How to Finance the Global Transition to Clean Energy
Last December in Paris, the world reached a groundbreaking and profoundly important agreement to rein in global carbon emissions. Now that the confetti has been swept away, we’re faced with the challenge of how to pay for the needed transformation.
According to this new report, the world’s financial markets have adequate funds to pay for the transition to clean energy – but they’ll need to quickly shift the way that money is allocated in order to meet the Paris goals.
As Danny Kennedy, managing director of the California Clean Energy Fund (CalCEF) and an ecoAmerica board member, and Ken Locklin, co-author of the report, point out here, one key issue is subsidies. In their words, “Fossil fuel subsidies are perverse; they are using public funds to create a problem the world has agreed to fix in Paris.” Taking the $450 billion in global subsidies currently paid to the fossil fuel industry and transferring it to clean energy would be a huge step in the right direction. The benefits would be enormous as well, raising the global GDP as well as improving human welfare.
We have the means to make this happen – what we need now is the political will. In the coming months, it’s crucial to continue supporting clean energy investments and demanding swift and meaningful climate action.
Danny Kennedy and Ken Locklin | Greentech Media | February 1, 2016
Pulling the world back from the brink of catastrophic climate change cannot be done for free. Changing the way the world is powered means big spending – and huge investment opportunities – as new clean energy infrastructure is built across the world.
And that’s catching the attention of the global financial community.
This week, from New York to California to Abu Dhabi, business and political leaders have been talking about the costs and opportunities inherent in the historic pledge that the nations of the world made in Paris last month to limit global warming to 2 degrees Celsius. They are also considering whether the financial world is up to the challenge.
Bloomberg New Energy Finance teamed up with Ceres and Ken Locklin of Impax Asset Management to measure the difference between the substantial level of funding already flowing annually into clean energy, and the level of investment needed to meet commitments made in Paris. The resulting report, Mapping the Gap: The Road From Paris, finds there is enough money at play in the world’s financial markets to finance the transition. But policymakers in every country will need to “mind the gap” of over $200 billion annually for the electric power sector that needs to be mobilized to help assure it happens in time.
Image credit: Pixabay