Abstract
The radical change in recent global climate governance calls for China and Europe to ramp up their efforts in leading the world to reach the long-term climate goals. By analyzing the results from the state-of-the-art global integrated assessment model, MESSAGEix-GLOBIOM, this paper aims to understand the future levels of financial investment needed for building and maintaining energy-related infrastructure in the two regions for fulfilling stringent targets consistent with ‘well below 2 °C’. The results indicate that a rapid upscaling and structural change of these investments towards decarbonization are necessitated by the climate stringent scenarios. China and Europe need to increase their low carbon investments by 65% and 38% in a scenario reaching the 2° target relative to their respective reference scenarios which assume no such target from 2016–2050. In a more stringent climate policy scenario of the 1.5° target, these investment needs will increase by 149% and 79% for China and Europe respectively. Among all the energy sectors, energy efficiency, renewable electricity generation and electricity transmission and distribution are the three largest investing targets for the two regions. However, those investments will not likely be realized without strong policy incentives. Implications for green finance and multilateral cooperation initiatives are discussed in the context of the scenario results.
Highlights
The Paris Agreement defines the climate target aiming at keeping a global temperature rise this century well below 2 °C above pre-industrial levels and pursuing efforts to limit the temperature increase even further to 1.5 °C [1]
The results show no significant difference between the ‘Current Polices’ (CPol)’, which depicts a continuation of current trends, and ‘Nationally determined contributions (NDC)’, reflecting the most recent energy and climate policy pledges for all the regions
This study presents the analysis of energy investment needs for China and Europe under baseline scenarios as well as pathways in line with the global climate targets made by the Paris agreement (‘well below 2 °C’)
Summary
The Paris Agreement defines the climate target aiming at keeping a global temperature rise this century well below 2 °C above pre-industrial levels and pursuing efforts to limit the temperature increase even further to 1.5 °C [1] Fulfilling these targets will require pronounced reallocation of the investment portfolio worldwide [2]. Examining investment needs of low carbon sectors is essential for decision makers to enhance their cooperation in climate actions, which is requested by the most recent G20 (Group of 20 countries) climate and energy action plan for growth [4] Comparison between these two regions can illustrate to some extent how the disparities between developing and developed countries impact future investment portfolio in the transition to a low-carbon world. This comparative study can provide necessary information for the finance communities in both the regions which have become increasingly interested in using scenario analysis in their strategic planning processes [5]
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