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November 05, 2013
Climate investments stagnant

In 2012, total global investments in projects to mitigate climate change equaled about 7 percent of what is needed by 2020 to meet global temperature goals, reported the Climate Policy Initiative (CPI) in The Landscape of Climate Finance 2013, the third edition of CPI’s annual inventory of the climate finance flowing in, to, and between countries. 

Specifically, the CPI says that collective investments by both the world’s public and private sectors were $359 billion last year (about the same as in 2011) for renewable energy and energy efficiency projects as well as other climate-related projects involving industry process and fugitive emissions, sustainable transport, agriculture, land use, and livestock management.  According to the CPI, the International Energy Agency projects that $5 trillion will need to be invested in clean energy alone by 2020 to limit warming to 2 degrees Celsius. 

“However, the gap is likely wider,” says the CPI.  “The World Bank projects we are on a path to four degrees Celsius warming, suggesting that efforts to scale up finance are falling further and further behind.” 

‘Dwarfed’ by fossil fuel investments

According to a CPI statement, the report includes the following estimates:

  • Public sources provided $135 billion—38 percent of total finance—and played a critical role in enabling private finance through incentives, low-cost loans, risk coverage mechanisms, direct project investment, and technical support.
  • These public measures facilitated $224 billion in private investment—62 percent of total investment—from sources such as project developers ($102 billion), manufacturers and corporations ($66 billion), and households ($33 billion).
  • Public support for climate activities was still “dwarfed” by current government support for fossil fuel energy consumption and production, estimated at $523 billion each year for developing and emerging economies alone, according to a recent report from the Organization for Economic Co-operation and Development.
  • Climate investment was split almost evenly between developed and developing countries, which received $177 billion and $182 billion, respectively.  Private investment into renewable energy projects in Europe totaled $73 billion, while investment in China was $68 billion; the United States $27 billion; Latin America, $7 billion; and India, $5 billion.  Latin America also received an additional $19 billion in public money.
  • 76 percent ($275 billion) of all spending was domestic—it originated in the country in which it was used.  Of the remaining $84 billion that flowed between countries, a significant amount was private money passing between developed countries. On the other hand, public sector money made up the vast majority of developed to developing country flows.  “These figures illuminate a bias by private investors toward environments that are more familiar and perceived to be less risky,” says the CPI.

Better returns

There was one piece of good news, added the CPI.  Less financing resulted in more large-scale renewable energy.  In 2012, there was less investment in large-scale projects than in the past.  This investment was focused on fewer projects, but resulted in greater capacity.  This suggests that developers are achieving greater economies of scale and bringing technology costs down.

Information on CPI’s study

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