Climate Policy Initiative’s global landscape of climate finance 2017 (Landscape 2017) indicates that although global investment toward low-carbon and climate-resilient actions recorded a high of $437 billion in 2015, that quickly changed in 2016 when investment declined to a low of $383 billion.
The study, which for the first time provides a five-year trend analysis, found that the record in 2015 was driven by increased private investment in renewable energy, particularly in China, and in rooftop solar power in the US and Japan.
The decrease in 2016 can be explained by a combination of both falling renewable energy technology costs and lower capacity additions in some countries.
Taking into account annual fluctuations, the annual average flows across 2015/2016, $410 billion, were 12% higher than during 2013/2014.
The two record breaking years for renewable energy, and in particular rooftop solar and onshore wind, indicate that capacity additions and investment for these technologies are on track to meet their share of momentum required to prevent dangerous climate change according to IEA scenarios.
Still, the study indicates that scaling renewable energy is only one piece of the overall need.
Investments in other important areas such as energy efficiency, low-carbon transport, agriculture, water, curbing deforestation, and climate adaptation activities more generally remain severely underfunded with unmet needs of at least $1 trillion per year.
Further, fossil fuel investment, estimated by IEA at $825 billion in 2016, continues to dwarf overall investment in climate change, with potential repercussions for the overall effectiveness of investments in a low-carbon, climate-resilient economy. Read more…
Barbara Buchner, executive director of Climate Policy Initiative noted: “Two years since the negotiations of the Paris Agreement, there are still significant challenges in mobilising the investment required to meet its goal of limiting global warming to, at most, 2 degrees Celsius.”
“While our numbers show that a wide range of public and private finance actors are taking advantage of the strong political signal following Paris, a broader scale-up of investments across all sectors is critically needed to avoid dangerous climate change,” Buchner added.
Private investments upsurge
There are however, signals from Landscape 2017 that both public and private investments are becoming more effective and targeted as time goes on.
For example, overall the analysis shows that the private sector is contributing more than ever before, while the overall share of public investment remains steady.
Private climate finance averaged $270 billion a year during 2015 and 2016, which was 23% higher than the annual average in 2013/2014.
In addition, even as private investment in renewables surged, average annual public spending on renewable energy actually decreased by $11 billion from 2013/2014 to 2015/2016. This suggests that renewable energy is becoming a commercial investment choice in more markets with less support needed from public entities.
Additionally, public funding for energy efficiency outpaced renewable energy, reaching a $39 billion annual average for 2015/2016.
This trend suggests that the public sector is shifting to a critical role to provide increased support to energy efficiency. Sustainable transport also saw an increase in average annual investment from $19 billion in 2013/2014 to $22 billion in 2015/2016.
“While it’s clear that an overall scale-up of investment is needed, there are several positive trends from the last few years that may help the outlook for climate investments going forward,” said Padraig Oliver, senior analyst at Climate Policy Initiative.
“Falling technology costs, the Paris Agreement, initiatives that engage capital markets and large corporations, efforts to green public financial systems, and the rise of new sustainable investment vehicles are all new developments that bode well for the future,” Oliver added.
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