At the UN climate summit in Marrakech (COP22), an expert panel considered how financial tools can encourage investment in low-carbon technologies.
Speaking at the event last week, Dr Charles Donovan, Director of Imperial's new Centre for Climate Finance & Investment, advocated prioritising investment in proven technologies.
“There’s a huge difference between technologies that are merely possible and the ones that are already economically viable. More effort needs to go into scaling up the technologies that we know work,” he said.
Over 100 representatives from the private sector, governments and NGOs attended the panel discussion, which was jointly organised by Imperial, led by the Grantham Institute - Climate Change and the Environment, the Institution of Chemical Engineers (IChemE) and the Natural Resources Defence Council (NRDC).
In contrast, Donovan questioned the appeal to private investors of technologies that have yet to prove viable on a large-scale, like Bioenergy with Carbon Capture and Storage (BECCS) –a solution whereby the greenhouse gas carbon dioxide is extracted from the atmosphere by growing plant crops, which are then burned to generate energy, and the resulting emissions are stored underground.
“I can’t see a way that this technology could become acceptable to the private sector in the next two decades,” commented Donovan. Although BECCS is widely considered essential to meeting climate targets, it is still in the early stages of development and no full-scale trial BECCS plants have yet been built.
Watch Dr Donovan and other Imperial academics speaking at the conference in Marrakech.
Funding a low carbon world
'Low-carbon technologies' that either reduce or produce less emissions of greenhouse gases will be instrumental in limiting global warming to less than two degrees Celsius, the target agreed by governments signing the 2015 Paris Agreement. But experts agree that substantial financial investment will be needed to roll them out in sufficient quantity to have the desired effect.
Whilst governments around the world have committed to raising US$100 billion every year to fund projects designed to avoid and adapt to climate change, it will come nowhere close to meeting the need for new climate-friendly infrastructure. According to the International Energy Agency, meeting the pledges set out in the Paris Agreement will come with a hefty price tag: US$13.5 trillion by 2030. Getting private investors on board is therefore critical.
“Private sector investment is vital: we need trillions, not hundreds of billions,” said Donovan, speaking at the event. “The challenge however lies in convincing investors that low-carbon projects can reap the same rewards as more traditional investments.
"Green projects are frequently overlooked by the private sector as they typically do not offer high returns and present uncertain risks. New financial mechanisms might, however, encourage investors to think again."
One such example is the UK’s Green Investment Bank, which invests in infrastructure projects that are both green and profitable. Since its inception in 2012, the bank has mobilised £11 billion from private investors.
Donovan was however keen to emphasise that for financial solutions to work, green projects can’t be sold purely on their environmental impact. “A financial injection alone can’t make up for a project that is deemed to be too risky,” said Donovan.
As well as difficulties in attracting private investment, BECCS technology faces a number of additional hurdles.
Find out how climate change is affecting businesses in this animation.
“The challenges around deploying BECCS at the scales we think are required to meet the Paris Agreement’s goals are daunting,” said Ajay Gambhir, Senior Policy Research Fellow at the Grantham Institute, whose work in the AVOID 2 programme for the UK Government modelled the future for different energy technologies under different policy scenarios.
“We need to consider the huge amount of land area required for bioenergy crops as well as the infrastructure to transport and store captured carbon dioxide. To progress BECCS from a few pilot scale plants to a global bioenergy industry servicing thousands of commercial scale facilities, there will need to be considerable investment in planning, demonstration, infrastructure development and all of the supporting financial, legal and regulatory aspects surrounding this technology.”
“Governments should be focused on laying the foundations for these activities right now, even if - without effective carbon pricing or policy signals - BECCS will remain unattractive to private investors for some years to come.”
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