When we talk about the transformation to address climate change, the intent is clear, the targets are set, and the technology is accelerating. The missing piece in the green energy transition is finance.
Key decarbonization solutions—including large-scale renewable development, electrification of end-uses, circularity, green hydrogen uses in hard-to-abate sectors and energy efficiency improvements—are generally highly capital intensive and require significant investment. Yet funding levels remain below what’s needed to help meet 2050 net-zero goals. Finance can fuel and power a just energy transition, but the race to achieve net-zero greenhouse gas emissions by 2050 will likely require an annual global investment in the energy sector ranging from US$5 trillion to more than US$7 trillion —yet less than US$2 trillion is currently being invested on a yearly basis.
Deloitte’s economic analysis goes beyond finance to help provide a holistic overview, employing analysis and modeling to consider the technology landscape, policy environment, and a matrixed vision of financing challenges, identifying and detailing what is needed to allow capital to flow, how finance can fuel innovation and power a just energy transition.
Reducing the risks of green projects
Reducing the risks of green projects through climate policies, guarantee mechanisms, offtake reliability and the development of domestic capital markets.
Bridging the cost gap between fossil-based GHG-intensive products
Bridging the cost gap between fossil-based greenhouse gas (GHG)-intensive products and their green counterparts through research and development, upfront investment support schemes, the addition of operating premiums to renewable energy systems and penalization of GHG-intensive assets.
An ecosystem is required to help forge the path of a just, cost-efficient and successful transition – local and national governments and regulators can reduce the risks that threaten the bankability of green and sustainable investments, concessional investors can maximize the potential of blended finance to mobilize private capital, and societies and investors can deal with upfront investments today, reaping the benefits later.