Achieving worldwide net-zero greenhouse gas emissions by 2050 is being stymied by a severe lack of spending on clean energy systems, less than USD 2 tn each year, according to UK consultant Deloitte (London; www.deloitte.com). 

The company’s Financing the Green Energy Transition report said annual global investment of USD 5-7 tn would help put the world on course to meet the collective climate goals.

Private investors, however, tend to see green technologies as riskier than alternative investments, as they are highly capital-intensive and are often new and immature with significant development uncertainties, the report said. Compounding private investor worry is that 70% of green investments required for climate neutrality in 2050 would be needed in low- and middle-income economies by 2030, as these nations look to new, sustainable infrastructures and technologies.

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Key contributors to this perception of uncertainty are political and regulatory risks stemming from the failure of government to establish necessary mechanisms and instruments for guaranteeing attractive returns on investment, the report surmised. 

Deloitte predicted that while the cost to facilitate the transition from greenhouse gas-intensive assets to green assets is steep, remaining on the current policy pathway could cause a loss of USD 178 tn worldwide by 2070, or almost 8% of global GDP. In contrast, the global economy could earn USD 43 tn over the next five decades by rapidly accelerating the transition to net-zero through greater investment in clean energy systems and coordinated policymaking, the company said.

The report presents several key actions that it suggests can channel investment in green technologies to developing countries, including risk reduction for green projects, bridging the gap between fossil-based products and their green counterparts, and cutting the use of fossil fuels.

Furthermore, it noted that governments, financial institutions, and international organisations must develop blended, low-cost finance solutions to mobilise private investment. This includes implementing concessional finance – loans made on more favorable terms than offered by the market.

Deloitte said governments must develop a clearer and more strategic approach for climate action, create transparent and efficient regulatory frameworks for climate investment, and address market barriers that impede investment.

Finally, the consultant called for an end to fossil subsidies and compensation for the early phase-out of some fossil assets.