Just $8 billion flowed from developed to developing nations to foster the deployment of large-scale clean energy generation and biofuels production in 2011, finds a new report from Bloomberg New Energy Finance (BNEF).
This constitutes 8% of the $100 billion per annum total cross-border investment (CBI) promised by developed countries during the 2009 Conferences of the Parties (COP) climate talks in Copenhagen by 2020 – a commitment that was reaffirmed at subsequent COP meetings.
Of the $280 billion in new clean energy funds invested in 2011, asset finance for renewable energy generation projects and biofuels plants accounted for $165 billion, or 60%.
Over two-thirds of asset financings ($115 billion) came from domestic sources – in other words, the capital came from companies investing in their home markets. Meanwhile, $44.3 billion was deployed across borders. Last year saw a shift toward emerging economies, with their share of cross-border investment (CBI) breaking the 25% mark for the first time.
This shift was driven by an 87% increase in investment between emerging economies (South/South) as well as a more moderate 35% rise in investment from developed nations (North/South). In 2011, $31 billion flowed North/North, $1.3 billion flowed South/North, $3.8 billion flowed South/South and $7.9 billion flowed North/South.
The North/South figure would contribute to the $100 billion that wealthy nations have pledged at the international climate talks to deploy annually to help developing world economies address the issue of climate change but only addresses a small portion of the pledge – components of which have not been fully defined, BNEF says. Of the $44.3 billion deployed across borders in 2011, it is estimated that just 13% (or $5.8 billion) was sourced from public funds.
The bulk of financing for renewable energy assets has come from the private sector, accounting for 90% on average of CBI over the period from 2004 through the first half of this year, according to the BNEF report. Measured on a dollar basis, the top recipient of CBI since 2004 has been the U.S., with a cumulative inflow of $62.5 billion. This is nearly three times the equivalent values of the next two top-ranked countries, Spain and the U.K.
The top overseas investors are Germany ($39.8 billion), Spain ($28.5 billion), France ($21.4 billion) and the U.S. ($18.2 billion). China has seen the highest volume of new-build asset finance in renewable energy overall since 2004, with cumulative investment of $192.2 billion. Nearly all of this came from local investors, with just $7.9 billion (4%) of foreign investment.
The U.S. saw a total of $164.4 billion invested in projects there, with 38% of the funds coming from overseas. Germany was the leading overseas financier as measured in dollar terms, having invested $39.8 billion abroad from 2004 through the first half of this year.
Germany's position comes from a long tradition of both trade financing and manufacturing for export markets. The investment figures relate to renewable energy asset investment, which constitutes the largest single constituent of climate-related infrastructure spending overall.
‘This analysis shows we are far from seeing anything like the promised $100 billion per-year flow of climate finance to the developing world," notes Michael Liebreich, CEO of BNEF. "While the climate negotiators in Doha are working on the institutional structure of the Green Climate Fund, this analysis shows the real issue is that the private sector is far from comfortable investing in climate-related assets, while developed-world governments are under far too much fiscal and political pressure to make up the shortfall.
‘It should be noted, however, that private investors are poised and ready to deploy significantly more clean energy capital into the developing world," he continues. "What gives them pause is not specific to clean energy, but revolves around perceived currency and political risks in these emerging markets. While significant, these concerns are hardly insurmountable and can be addressed by the international community with the right mix of policies and financial instruments.’