Efforts to scale up climate change investment fall further behind
The most comprehensive inventory of climate finance to-date shows investment is far short of the need, and falling further behind each year.
Global investment in climate change plateaued at USD $359bn in 2012 and falls far short of what’s needed, according to a new Climate Policy Initiative (CPI) study, The Global Landscape of Climate Finance 2013.
The International Energy Agency projects that an additional investment of USD $5 trillion is required by 2020 for clean energy alone, to limit warming to two degrees Celsius. However, the gap is likely to be wider with The World Bank saying a four degree Celsius warming is more likely. This suggests that efforts to scale up finance are falling further and further behind.
Public sources provided $135bn, or 38% 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 $224bn in private investment, or 62% of total investment, from sources such as project developers ($102 bn); manufacturers and corporations ($66 bn); and households ($33 bn).
While public support for climate activities was significant, it was still dwarfed by current government support to fossil fuel energy consumption and production, estimated at $523bn each year for developing and emerging economies alone, according to a recent report from the OECD.
"Investment to combat and adapt to climate change is happening around the world, but it's short of where it needs to be and efforts to grow it have not been successful enough," said Thomas C. Heller, executive director of Climate Policy Initiative, while announcing the report at the Global Green Growth Forum. "Leveling the playing field can help unlock significant additional finance."
Climate investment was split almost evenly between developed and developing countries, with $177bn and $182bn respectively. Private investment into renewable energy projects in Europe totaled $73bn, while investment in China was $68bn, the US $27bn, Latin America $7bn, and India $5bn. Notably, Latin America also received additional $19bn in public money.
However, the report shows that 76%, or $275bn, of all spending was domestic (ie originated in the country in which it was used). Of the remaining $84bn that flowed between countries, a significant amount was private money flowing 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.
You can read the report here.