Global investors gather in New York to scale up investments in the low-carbon economyWe Mean Business
500 investors gathered on Wednesday at the UN headquarters in New York for the first major climate event of the year, the Investor Summit on Climate Risk.
Organized by Ceres, the United Nations Foundation and the United Nations Office for Partnerships the summit shed light on one of the key issues of the pre-2020 agenda: mobilizing massive contributions from the investor community to scale up financing for the low-carbon economy.
The Summit explored the economic opportunities provided by the global climate deal sealed in Paris last December, focussing on how to shift the trillions necessary to achieve its ambitious global carbon-reducing goals and extend clean energy investment across both developed and developing countries.
The cost of action needed to ensure the targets set by the Paris agreement are met has been quantified in 13 trillion, according to Christiana Figueres, Executive Secretary of the UNFCCC.
“Getting to the Paris agreement was the easy component”, she reminded the audience, “it was the starting line. Now we have to turn these intentions into implemented activities and projects.”
She also stressed a critical point in the implementation of the agreement: the urgency of the actions required. “Knowing where we have to be in 2050 is critical,” she said, pointing at the long-term goal which was included in the agreement. “It gives us a direction of travel. But it is the next 5 years which are critical.”
The agreement enters into force officially in 2020, meaning that governments will have to start working closely with the private sector now, to ensure that the transition is fair and scaled up over time.
MAPPING THE GAP
Michael Liebrich, chairman and founder of Bloomberg New Energy Finance (BNEF) launched a new report in partnership with Ceres, “Mapping the gap”, which analyses the total investment per sector in renewable energy needed to close the gap between a business-as-usual scenario and a 2C scenario.
The report estimates investments in new renewable energy projects in the electric sector to rise in the next twenty years by nearly $500 billion per year above current investment levels.
The United Nations Secretary-General Ban Ki-Moon stressed one of the key points that emerged from the study, calling on the investor community to at least double clean energy investment from current levels by 2020. This is the “minimum” required to ensure the world stays on track to meet the temperature goals set by the Paris Agreement: under 2C, aiming at 1.5C.
“The clean energy industry could make a very significant contribution to achieving the lofty ambitions expressed by the Paris Agreement,” echoed Liebrich. “To do so, however, investment volume is going to need to more than double, and do so in the next three to five years. That sort of increase will not be delivered by business as usual; closing the gap is both a challenge and an opportunity for investors.”
But what’s the financial extent of the “gap” between a business-as-usual scenario and a 2C one? BNEF estimates it to average $5.2 trillion, or $208 billion a year over the next 25 years.
Starting from the analysis of the investments needed in different sector – technology, renewable energy, new power generation, infrastructures – the BNEF report stresses that the existing policy frameworks and market conditions are not likely to convince investors to “mobilize sufficient funds to fully close the divide between what will happen under a business-as-usual scenario and what should happen (temperature increase <2C) unilaterally.”
The need for bolder policies, ranging from carbon taxes, cap-and-trade systems to feed-in-tariffs, highlights the importance of one of the key points of the Paris agreement: the ratcheting mechanism. As countries and policymakers will get back to the negotiating table every 5 years, being forced to ramp up their ambition and report on their achievements, will ensure the efforts that led us to such a historic achievements will not be wasted.
Read and share our wrap-up of the day also on Storify.
Photo Credits: Ceres