Renewable power investments will need to rapidly grow in the coming two decades to be in line with the Paris Agreement climate goals, according to the Allianz Climate & Energy Monitor Deep Dive, which aims to inform investors and policymakers on the scale of investments needed to comply with the Paris targets.
To stay under the 2°C global warming threshold, emissions will need to peak in the coming years and be cut to zero by 2050, said Allianz, noting that China, India and the U.S. play a key role in achieving this target because they together emit over 50 percent of the global CO2 emissions and the largest markets for renewable energies.
Renewable investments in China and the U.S. need to roughly double, while India may require a tripling of investments, to remain within the Paris Agreement warming limit, Allianz said.
The good news, said Allianz, is that China and India are currently well on track to achieve climate targets set by the Paris Agreement.
The bad news is that the climate policies of new U.S. administration may constrain the investment climate for renewables, indicated Allianz, noting, however, that there remain good investment prospects in “progressive states.”
A mature market, attractive state-level policies, and a very good general investment climate still attract high amounts of renewable energy investments in the US in progressive states
“With policy retrenchment beginning to take shape under an ‘America first’ energy blueprint, we expect China and India to outcompete the U.S. – for the second-consecutive year – in providing an effective and reliable green policy environment”, says Ritika Tewari, Climate Policy Analyst at NewClimate Institute, one of the report’s authors. The NewClimate Institute is a Berlin-based research institute generating ideas on climate change and driving their implementation.
Exiting Coal Power
China and India are looking to exit coal-based power generation, Allianz confirmed. China is canceling plans to build fossil-based power plants and is decommissioning existing coal power plants, “while India is considering plans to stop building new coal power plants after 2022,” said the report.
China aims to increase its renewable energy capacity by 38 percent in 2020 compared to 2015 levels, equaling 680 gigawatt (GW) of installed capacities with investments of US$361 billion in renewable energies, Allianz said.
For the purposes of comparison, the Allianz report said, Germany, which ranked first in the Allianz Climate & Energy Monitor 2016 for its renewable energy policies, currently has roughly 100 GW renewables installed.
India is also developing its renewable energy capacity at a rapid pace, said the report, noting that in 2016, solar and wind installations exceeded the annual goal by 43 percent and 116 percent, respectively.
By 2022, India is planning 175 GW of installed renewables and as a result is expected “to comfortably achieve its climate targets,” Allianz said.
Combined investments in renewable electricity in China, India and the U.S. amounted to US$134 billion, which accounted for over half of the global investments in electricity supply in 2016, said the Allianz report, quoting the United Nations Environment Programme (UNEP) and Bloomberg New Energy Finance (BNEF).
Renewables Supported at U.S. State Level
Despite the climate policies of the Trump Administration, renewables are still booming with more than 16 GW of wind and solar capacities installed in 2016, accounting for 60 percent of all new capacity (27 GW), said Allianz.
“This has been driven by ambitious Renewable Portfolio Standards in various U.S. states and tax credit schemes on federal level as well as the decline in costs for renewables,” the report explained.
“Rapidly falling technology costs for renewables and strong investment conditions at the state level continue to make the U.S. attractive for institutional investors like Allianz, despite a constraining outlook on support from the federal level from 2020 onwards,” said Thomas Liesch, senior project manager at Allianz Climate Solutions.
However, if the U.S. drops out of the renewable triad mid-term, the EU could emerge as the third global pillar.
“The EU could replace the USA and take the economic chances” explained Jan Burck (Germanwatch), co-author of the study. “With the current G20-presidency Germany plays additional a crucial role: The German government needs to convince the other G20-states to set up own climate protection plans.”
Germanwatch is an independent development and environmental organization that advocates for global equity and preservation of livelihood.
Source: Allianz Climate Solutions, Germanwatch, NewClimate Institute for Climate Policy and Global Sustainability
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