Global investment in low-carbon energy transition has broken new ground, exceeding $2 trillion for the first time, according to a recent report by BloombergNEF, which was released on Thursday.
This milestone marks a significant surge in the global effort to develop cleaner power sources and infrastructure, driven primarily by the need to meet climate targets outlined under the Paris Agreement. While this achievement is noteworthy, experts caution it remains insufficient for the ambitious net-zero emissions targets by mid-century. The report indicates the investments need to average $5.6 trillion each year between 2025 and 2030 to align with these goals, yet current levels are only about 37% of what’s necessary.
The growth of investment surged by 11% last year, totaling $2.1 trillion, propelled by investments across renewable energy, power grids, electrified transport, and energy storage. These sectors are increasingly recognized for their potential to drive low-carbon transitions and enable large-scale decarbonization. Yet, this pace of growth is slower compared to previous years, which saw investment increases of 24-29% annually.
The most significant share of this investment came from China, which allocated $818 billion, marking a 20% increase from the previous year. Mainland China continues to emerge as the dominant force driving global clean energy investment, stimulating not only domestic advancements but also influencing global trends.
According to experts, the road to achieving net-zero emissions comprises much more than just increased funding. Albert Cheung, deputy chief executive of BloombergNEF, emphasized, “There is still much more needs to be done, especially in emergent areas like industrial decarbonisation, hydrogen, and carbon capture, to reach global net-zero goals.”
Reported by Reuters.
This suggests the global energy transition not only requires more investment but also strategic focus on innovative solutions and technologies, particularly those addressing the hard-to-abate sectors. Industries such as cement and steel manufacturing are recognized as major contributors to global greenhouse gas emissions, necessitating urgent action and funding.
Meanwhile, the urgency to bolster investments was highlighted by various shifts in policy and funding, particularly within the United States. The departure from the Paris Agreement under former President Donald Trump had significant repercussions on U.S. climate funding internationally which could hinder progress as global warming escalates.
The holistic approach to sustainable energy involves not only funding but comprehensive systematic changes across sectors to drive collective impact. The clean energy sector’s evolution relies on consistent funding across various technologies and innovations. To achieve this, collaboration between governments, financial entities, and private investors will be pivotal.
Despite the impressive figures, industry experts argue progress is still lagging. More investment is required to obtain infrastructure needed for the global shift to renewable energy. There is also the call for scaling efforts to include emergent areas like carbon capture technologies, which play a significant role in mitigating the adverse effects of carbon emissions.
Experts anticipate the need to confront challenges surrounding venture capital investment, which has also dwindled. Following years of resilience amid broader market challenges, the climate venture markets have faced setbacks, with funding for climate initiatives sharply dropping by 40% over the past year.
BloombergNEF’s report delineated investment styles, categorizing total global investment across four segments: energy transition, supply chain, climate tech equity raising, and energy transition debt issuance. A shockingly low percentage of 7.4% of investments have been allocated to plummeting sectors like nuclear, carbon capture, hydrogen and clean shipping, raising red flags about the broader approach to energy transition.
Overall, as investments ramped up internationally, particularly from influential players like China, the collective efforts need to be recalibrated through comprehensive strategies and innovative funding streams to hit net-zero targets by 2050. The world cannot afford complacency; the stakes are simply too high, and the solutions too pressing. The future health of our planet hinges on the actions taken today.