$45 Trillion Needed for Clean Tech Investment

Posted by: Mark Scott on June 09

At first glance, $45 trillion looks like a lot of money. That’s the total cost of investment in clean technologies that the International Energy Agency (IEA) reckons is needed to bring carbon dioxide levels under control by 2050. If the world doesn’t embrace CO2 reductions, the IEA figures carbon emissions will rise by 130% and oil demand will increase by 70% by mid-century.

To put that into context, the $45 trillion estimate equates to 1.1% of average annual global GDP between now and 2050, or just over $1 trillion a year. That might still sound like a lot of cash, but with mid-range renewables projects, such as onshore wind-farms, costing hundreds of millions of dollars, the ‘$45 trillion by 2050’ figure now seems like an attainable goal.

The clean tech lobby also got a shot in the arm after last week's record oil prices. If senior executives needed a reason to embrace renewables, the prospect of $150 oil and even higher gas prices this summer certainly provides a large incentive.

Soaring fuel costs offer two benefits for investing in clean technology. Not only do eco-friendly products, everything from solar panels to electric cars, help reduce companies' CO2 emissions, but they also offer lucrative business opportunities that are increasingly cost effective. Record oil prices, for example, make the multi-million investment needed for a wind farm look like a wise move because dirtier energy sources, such as coal and natural gas, are becoming more and more expensive.

This cost parity will only continue as countries accept the need to cap and trade carbon emissions. In Europe, analysts expect the cost to offset one tonne of CO2 to reach €40 ($63) by 2020. That would make (most) clean energy cheaper than its hydrocarbon-based counterparts, helping companies that invest in renewables to turn a healthy profit while reduction carbon emissions.

Not that the future is plain sailing for all clean technologies. Scepticism across the developing world and in certain Western countries, particularly the U.S., about the importance of reducing carbon footprints could well scupper attempts to reduce CO2 emissions. Yet with the IEA estimating $45 trillion will need to be invested in clean tech by mid-century, the smartest companies (and countries) will see that as a lucrative new business opportunity, not a threat to their livelihoods.