The $13.6 trillion question: how do we pay for the green transition?

Attracta Mooney

In Falls County, about 30 minutes’ drive from Waco in the heart of Texas, clean energy company Avangrid is building its largest solar project.

Due to be completed early next year, the True North project will have a capacity of 321 megawatts, equivalent to enough energy to provide power for more than 55,000 US homes.

True North, as well as several other Avangrid projects, is a beneficiary of the Inflation Reduction Act (IRA), the US’ foremost legislation to drive green investments by providing subsidies, grants and tax credits to climate-friendly projects and companies.

But the world needs many more True Norths if it is to meet its climate goals. The International Renewable Energy Association estimates that an average of 1000 gigawatts of renewable power capacity needs to be built globally every year until 2030 – equivalent to more than 3000 projects of True North’s scale.

On top of that, buildings will have to be made more energy efficient, infrastructure of all kinds adapted to deal with the effects of climate change, and natural environments restored and made more resilient.

The bill will be immense. If average global temperature rises are to be limited in line with the 2015 Paris Agreement, climate finance globally will need to increase to about $US9 trillion ($13.6 trillion) a year globally by 2030, up from just under $US1.3 trillion in 2021-22, according to a report last year from the Climate Policy Initiative.

A separate report released last month found that Europe will need to invest €800 billion ($1.3 trillion) in its energy infrastructure to meet 2030 climate goals, and a total of €2.5 trillion to complete the green transition by 2050.

Former US presidential candidate John Kerry, who stepped down from his role as the US special climate envoy in March, puts the challenge of meeting this bluntly: “We don’t have the money.”

The 80-year-old is now planning to turn his attention to climate finance to prepare for the phaseout of fossil fuels. “We have to put in place more rapidly the funding mechanisms that are going to actually fuel this transition at the pace it needs to be,” he says.