A new report from Accenture and Barclays says that Europe's banking sector will be required to finance the “vast majority” of the capital that the region will need to implement low carbon technologies.
The study found that €2.9 trillion of capital will be required between 2011 and 2020 to implement the range of low carbon technologies that will be needed reduce Europe's carbon emissions by 2.2 Gt CO2e.
Banks will play an increasing role in financing the transition, says Accenture, because of high levels of public debt and the maturing of key technologies.
“The path to a low carbon Europe has largely depended on government initiatives,” said Peter Lacy, Accenture's managing director of Sustainability Services in Europe, Africa and Latin America. “High public sector debt and maturing technology now mean that private sector capital, primarily intermediated by banks, must be provided to accelerate the investment we need to meet our 2020 goals.
“However, governments must still play a role to stimulate demand and stabilize carbon markets with transparent and long term policy commitments.”
According to the report, capital investments of €2.9 trillion over the next decade in low carbon technologies would reduce Europe's carbon emissions to 83 per cent of 1990 levels by 2020. The forecasts are based on calculations of realistic technology adoption rates of low carbon technologies, rather than on rates that are required for meeting Europe's 2020 targets.
Technologies in the report include smart metering and smart grid systems, renewable energy, transport infrastructure and energy efficiency technologies for buildings. Out of the €2.9 trillion required to finance Europe's low-carbon transition, €2.3 trillion will finance the procurement and implementation of the low carbon equipment and infrastructure, while €0.6 trillion will be required to finance the research, development and production of these technologies.
Banks have been criticised for their reluctance to lend to the green energy sector in the wake of the financial crisis, but the report puts forwards a number of recommendations to corporate banks that will help them to find ways of working with the sector.
“Banks in Europe are facing the challenge of capital lending constraints, uncertain carbon markets and myriad local policies," said Rupesh Madlani, Head of Renewables and Clean Technology Equity Research, Barclays Capital. “In order to limit the burden on their balance sheets and to mitigate risks, they must create credit products that meet the risk and return appetite of investors.
“The low carbon transition presents a major opportunity for innovation in financial products and services to meet this challenge.”
The report also recommends that policy makers commit to implementing long-term, stable policies and incentives to help drive investment.
Linkedin
