Energy Investments under Climate Policy: A Comparison of Global Models

McCollum DL, Nagai Y, Riahi K, Marangoni G, Calvin K, Pietzcker R, van Vliet J, & van der Zwaan B (2013). Energy Investments under Climate Policy: A Comparison of Global Models. LIMITS Special Issue, FP7 LIMITS Project

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Abstract

The levels of investment needed to mobilize an energy system transformation and mitigate climate change are not known with certainty. This paper aims to inform the ongoing dialogue and in so doing to guide public policy and strategic corporate decision making. Within the framework of the LIMITS integrated assessment model comparison exercise, we analyze a multi-IAM ensemble of long-term energy and greenhouse gas emissions scenarios. Our study provides insight into several critical but uncertain areas related to the future investment environment, for example in terms of where capital expenditures may need to flow regionally, into which sectors they might be concentrated, and what policies could be helpful in spurring these financial resources. We find that stringent climate policies consistent with a 2 degrees C climate change target would require a considerable upscaling of investments into low-carbon energy and energy efficiency, reaching approximately $45 trillion (range: $30-75 trillion) cumulative between 2010 and 2050, or about $1.1 trillion annually. This represents an increase of some $30 trillion ($10-55 trillion), or $0.8 trillion per year, beyond what investments might otherwise be in a reference scenario that assumes the continuation of present and planned emissions-reducing policies throughout the world. In other words, a substantial "clean-energy investment gap" of some $800 billion/yr exists -- notably on the same order of magnitude as present-day subsidies for fossil energy and electricity worldwide ($523 billion). Unless the gap is filled rather quickly, the 2 degrees C target could potentially become out of reach.

Item Type: Other
Uncontrolled Keywords: Integrated assessment; Energy scenarios; Climate change; Policy analysis; Carbon financing
Research Programs: Energy (ENE)
Transitions to New Technologies (TNT)
Bibliographic Reference: LIMITS Special Issue, FP7 LIMITS Project
Depositing User: IIASA Import
Date Deposited: 15 Jan 2016 08:49
Last Modified: 17 Feb 2016 12:34
URI: http://pure.iiasa.ac.at/10626

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