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Renewable Energy at $254 Billion? Let’s Make It a Clean Trillion

By Tom Randall
Bloomberg
Billionaire bankers gathered at the United Nations yesterday to call for more investment in renewable energy -- $1 trillion a year, to be exact.

Billionaire bankers gathered at the United Nations yesterday to call for more investment in renewable energy -- $1 trillion a year, to be exact.

It won’t be easy. Global investment in renewable energy fell 12 percent in 2013 to $254 billion, according to data released by Bloomberg New Energy Finance (BNEF), casting a shadow over the notion of a “clean trillion.”

Last year was the second decline in renewable investments since 2011’s record-high $318 billion. Investors and climate-policy advocates including hedge-fund billionaire Tom Steyer and former U.S. Treasury Secretary Robert Rubin called for changes to financial markets that would boost investment. Financing must double by 2020 and double again to $1 trillion by 2030 in order to avoid global warming of more than 2 degrees Celsius, reports Ceres, the host of yesterday's conference.

These top-line numbers are fuzzy and paint a picture that’s perhaps more bleak than reality. First, the price of solar energy continues to tumble, so more renewable energy is being generated with fewer dollars invested. Second, while BNEF’s clean-energy tally is the most comprehensive for renewable energy, it’s not all-encompassing; it doesn’t include most energy-efficiency measures, fuel-efficiency gains or expanded public transportation.

The full accounting of current investment in clean energy is probably closer to $500 million a year, said Michael Liebreich, the CEO of BNEF, in an interview at the conference. But by that measure, we probably need to get to $2 trillion to prevent the worst affects of global warming, he said. The goal of quadrupling investment from its current state "is the right order of magnitude."

Whether it's one trillion or two, the benchmarks show there’s clearly a long way to go. The will is there, and the price is right, but what’s lagging, according to Ceres, is easy financing. That’s what yesterday’s conference was about.

A few proposals from the Ceres report:

1) Pension funds and other institutional investors should commit to a goal of investing five percent of their portfolios in clean energy. They currently invest less than 1 percent, according to the OECD.

2) Investors should increase scrutiny of companies that are responsible for high levels of emissions of carbon dioxide. Last year was a turning point in that regard. Read: Oil's Future Draws Blood and Gore in Investment Portfolios.

3) Bonds, bonds, bonds and asset-backed securities. Not all investors want to put solar on their roofs or can afford to build a field of panels. Banks need to create simple investment vehicles that help both retail investors and billion-dollar institutional investors access those markets. SolarCity, created by Tesla Founder Elon Musk, announced yesterday that within six months it will introduce an online system for retail investors to buy into rooftop solar projects.

Is the clean-energy story of 2014 going to be the adoption of green bonds? We'll see. In the meantime, you can read all 10 recommendations in the Ceres report here. Details from BNEF’s tally of renewable energy investment can be found here.

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