- According to the International Energy Agency, investment in clean energy will need to exceed $4 trillion a year by 2030 in its net-zero emissions by 2050 scenario.
- Achieving this type of figure will require a great effort from both the public and private sectors.
- “We are very impressed by the scale of the task ahead, but there are many very encouraging signs that the money will be there as soon as we can produce … the projects,” Mark Dooley, Macquarie’s global head. Asset Management’s Green Investment Group, he says.
The growing influence of technologies related to the energy transition can be seen everywhere, from the increasingly common sight of electric vehicles on our roads to the development of large renewable energy projects such as the Hornsea 2 offshore wind farm.
Shifting towards a low carbon and zero emission future will require cutting edge technological innovation coupled with enormous levels of investment.
The importance of the latter was highlighted during a recent panel discussion moderated by CNBC’s Steve Sedgwick.
“There’s reason for a lot of stimulus in what we’ve seen … (happening) in the last year,” said Mark Dooley, global head of the Green Investment Group at Macquarie Asset Management.
Referring to the global situation, Dooley added: “We have just had our first year, in 2022, where we exceed a trillion dollars enter the energy transition: one trillion dollars”.
“Now, there are a lot of authorities saying that that needs to quickly escalate to $4 trillion, which is a dizzying amount of money… as an annual expense.”
According to the International Energy Agency, investment in clean energy should reach more than $4 billion one year to 2030 in its 2050 net zero emissions scenario.
Achieving this kind of figure will require a huge effort from both the public and private sectors, and the stakes are high.
This is because reducing man-made carbon dioxide emissions to net zero by 2050 is considered crucial when it comes to meeting the The goal of the Paris Agreement to limit global warming to “1.5°C above pre-industrial levels”.
The challenge is enormous, and the UN has pointed out that 1.5 degrees Celsius is considered to be “the upper limit” when it comes to avoiding the worst consequences of climate change.
The IEA is not the only organization highlighting the large amounts of money that are needed in the future.
Elsewhere, the International Renewable Energy Agency says that cumulative investments must reach $44 trillion by 2030 if we are to stay on the path to 1.5 degrees. What he calls “transition technologies” would account for 80%, or $35 trillion, of this.
As the CNBC discussion progressed, Dooley took a look at where he thought the investment would go in the next few years.
“It’s actually many different categories of activity, drawing on many different sources of capital,” he explained.
“A lot of those 4 trillion are networks, they’re transmission networks, a big part of them.”
“A lot of this is people choosing to buy electric vehicles and taking other steps,” he added later.
“And yes, a lot of it is about big projects, the kind of things that are at the heart of the business that I run.”
“It’s a tall order, but the feeling we have, the experience we have, is that the appetite from investors to be part of this transition is huge.”
This appetite was there for both established and newer technologies, Dooley argued.
“We are very impressed by the scale of the task ahead, but there are many very encouraging signs that the money will be there as soon as we can produce … the projects.”
Among those appearing alongside Dooley was Angela Wilkinson, secretary general and chief executive of the World Energy Council, a London-based organization established in 1923.
“There is no way to separate the market from politics and energy, ever,” he said. “You don’t just have geopolitics, you also have sociopolitics… local politics as well.”
Wilkinson went on to state that realistically, “we’re going to have to have a combination of state and markets working on this, and that’s going to take very irregular shapes in different parts of the world.”
Wilkinson also spoke of a “humanizing energy transition” and the importance of moving away from “future-scary narratives to allow more people to see opportunity and benefit at all levels of society.”
“We have technologized this debate, we have financed this debate, but we still have to humanize it,” he added.
“And believe me, it’s hundreds of thousands of smaller steps rather than one big technological leap or one financial leap that will really make progress.”