infrastructure (two-thirds for generation and one-third for networks), a USD 0.5 trillion increase in investment in energy efficiency and end-use decarbonisation in the buildings, industry and transport sectors, as well as a rapid scaling up from a low base of low emissions fuels based on hydrogen or bioenergy. All regions see a surge in clean energy spend, but the required increase is particularly large in emerging market and developing economies.

The large increase in capital investment in the NZE is partly compensated for by the lower operating expenditure that follow the shift away from upstream fuel supply and fossil fuel generation projects towards capital-intensive clean technologies. Keeping upfront financing costs low nevertheless is critical to the speed and affordability of this transformation. In recent years, economy-wide financing costs have tended to come down around the world. However, capital remains up to seven-times more expensive in emerging market and developing economies than in advanced economies, while fiscal expansions and inflationary pressures around the world increase the risk of growing debt burdens and higher borrowing costs in the future.

Achieving rapid clean energy transitions depends on enhancing access to low cost finance for clean energy projects. This means channelling retained earnings from the balance sheets of large energy companies, as well as opening funding from a range of companies and external sources – notably banks and the enormous pools of capital in financial markets. We estimate that around 70% of clean energy investment will need to be carried out by private developers, consumers and financiers responding to market signals and policies set by governments. But an expansion of public sources of finance is also required. Public actors, including state-owned enterprises (SOEs), often have a key part to play in funding network infrastructure and clean energy transitions in emissions-intensive sectors. Public finance institutions will need to catalyse private capital, and their role is especially important in the NZE, where their investment more than doubles compared with the APS.

Annual average clean energy financing by source in the Announced Pledges and Net Zero Scenarios, 2016-2050
Open
billion USD (2020)

2016-2020
2026-2030 Announced​Pledges Scenario
2026-2030 Net Zero​Scenario
0
1000
2000
the back of these commitments