Investing $1 Trillion a Year In Clean Energy is Achievable

Clean energy is the future – if the future we want is one where average global temperature rise does not exceed two degrees Celsius. That’s the level experts say we need to stay within to avoid the worst impacts of climate change.

Investing an additional $1 trillion in clean energy annually until 2050 is achievable, a new Ceres report finds. That’s the investment needed to limit global temperature rise to two degrees.

It’s a good time to invest in clean energy because the energy market dynamics “have shifted in favor of clean energy such as wind and solar,” according to the report. The advanced and clean energy market has surpassed $1.4 trillion globally. Global investment in advanced and clean energy exceeded $333 billion in 2017 while investment in conventional fossil fuels and nuclear energy was only $144 billion.

The investment in clean energy technology has “increased its impact per dollar invested,” the Ceres report revealed, and in many regions, it is more competitive than fossil fuels or nuclear power. The actual capacity of clean energy increased by more than 15 percent in 2017, even though the annual investment was a bit lower than the record high levels in 2015. The fastest growing source of electric generation globally is clean energy. By 2040, the clean energy market is expected to comprise nearly 50 percent of installed capacity.

“Along with corporations, institutional investors have the opportunity to play a key role in the global clean energy transition as the risk and return characteristics of lower-carbon investments are set to increasingly outperform those with carbon risks.” said report co-editor Mark Fulton, a senior fellow at Ceres and veteran economist, strategist and former head of research at Citi, in a statement.

“The clean energy transition is well underway and irreversible, and the capital needed to support it is not extraordinary in the context of existing global capital flows,” says Sue Reid, co-editor of the report and vice president of Climate and Energy at Ceres.

“Scaling clean energy investment to achieve the ‘Clean Trillion’ is eminently feasible.”

The kind of investment that is needed

Investment is needed in cleaner transportation. Transportation comprises 27 percent of greenhouse gas emissions in the U.S. and the transportation sector is one that deserves attention. Tremendous capital flows into low emission vehicles (LEVs) are expected, according to the report. And LEVs are expected to be financed with equity and loans. It is projected that the needed scale-up in LEV financing will start in a big way in the 2020s, reaching $1.7 billion by the 2030s. Incremental costs of LEVs are expected to considerably decrease as economies of scale increase and battery costs continue to decrease.

Investors need to consider investing at least one percent of their total assets under management in lower carbon and renewable energy infrastructure, the Ceres report advises. The investments considered should include both newly developed and constructed infrastructure investments that produce extra carbon mitigation. Nineteen of the world’s biggest asset owners have already invested more than five percent of their total assets in low-carbon investments. However, the majority of investment consultants “have been slow to incorporate climate-related considerations as standard across their client base,” the report points out.

Green banks are defined as a “dedicated public or non-profit finance entity designed to drive private capital into market gaps,” by the Coalition For Green Capitol. Green banks have “tremendous promise” to catalyze investment in energy efficiency, according to the report. One green bank, in particular, demonstrates this to be true. Clean Energy Finance Corporation (CEFC) is the largest green bank in the world. The Australian based bank has directed about half of its $4.3 billion in investment commitments to energy efficiency and leveraged more than double its investment through co-financiers and investors.

A post-fossil fuel subsidies world

Fossil fuels receive the lion’s share of subsidies. Global subsidies for clean energy are just a fraction of those for fossil fuels, but they provide more useful energy output per dollar directly spent on fossil fuel capacity. Fossil fuels have a big impact on health and pollution, and governments need to understand those risks. Renewable energy costs have continued to decrease while technological efficiencies have increased, and subsidies for renewable energy “in many instances, may now produce comparable energy output benefits as compared to fossil fuel subsidies,” the report declared.

In other words, renewable energy is the best investment for both the planet and its denizens.