Infrastructure Investment Needs of a Low-Carbon Scenario

New Climate Economy

Dec 2014

This note describes the Commission’s assessment of future infrastructure investment needs. It presents projections for a baseline scenario, and the estimated incremental investment required for a low-carbon scenario. It sets out the sources used and provides an overview of the estimates and modelling undertaken by the New Climate Economy (NCE) network.The extent of future investment needs are highly uncertain, and projections differ depending on methodology and assumptions.

Past projections have often been proved wrong, which is one reason why the NCE project does not generally consider the notion of a “business-as-usual” development either plausible or even helpful. The estimates presented in this note therefore should be regarded not as an attempt at precise projections, but as a broad indication of the approximate magnitude of investment needs for a baseline and low-carbon scenarios. In addition, we emphasise that estimates of infrastructure investment needs in a low-carbon scenario are not equivalent to the macroeconomic costs of a low-carbon transition.

Two key findings arise from our work on infrastructure:

1. There are large infrastructure investment needs over the next 15 years, totalling approximately US$90 trillion between 2015 and 2030. Developed countries have ageing infrastructure that needs to be replaced and developing countries will continue to invest in rapidly expanding their infrastructure, all in the context of a growing global population and increasing urbanisation.
2. The estimates outlined in this note suggest that a low-carbon pathway has incremental infrastructure investment requirements of US$4 trillion between 2015 and 2030, an increase of less than 5% on baseline levels. Other studies have suggested estimates that are even lower.