According to a new report from Climate Policy Initiative, global investment in activities that reduce the threat of climate change fell for the second year in a row from USD $359 billion in 2012 to USD $331 billion in 2013. The report, “Global Landscape of Climate Finance,” found while public sources and intermediaries contributed $137 billion, private investment dropped by $31 billion (all numbers USD).
The study found that the decrease in private funds was due largely to falling costs of solar PV. Solar development costs were down $40 billion in 2013 as compared to 2012. However, the report states that the situation remains grave: The International Energy Agency (IEA) estimates that an additional $1.1 trillion in low-carbon investments is needed every year between 2011 and 2050, in the energy sector alone, to keep global temperature rise below two degree Celsius. In other words, the world is falling further and further behind its low-carbon investment goals.
Climate finance spending was split almost equally between developed (OECD) and developing (non-OECD) countries, with $164 billion and $165 billion respectively. Nearly three-quarters of all spending was domestic: It originated in the country in which it was used. Private actors had an especially strong domestic investment focus with $174 billion or 90 percent of their investments remaining in the country of origin. These figures illuminate a bias by private investors toward environments that are more familiar and perceived to be less risky. However, public sector money made up the vast majority of developed to developing country flows, which fell by around $8 billion from the previous year to between $31 and $37 billion in 2013.
“As policymakers prepare a new global climate agreement in 2015, climate finance is a key ingredient to bring the world on a two degree Celsius pathway. Our analysis shows that global investment in a cleaner more resilient economy are decreasing and the gap between finance needed and actually delivered is growing,” said Barbara Buchner, senior director of Climate Policy Initiative and lead author of the study. “Our numbers demonstrate that most investment is happening at the national level with investors favoring familiar environments they perceive to be less risky. This implies that domestic policy frameworks and appropriate risk coverage are critical to encourage investment.”