Investments in clean energy must quadruple within the next two decades, said the Energy Transitions Commission (ETC) in its latest report published last month.
The global coalition of leaders from across the energy sector highlights the critical importance of strong government policies relating both to the real economy and to the financial system if finance is to flow on the scale required. It also identifies ‘concessional/grant’ payments needed to support early coal phase-out, end deforestation and finance carbon removals.
Around $3.5 trillion a year of capital investment will be needed on average between now and 2050 to build a net-zero global economy, up from $1 trillion per annum today. Of this, 70 per cent is required for low-carbon power generation, transmission, and distribution, which underpins decarbonisation in almost all sectors of the economy.
Part of the investment needed will be offset by declining investment in fossil fuels, cutting the $3.5 trillion per annum requirement to a net $3 trillion. This is equivalent to 1.3 per cent of potential average annual global GDP over the next 30 years. In middle- and low-income countries, much of the investment would be required to support economic growth even in the absence of a climate change challenge and could come from corporates via voluntary carbon markets, philanthropy, and high-income countries.