2014-01-15

Co.Exist

Clean Energy Investments Slumped Worldwide Last Year, As Investors Mobilize To Reverse The Slide

After years of increases, clean energy investment plunged for the second straight year. What's going to happen this year?

While the world needs far more investment in clean energy if it’s ever to succeed at limiting global warming to safe levels--the International Energy Agency estimates an average of $1 trillion a year until 2050--the latest investment numbers reflect that we're far from that goal and moving in the wrong direction.

For the second year in a row, investments in renewable energy and energy efficiency projects have declined worldwide by 12% to a total of $254 billion in 2013 (from $289 billion in 2012 and $318 billion in 2011), according to the latest numbers from Bloomberg New Energy Finance, which has been tracking comprehensive global investment data since 2004. This total is half the IEA's estimate that $500 billion a year is needed by 2020 and a quarter of the $1 trillion goal by 2030. Ceres, an organization that mobilizes investors to take action on climate change, calls this the “clean trillion" gap.

Courtesy of Ceres

Significantly, investments declined slightly for the first time more than 10 years in China (by 4% to $64 billion), the world’s largest carbon emitter, as well as more significantly in the U.S. (8.4% to $48 billion) and a whopping amount in Europe’s shaky economic climate (by 41% to $58 billion).

Yet Bloomberg New Energy Finance CEO Michael Liebreich painted a rosy picture on the numbers while speaking to an audience of major investors at the U.N. Investor Summit for Climate Risk on Wednesday.

“We are by no means in as bad a place as we could be,” he said. One reason, he explained, is that “the cost of these technologies has come down so dramatically.” A company that intended a major wind or solar installation, for example, is simply spending less, he noted.

There were other positive trends. In the wake of the Fukushima disaster, Japan’s clean energy investments increased 55% as the country moves away from nuclear power. And in some nations in Latin America, like Chile, Mexico, and Uruguay, are just starting to invest in clean energy. India, South Africa, and Brazil were also major investors for emerging market nations. Overall, he also noted, the capacity solar installations is steady and set to grow globally--reflecting the fact that solar is cheaper and cheaper to install.

At the UN Summit, Ceres called on deep-pocketed institutional investors, such as pension funds and sovereign wealth funds, to invest money that could close this “gap,” suggesting, for example, that they set goals like devoting 5% of their portfolios to the purpose and expand the clean energy bond market to broaden the number of options for risk-averse investors. Today, primarily, clean energy investing is restricted to commercial banks, development banks, and electric utilities--but these sources alone won’t be enough to get to $1 trillion, the organization said in a report today that included 10 recommendations.

Mindy Lubber, president of Ceres, said the $1 trillion a year investment goal is achievable with attractive investments. “There is no investor that should be investing in...assets that are not competitive and receiving competitive returns. That should be a given,” she said.

However, it’s likely that national and international policies are required if investors are ever to ramp up to the IEA’s goals. Christiana Figueres, chief of the UN’s slow-moving efforts to have nations agree to a new global climate treaty that would limit temperature rise, called on investors to demand policy sooner rather than later in their own interests. “The longer we take on achieving final clarity on policy the more the risk goes up for investors,” she said. “Policy on climate change at the international level and at the national level is by now inevitable.”

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