Governments have power to unlock trillions of dollars in green investments
A combination of smart policy reforms and innovative business models could catalyse trillions of dollars in private investment to help tackle climate change.
That is according to a new report from the World Bank’s International Finance Corporation (IFC), which identifies seven industry sectors in which significant investment would put the goals of the Paris Climate Agreement within reach.
These include the renewable energy sector, off-grid solar and energy storage, agribusiness, green buildings, urban transportation, water, and urban waste management.
The report reveals more than $1trn (£0.76trn) of investment is currently flowing into climate-related projects in these areas, but that trillions more could be triggered by creating the right business conditions in emerging markets.
‘The private sector holds the key to fighting climate change,” IFC CEO Philippe Le Houérou. “But this also requires government reforms as well as innovative business models.”
The research was released prior to the COP23 climate summit in Bonn this week, where the world’s nations are meeting to outline how they intend to implement and accelerate the goals of the Paris Climate Agreement.
It offers several investment opportunities, arguing that funding in renewable energy could climb to $11trn by 2040 though reforms to energy auctions and land titling, along with more supportive energy storage policy frameworks.
In addition, investments in off-grid solar and energy storage can reach $23bn a year by 2025 if governments use differentiated tariffs, clear technical and safety standards, and targeted financial incentives.
This comes after a report published last week by PwC revealed G20 nations collectively reduced their carbon intensity by around 2.6% over the past three years – less than half the 6.3% required to meet the goals of the Paris Climate Agreement.
Of these countries, only Britain and China were found to be decarbonising at the necessary rate, with reductions of 7.7% and 6.5% respectively last year.
“When it comes to action on climate change and the two degrees goal, the gulf between the best and worst performing nations is widening,” PwC director of climate change, Jonathan Grant, said.
“As countries prepare to discuss raising the ambition of their national targets in Bonn, our report emphasis that the Paris Climate Agreement will only be possible if they are serious about accelerating action.”