Global green transition needs an extra $2.5tn a year to reach net zero by 2050, study says
Investment in the global green transition needs an rise by an extra $2.5tn a year in order to reach net zero by 2050, a new study has suggested.
Capital investment will need to average $3.5tn a year between now and 2050 to reach net zero, according to a new report from international think tank The Energy Transition Commission (ETC). At the moment, around $1tn is invested in clean energy globally.
“Adequate flows of finance are the key to delivering a net-zero future and limiting the impact of climate change,” chair of the ETC Adair Turner said.
“Private investment, government and philanthropic money are needed to deliver the large-scale funding and international financial flows to ensure we move from targets to action and deliver a low-carbon global economy,” Turner continued.
But the report also highlighted “the critical importance of strong government policies” to scale up investment in clean energy.
Amongst recommended reforms, the ETC said carbon pricing should be introduced across all countries, which would create “strong incentives for decarbonisation”.
It also suggested that governments could de-risk investment in early stage technologies by guaranteeing revenue for firms.
Green finance groups agreed that in order to increase funding to clean energy, governments around the world needed to do more to incentivise investment.
“While private finance can serve as a catalyst, governments need to create the public policies that enable private finance to accelerate investment into climate solutions and the energy transition,” a spokesperson for Glasgow Financial Alliance for Net Zero said.
UK Sustainable Investment and Finance’s (UKSIF), an industry body which represents more than 300 members with over £19trn in assets, said the UK government needed to do more to incentivise investment in green energy.
“In the UK context, many of our members stand ready to provide the necessary capital to help decarbonise the economy in the coming years,” James Alexander, UKSIF CEO, said. “However, to invest with confidence they continue to require much clearer signalling from government on its long-term plans.”
Lynsey Jones, a spokesperson for the Conservative Environment Network, also called on the UK government to improve incentives for green investment, by delivering “faster planning decisions for clean industries, permanent capital allowances, and revenue support schemes like Contracts for Difference for nascent clean technologies.”
The government is currently consulting on a range of environmental regulations, including improving sustainability disclosures. It is expected to release its Green Finance Strategy later this month.