Investors spent $67 bn less for clean energy in emerging markets

Renewable energy in Cambodia

Investors spent $67 billion fewer dollars into clean energy in emerging markets vs developed countries, a study from research company BloombergNEF (BNEF) finds.

Energy transition investment in less developed markets fell 10 percent from 2019-2020, as financiers deployed more funds in traditionally lower-risk OECD countries, according to BNEF’s annual Climatescope survey. This marked a major shift from previous years when these rapidly growing economies attracted the majority of new funds deployed.

In 2020, developed nations received $262 billion, or 57 percent, of energy transition investment, which includes support for renewable power assets, electric vehicles, and electrified heating. Developing economies received $195 billion, or 43 percent. In 2019, emerging markets accounted for a slight majority of such funds received and in 2017, some 59 percent of such investment went to developing economies.

“Based on total funds deployed in 2020, enthusiasm for clean energy technologies appears to be at an all-time high,” said Luiza Demoro, head of energy transitions research at BNEF and lead author of Climatescope. “But investors’ willingness to invest in poorer parts of the world really seemed to stall in 2020 as the pandemic took hold.”

The surge in investment in wealthier nations can in part be explained by the explosive growth in electric vehicle adoption in western European nations and, to a lesser degree, in the U.S. In emerging markets other than mainland China, EV purchase rates have remained slow to date as such vehicles typically sell for a premium over conventional internal combustion engine vehicles.

The trend away from emerging markets and back to countries regarded as less risky was clearly evident in renewable power asset finance flows alone. Investment in renewables fell 9 percent from 2019-2020 in emerging markets but spiked 24 percent year-on-year in developed countries.

The survey found that markets responsible for nearly two-thirds of global greenhouse-gas emissions have net-zero targets in force, meaning they plan to achieve zero CO2 emissions by some future date. Policymakers in countries representing a further 27 percent are actively considering codifying such a pledge.

Mainland China topped the list of emerging markets with a composite score of 2.40 (out of a maximum possible score of 5.0). While China, maintains the world’s largest fleet of coal-fired power plants, it is also the largest supply and demand market for wind and solar. China has promoted electric vehicle adoption with a number of supportive policies.

India ranked second with a score of 2.35. India is the world’s largest market for renewables auctions, leading to substantial clean energy investment. Croatia finished third overall with 2.15. The nation has a target for renewables to account for 63.8 percent of electricity consumption in 2030.

Taking into account only power-related scores, India finished top of the table, followed by Chile and mainland China. Chile originally set a goal of having 20 percent of its electricity come from renewables by 2025, which it surpassed in 2020 with 25 percent clean generation.