Unlocking the trillions to finance the 1.5°C limit

Abstract

In order to meet the +1.5 ° C limit specified in the Paris Agreement, a shift of the global energy supply to 100% renewable energy is necessary at the latest by 2050. Such a process requires annual investments in the order of $1.5 to $2 trillion. Although the costs of renewable energies (RE) have recently declined sharply and further downturns can be expected, current investments are stagnating at approximately $250 billion. Therefore, additional monetary support must be provided, in order to bring the global expansion of RE to the necessary scale.

 

Financing the Green Climate Fund

Abstract

Reaching the 1.5°C limit will have to involve upscaling and accelerating the move towards 100 percent renewable energy (RE). Therefore, investments from 1.5 to $2 trillion per year are necessary. To trigger sums of RE-investments (including private capital) on such a large scale, a large involvement of public grants (at least 300bn per year) will be necessary.

The only promising way to receive yearly public grants on that scale is the involvement of central banks (CBs) as the producer of all legal tender. CBs should purchase standardized ‘Green Climate Bonds’ to channel the so created new money to the Green Climate Fund, Multilateral Development Banks or other dedicated financial institution which are involved in climate finance. No additional debt burden of public budget is needed and CBs gain a new monetary tool to stimulate the economy in a direct way.

The proposed study demonstrates how the new money flows would be financing the global RE-transition.