Investment in renewable energy for emerging economies will need to hit $2.8 trillion/year by the early 2030s to meet demand and align with climate goals set out in the Paris Agreement, according to the International Energy Agency (IEA) and International Finance Corporation (IFC) Wednesday.
Annual clean energy investments totaled $770 billion in 2022, and to meet this projected spending increase, both public and private financing will be necessary to tackle climate change, the IEA and IFC report said in a report titled Scaling Up Private Finance for Clean Energy in Emerging and Developing Economies.
Two-thirds of the finance for clean energy projects in emerging and developing economies, outside China, will need to come from the private sector. A current total of $135 billion/year in private financing for clean energy will need to rise to as much as $1.1 trillion/year within the next decade, the report said.
“The investment needs go well beyond the capacity of public financing alone, making it urgent to rapidly scale up much greater private financing for clean energy projects in emerging and developing economies,” said IEA Executive Director Fatih Birol in a news release Wednesday. “There is a major risk of many countries around the world being left behind. Investment is the key to ensuring they can benefit from the new global energy economy that is emerging rapidly.”
In addition, concessional financing will be required for newer technologies that are not yet at scale nor cost-competitive in many markets, such as battery storage, offshore wind, renewable-powered desalination or low-emission hydrogen. The report estimates that $80-$100 billion/year of concessional finance will be needed by the early 2030s to attract private investment at the scale required for the energy transition in emerging and developing economies outside China.
The IFC is a member of the World Bank Group and is the largest global development institution focused on the private sector in emerging markets. In the fiscal year 2022, the IFC committed a record $32.8 billion to private companies and financial institutions in developing countries, according to the report.
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–Reporting by Rob Sheridan, rsheridan@opisnet.com; Editing by Yazdi Merchant, ymedrchant@opisnet.com