Red tape holding up $24 trillion needed for 2030 climate goals

LONDON - Grid constraints, the still high cost of green technology, and planning delays are holding up US$18 trillion (S$24 trillion) worth of investments needed to reach global 2030 climate goals, making any rapid energy transition increasingly unlikely. 

The incorporation of renewable and other low-carbon sources of energy must happen three times faster than previous fuel transitions to limit global warming to 1.5 deg C above pre-industrial levels, according to a report from management consulting firm Boston Consulting Group (BCG).

“There’s still some blue sky from getting from policy tailwinds to viable business cases,” said Mr Maurice Berns, chairman of the group’s Centre for Energy Impact and one of the report’s co-authors. “We need to get past the top level and into more implementation, the regulations, the disbursements, the actions needed at state level and member state level to get us there.”

Fossil fuel emissions are warming the planet, triggering extreme weather, from flooding in India and the US to wildfires in Greece and Canada.

July was the world’s hottest month on record.

Current policies and the speed of the energy transition in sectors like industrial manufacturing and buildings would permit warming to 2.7 deg C by 2100, above the 1.5 deg C threshold prescribed in the Paris Climate Accords. 

The main shortfall in funding was in the electricity and end-user categories, where the gap was primarily of investments in renewable power, the report said.

“For renewables, the higher cost of finance negatively impacts the cost of renewable energy produced, increasing the competitiveness of fossil investments,” it added.

Several studies have assessed the investment requirements and gaps in the world’s energy transition targets. According to BloombergNEF, global annual investment needs to treble throughout this decade in order to achieve a net-zero emissions world by 2050. Current levels of capital spending are not aligned with that goal, its report shows.

But the world already has the tools and capital needed to effect the changes, the BCG report said. Out of the US$37 trillion needed by 2030, roughly US$19 trillion has already been committed, the consulting firm calculated by using a bottom-up build methodology across 270 energy firms. 

Governments and the private sector need to work together on finding a way to bring down the cost of deploying low-carbon technologies and make the business cases viable to bridge the US$18 trillion gap. That is where policies like the US Inflation Reduction Act can help, according to the report. 

In the United Kingdom alone, it is estimated that there is capacity of about 220 gigawatts (GW) – about two-thirds in wind and the rest in solar – in the connection queue, while in Spain there is about 180GW in the queue, which is also similar across systems and countries around the world, Mr Berns said. 

“It’s not a technical challenge because we know what technologies we need to put into place, and they exist,” he added. “It’s a matter of getting a bit of acceleration into the system, to see things progress.” BLOOMBERG