High Financing Costs Hinder Clean Energy Expansion
A recent International Energy Agency (IEA) report underscores the critical barrier high capital costs pose to clean energy development in emerging and developing economies. Despite a 40% increase in global clean energy investment since 2020, reaching $1.8 trillion in 2023, these economies have seen minimal benefit due to prohibitive project financing rates.
Disparity in Investment
While advanced economies and China dominate recent growth in clean energy investments, emerging markets, home to 65% of the global population, account for less than 15% of total funding. This discrepancy underscores the need for a significant financial shift to support the global 1.5 °C warming limit goal.
Investment Needs and Solutions
To meet international climate targets, investment outside China in these regions must rise from $270 billion to $1.6 trillion by the early 2030s. Notably, half of this investment should target solar and wind projects, electricity networks, and energy efficiency in buildings and appliances. The IEA highlights that lowering the cost of capital by just 1% could save $150 billion annually in clean energy financing.
The Path Forward
IEA Executive Director Fatih Birol emphasizes the importance of affordable financing and regulatory clarity to attract investments. Moreover, the international community must bolster support to bridge the gap between investors and markets requiring urgent clean energy development.
Focus on Mature Technologies
The majority of required investments are in mature technologies with proven policy success, reducing the reliance on emerging sectors such as low-emissions hydrogen or carbon capture. This focus on established technologies offers a clear roadmap for accelerating clean energy transitions in underinvested regions.
The IEA’s new report, prompted by the Paris Summit on a New Global Financing Pact, aims to lower capital costs for clean energy in these crucial markets, offering detailed insights and recommendations to overcome financing challenges and unlock clean energy potential worldwide.
Source: miragenews.com
