Additional investments of about 800 billion US Dollars per year are required globally from now to mid-century in order to limit climate change to 2 degree Celsius, reveals a new study.
However, much of that capital could come from shifting subsidies and investments away from fossil fuels and associated technologies, as fossil subsidies currently amount to around 500 billion dollars per year worldwide.
David McCollum, the IIASA researcher, said that to avoid the worst impacts of climate change, they need to drastically transform their energy system and this comprehensive analysis revealed how much investment capital was needed to successfully make that transition.
The authors examined future scenarios for energy investment based on a variety of factors, including technology progress, efficiency potential, economics, regional socio-economic development, and climate policy.
The researchers established that their analysis of future investment costs did not attempted to quantify the potentially major fuel savings from switching from fossil fuels to renewable sources, such as wind and solar energy.
The study found that the greatest investments would be needed in rapidly developing countries like Asia, Latin America, and Sub-Saharan Africa.
The study is published in the journal Climate Change Economics.