When it comes to investing in a future of clean and sustainable energy, the world is rapidly falling behind.
That’s the finding from a new study by the Climate Policy Initiative (CPI), that determined global investment in renewable energy, energy efficiency, and adaptation actually dropped $5 billion — from $364 billion in 2011 to $359 billion in 2012.
But the International Energy Agency estimated last year that a grand total of $5 trillion will be needed by 2020 — at minimum — to keep the world under the two degrees of warming Celsius scientists have pegged as the threshold beyond which climate change becomes dangerously destructive. That works out to roughly $625 billion per year.
According to estimates by the U.N., another $48 billion will be needed on top of that every year until 2030 to bring global energy access. That would move the world towards a sustainable energy economy while reducing global energy poverty at the same time — two goals that are often in structural tension.
Of 2012’s $359 billion, about two thirds of it — $224 billion — came from private investment, while the remaining $135 billion came from public sources like government projects, incentives, and loan mechanisms. It was also split almost evenly between developed countries and the developed world, which received $177 billion and $182 billion respectively.
More worryingly, 76 percent of that investment was domestic, coming from the same country in which it was used. That makes the even split between advanced nations and ones that are still struggling economically problematic. With their greater wealth and much lower poverty, developed countries bare the majority of the responsibility to sacrifice to combat climate change. Work by the Greenhouse Development Rights Framework and the Stockholm Environment Institute earlier this year tried to put some hard numbers to that obligation, and determined that the U.S. alone needs to take on one of the burden of cutting global carbon emissions.
“Currently, climate finance is mostly a domestic game,” said Barbara Buchner, Senior Director at Climate Policy Initiative. “This implies that effective national policy is critical to increasing climate finance globally. There may also be an opportunity to increase international flows, by addressing the perception of additional risk in overseas investments.”
One good sign in this regard is the increased efforts by shareholders and investment firms around the world to take stock of the environmental risk in their portfolios, and the danger of investing in fossil fuel stocks that will wind up never being exploited.
Other good news from the CPI report was the discovery that we’re getting more bang for our buck out of renewable investments, probably due to improved economies of scale and lower technology costs. While 2012 saw a lower raw dollar amount of investment that focused on fewer projects, those investments nevertheless delivered greater capacity for renewable generation.