London, 28 January 2010

Clean energy spending needs to rise at least threefold to avoid dangerous climate change. The World Economic Forum and Bloomberg New Energy Finance said in a new report today that investment of around $500 billion per year will be required if the increase in global average temperature is to be restricted to 2C.

This figure compares with around $145 billion estimated to have been spent last year on cleaner energy infrastructure such as windfarms, hydroelectric dams, solar power plants and energy efficiency measures.

The report, called Green Investing 2010: Policy Mechanisms to Bridge the Financing Gap, found that investment in clean energy has held up better than expected during the financial crisis and resulting recession, falling only 6 per cent in 2009 compared with 2008.

It added: “But a considerable gap still exists between current levels of investment and what is needed to begin reducing the world’s carbon emissions. To unleash adequate funds to bridge this gap, appropriate policy mechanisms are required.”

The report recommends new structures that could funnel a much larger flow of investment in cleaner technologies, but in way that is tailored “in the national, state and local context.”

The survey was released at the World Economic Forum’s annual meeting in Davos, Switzerland, which has drawn together world leaders and business chiefs to discuss key economic and political issues – including climate change and investing in clean energy.

After last month’s Copenhagen summit, which failed to map out in detail a successor to the current Kyoto protocol, investors and policymakers have been mulling whether a fragmented collection of cap-and-trade schemes will be able to boost investment.

The accord reached at Copenhagen agreed in principle that rich countries should contribute $100 billion to fund cleaner energy projects and adaptation measures from 2020, but no countries have stepped forward to say how much funding they will commit to.

The future of the clean development mechanism ( CDM), which enables poorer countries to host cleaner energy projects that earn carbon credits, is shrouded in uncertainty until negotiators agree a future role for the Kyoto protocol.

New Mechanisms

Investment in the CDM – including credits traded in the secondary market – was around €17.5 billion in 2009, down 28 per cent on the year before, according to recent research by Point Carbon's research arm.

Some negotiators at Copenhagen had hoped to make progress on agreeing new mechanisms in a potential post-2012 climate regime –such as a sector-based approach – but only avoided deforestation managed to gain traction at the climate meeting.

A growing trend in the carbon market over the past few years is for funds to invest in the underlying project in order to guarantee a dominant revenue stream with revenues from CDM seen as the "icing on the cake".

Leaf Clean Energy, an investment fund, and Trading Emissions Plc, which is mainly an investor in CDM credits, will merge this year and list on the London Stock Exchange in order to earn two sources of revenue.

Ends --

By John McGarrity, Point Carbon

www.pointcarbon.com