Clean Energy: Emerging Economies Received Less Than 15% of Total Investments
From the current level of $270 billion, investments need to rise to $1.6 trillion for substantial development of clean energy.
In the current global energy landscape, the urgency of transitioning to clean energy sources is crucial in emerging and developing economies, where access to affordable financing remains a significant challenge.
According to recent studies by the International Energy Agency (IEA), to achieve the goals of limiting global warming to +1.5°C, an exponential increase in clean energy investments in these regions, excluding China, is necessary.
From the current level of $270 billion, investments need to rise to $1.6 trillion by the beginning of the next decade, implying a more than sixfold increase from current levels.
Clean Energy: Less Than 15% of Investments Have Been Allocated to Emerging Economies
Most of these investments will need to be channeled into large-scale solar and wind energy projects, electric grid infrastructure, and initiatives to make buildings and facilities more energy-efficient.
Despite the global 40% increase in clean energy investments since 2020, bringing the total to about $1.8 trillion in 2023, advanced economies and China have absorbed the bulk of this growth.
Emerging and developing economies, excluding China, although hosting two-thirds of the world’s population and contributing about one-third to global GDP, have received less than 15% of total clean energy investments.
This imbalance reflects the challenges posed by the significant cost of capital in these regions, which discourages investors and limits the development of clean energy projects.
Renewable technologies, such as solar photovoltaic and onshore wind, already offer lower costs compared to fossil fuels in many areas of the world.
However, the IEA highlights that the cost of capital for large-scale projects in these technologies in emerging and developing economies is significantly higher than in advanced economies. A 1% reduction in the capital cost gap could, according to the IEA, cut clean energy financing costs by $150 billion annually.
Clean Energy: Making Financing More Accessible and Reducing Risks
IEA Executive Director Fatih Birol emphasized the enormous opportunities that emerging and developing economies have in meeting the growing energy demand through clean technologies.
However, he underscored the importance of making financing more accessible and reducing risks through clear and timely regulations to attract investments. In this regard, the IEA also recommends a significant increase in international financial and technical support to bridge this investment gap.
In response to the need to reduce the cost of capital for clean energy investments, the IEA was tasked during the Paris summit on a new global financing pact in June 2023 to develop specific recommendations.
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