BARCELONA (Thomson Reuters Foundation) - Finance for measures to cut climate-changing emissions and adapt to a hotter planet has grown to more than half a trillion dollars a year, but a “tectonic shift” is still needed to green economies and rein in global warming, analysts said on Thursday.
In 2017, global climate finance reached a record high of $612 billion, driven by rising investment in lower-carbon transport and renewable energy in China, India and the United States, said international think-tank Climate Policy Initiative (CPI).
In 2018, the total dropped to $546 billion as governments spent less on green transport and falling costs for clean energy kept business investment lower, CPI said in a report tracking climate finance from governments, companies and households.
But averaged across 2017 and 2018, climate investment was 25% higher than in 2015-2016, with funding for low-carbon transport rising by 54%, it added.
Angela Falconer, CPI associate director, said climate finance was on a rising trend despite the 2018 dip, but remained “vastly insufficient” to cut heat-trapping emissions adequately.
The report said climate-friendly funding had to increase quickly, from billions to trillions, to meet globally agreed goals to curb temperature rise caused by burning fossil fuels, felling forests and other activities that emit greenhouse gases.
Renewable energy was the biggest destination for climate finance in 2017-2018 with nearly 60% of the total - but the $337 billion per year was still far below estimated needs, CPI said.
To keep global warming to a lower limit of 1.5 degrees Celsius, the U.N. climate science panel has estimated clean energy investment of $1.6 trillion to $3.8 trillion per year is required - and that is only part of the puzzle.
“We really do need a massive increase in the speed and scale in investment... that needs to go beyond the energy and transport sectors across the economy to land use, agriculture, forestry (and) infrastructure as a whole,” Falconer told the Thomson Reuters Foundation.
Renewables such as solar and wind power, and greener transport including electric cars, have attracted private-sector money as they are seen as a good investment, she said.
But business models for investing in greener farming and forest protection are just starting to emerge, she added.
Households, meanwhile, are sinking more money into sustainable energy and transport options, including electric cars, solar panels and solar water heaters, the report said.
Their annual average climate-related spending rose to $55 billion in 2017 and 2018, a jump of nearly a third from 2015-2016.
The report highlighted how 93% of climate finance in 2017-2018 was for measures to reduce planet-warming emissions, with a mere 5% invested in building resilience to climate threats and adapting to wilder weather and rising seas.
The remaining 2% went to efforts that address both objectives.
Adaptation finance did rise significantly, to an annual average of $30 billion in 2017-2018, but that “falls far short” of international needs and targets, the report said.
“There has been a slower recognition that climate impacts are coming and that all different sectors need to be ready to respond,” said Falconer.
In September, a report from the Global Commission on Adaptation said early warning systems, robust infrastructure, improved crop production, mangrove protection and resilient water resources would cost $180 billion annually from 2020-2030.
The CPI report noted that its estimates of finance for adaptation were only partial as it remains hard to track what businesses are investing to protect themselves and others.
Overall climate finance for projects in countries outside the rich-nation Organisation for Economic Co-operation and Development saw a major increase in 2017-2018, accounting for 61% of the total.
Among regions, East Asia and the Pacific was both the largest provider and recipient of funding.
“There are some bright spots, but our study is very clear,” said Barbara Buchner, CPI’s head of climate finance.
“Governments, development finance institutions and investors need to make a major shift in how they invest if they want to avoid climate change,” she added in a statement.
Reporting by Megan Rowling @meganrowling; editing by Laurie Goering. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, climate change, women's and LGBT+ rights, human trafficking and property rights. Visit news.trust.org/climate