Bridging the clean energy investment gap: Cost of capital in the transition to net-zero emissions

Cian Montague, Kilian Raiser and Moongyung Lee

No 245, OECD Environment Working Papers from OECD Publishing

Abstract: The rapid and deep emissions reductions needed to keep global warming to 1.5°C rely critically on an immense scaling-up of investment in clean energy technologies. The cost of capital plays a key role in determining investment decisions and, when elevated, can pose a significant barrier to accelerated climate action. The high capital expenditure needs of clean energy technologies make them more vulnerable to changes in the cost of capital than fossil fuel alternatives. This paper provides an overview of the cost of capital as a barrier to clean energy investment and depicts the key risk factors that determine the cost of capital for specific investments. It shows how, particularly in developing countries and for new and emerging technologies, a high cost of capital can significantly stifle investment, and calls on governments to implement better risk sharing mechanisms to overcome this barrier.

Keywords: clean energy investment; clean energy technologies; climate policy; developing countries; finance (search for similar items in EconPapers)
JEL-codes: E22 E43 O14 Q25 Q42 Q48 Q54 Q58 (search for similar items in EconPapers)
Date: 2024-07-19
New Economics Papers: this item is included in nep-ene and nep-env
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1787/1ae47659-en (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oec:envaaa:245-en

Access Statistics for this paper

More papers in OECD Environment Working Papers from OECD Publishing Contact information at EDIRC.
Bibliographic data for series maintained by ().