Spending on clean energy and low-carbon technologies didn’t crash as much as feared as the global recession bit in 2009, but investments need to be ramped up much more if we want to prevent dangerous climate change.
So says a new report released today at the World Economic Forum (WEF) in Davos, Switzerland.
“Last year we reported that if the world is to see energy-related CO2 emissions peak by 2020 — (which) scientists say is necessary to restrict the increase in global average temperatures to 2°C — global investment in clean energy must reach $500 billion (US) per annum by 2020,” states the report, “Green Investing 2010: Policy Mechanisms to Bridge the Financing Gap.”
Following the path we’re on now, though, annual spending on such programmes will reach just $350 billion at the start of the next decade. That won’t be enough to get us where we need to go, the WEF report cautions.
In fact, it cites research from the International Energy Agency (IEA) warning that the “business as usual” approach would “result in a global mean temperature rise of around 6 degrees C” at which “the environmental impacts would be severe.”
Still, it could be worse, the WEF report notes. Despite the economic downturn, green investments last year dropped by just 6 per cent, from $155 billion (US) in 2008 to $145 billion in 2009. The decline would have probably been much bigger if it weren’t for the billions that governments around the globe poured into economic stimulus programmes.
In fact, according to estimates from HSBC, worldwide stimulus investments with “climate change themes” amounted to more than $430 billion. Much of that, though, was directed at improvements to railways and electrical grids, rather than clean energy specifically, and only about one-seventh of the funds focused on low-carbon technologies ($25 billion of $177 billion allocated) “reached the front line” in 2009.
Stimulus spending is expected to have a greater impact this year and next year, contributing about $60 billion toward clean energy programmes around the world.
To bring low-carbon investments to the level they need to be by 2020, policy-makers at the local, state and national levels must enact a variety of different measures to encourage research, development and commercialisation of the rights technologies, the WEF report states. It lays out a menu of 35 policy mechanisms for achieving those goals.
The report also highlights the 10 emerging large-scale renewable energy sectors most likely to dominate a low-carbon future: onshore wind, offshore wind, solar photovoltaic power, solar thermal electricity generation, biomass, municipal solid waste-to-energy, geothermal power, small-scale hydro, sugar-based first-generation biofuel and cellulosic, algal and other second-generation biofuels. Making the most of those sectors, though, will require the financial sector’s health to improve first.
“For almost all clean energy technologies — wind, solar, geothermal, marine, hydro and energy efficiency — the bulk of costs are borne up-front, with no fuel costs during the life of a project, making them more sensitive to higher net interest rates than fossil fuels,” the report notes. “An improvement in the capital markets can therefore be expected to have a significant impact on the competitiveness of renewable energy sources.”