Working PaperEnergyFinance

Investing at Least a Trillion Dollars a Year in Clean Energy

Julia Zuckerman, Jana Frejova, Ilmi Granoff, David Nelson

Energy demand is projected to grow by a third in the next 15 years. A rapid scale-up of low-carbon energy sources and energy efficiency is essential to drive global growth, reduce the air pollution and greenhouse gas emissions (GHGs) associated with fossil fuel use and help provide reliable access to modern energy for those who lack it. This need has become more urgent following the global commitment made in the UN Paris Agreement in December 2015 to reducing net GHG emissions to zero in the second half of the century.

Authors

Julia Zuckerman Climate Policy Initiative (CPI)

Jana Frejova New Climate Economy

Ilmi Granoff Overseas Development Institute

David Nelson CPI

Overview

April 2016

Energy demand is projected to grow by a third in the next 15 years. A rapid scale-up of low-carbon energy sources and energy efficiency is essential to drive global growth, reduce the air pollution and greenhouse gas emissions (GHGs) associated with fossil fuel use and help provide reliable access to modern energy for those who lack it. This need has become more urgent following the global commitment made in the UN Paris Agreement in December 2015 to reducing net GHG emissions to zero in the second half of the century.

 

There has been significant progress in recent years, partly due to sharp declines in the cost of renewables. Solar PV modules, for example, are about 80% cheaper than they were in 2008. Clean energy is increasingly cost-competitive with fossil fuels. In 2013, for the first time, the world added more low-carbon electricity capacity than fossil fuel capacity. According to IRENA, the share of renewable energy in total electricity generation can reach as much as 36% by 2030 with technologies that are available today, if the right conditions and investments are secured. Given an estimated 1.1 billion people currently without access to electricity and 2.9 billion lacking modern cooking facilities, increasing international financing for energy access is also a key priority. International cooperation coordinated by development finance institutions is helping improve the risk-reward profile of clean energy projects, particularly for renewables and energy efficiency, lowering the cost of capital for investment, increasing its supply, and facilitating access to energy services.

 

This report recommends that, to bring down the costs of financing clean energy and catalyse private investment, multilateral and national development banks scale up their collaboration with governments and the private sector, and their own capital commitments, with the aim of reaching a global total of at least US$1 trillion of investment per year in low-carbon power supply and (non-transport) energy efficiency by 2030.

 

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