Climate Change Investment Falls Short

The Climate Policy Initiative just released its assessment of global climate change investment, and the results are disheartening. According to the report, climate change investment—which includes investment in renewable energy, energy efficiency, and adaptation—checked in at $359 billion in 2012, $5 billion short of its 2011 total. This decrease, though minimal, is troubling, especially considering the International Energy Agency’s estimate that by 2020, we must invest $5 trillion in clean energy to keep the planet from warming more than two degrees Celsius, largely considered by scientists to be a critical threshold.

Both the public and private sectors played a role in this investment. Public investment accounted for $135 billion, or 38%, of total financing in 2012, through “incentives, low-cost loans, risk coverage mechanisms, direct project investment, and technical support.” The private sector was responsible for $224 billion in investment. Public support for fossil fuels, meanwhile, reached $523 billion in developing countries alone, according to the OECD. This disparity is particularly troublesome.

According to the Executive Director of CPI, “Investment to combat and adapt to climate change is happening around the world, but it’s short of where it needs to be and efforts to grow it have not been successful enough. Leveling the playing field can help unlock significant additional finance.”

Of the $359 billion that was invested in 2012, about half was in developed countries and half was in developing countries. Private investment was spread throughout the world--$73 billion in Europe, $68 billion in China, $27 billion in the US, $7 billion in Latin America, and $5 billion in India.

76% of all climate change investment was domestic, meaning the funding stayed in the country in which it originated. “Currently, climate finance is mostly a domestic game,” said a Senior Director at CPI. “This implies that effective policy is critical to increasing climate finance globally. There may also be an opportunity to increase international flows, by addressing the perception of additional risk in overseas investments.”