Editing IPCC:AR6/WGIII/Chapter-6 (section)

=== 6.7.2 Investments in Technology and Infrastructure ===

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Total global energy investment was roughly USD1940 billion yr –1 in 2019 ( [[#IEA--2021f|IEA 2021f]] ). This total can be broken down into the following main categories: fossil-related energy supply, including oil, gas, and coal extraction and fossil electricity generation (USD990 billion yr –1 ); renewable electricity, primarily solar and wind (USD340 billion yr –1 ); nuclear energy (USD40 billion yr –1 ); electricity networks (USD270 billion yr –1 ); and end-use energy efficiency (USD270 billion yr –1 ).

Energy investment needs are projected to rise, according to investment-focused scenario studies found in the literature ( [[#McCollum--2018a|McCollum et al. 2018a]] ; [[#Zhou--2019|Zhou et al. 2019]] ; [[#Bertram--2021|Bertram et al. 2021]] ). While these increases are projected to occur in emissions-intensive pathways as well as low-carbon pathways, they are projected to be largest in low-carbon pathways. Average annual global energy investments over the 2016–2050 period range (across six models) from USD2100 to 4100 billion yr –1 in pathways limiting warming to 2°C (&gt;67%) and from USD2400 to 4700 billion yr –1 in pathways limiting warming to 1.5°C (&gt;50%) with no or limited overshoot (McCollum et al. 2018). Whatever the scenario, a significant and growing share of investments between now and 2050 will be channelled toward infrastructure build-out in emerging economies, particularly in Asia ( [[#Zhou--2019|Zhou et al. 2019]] ).

More widespread electrification of buildings, transport, and industry means particularly substantial investment in the electricity system. According to C1–C3 pathways in the IPCC’s ''Sixth Assessment Report'' (AR6 Scenarios Database), such investments could be at the following average annual levels (inter-quartile range, USD2015) over the 2023–2052 timeframe: USD1670 to 3070 billion yr –1 (C1), USD1600 to 2780 billion yr –1 (C2), and USD1330 to 2680 billion yr –1 (C3) (see also [[IPCC:Wg3:Chapter:Chapter-3#3.6.1.3|Section 3.6.1.3]] ).

Beyond these sector-wide numbers, a key feature of stringent mitigation pathways is a pronounced reallocation of investment flows across sub-sectors, namely from unabated fossil fuels (extraction, conversion, and electricity generation) and toward renewables, nuclear power, CCS, electricity networks and storage, and end-use energy efficiency ( [[#McCollum--2018a|McCollum et al. 2018a]] ; [[#Bertram--2021|Bertram et al. 2021]] ; [[#IEA--2021f|IEA 2021f]] ) (Figure 6.32). Investments in solar, wind, and electricity transmission, distribution, and storage increase the most in mitigation scenarios. Up to 2050, the bulk of these investments are made in OECD and Asian countries (Figure 6.33). While fossil fuel extraction investments exhibit a marked downscaling across all regions, compared to reference scenarios, the declines are especially strong in the Middle East, Reforming Economies of Eastern Europe and the Former Soviet Union (REF), and OECD.

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'''Figure 6.32 | Global average annual investments from 2023 to 2052 (undiscounted, in USD billion yr''' –1) '''for electricity supply sub-sectors and for extraction of fossil fuels in scenarios that limit warming to 2°C (&gt;67%) or lower (C1-C3)''' (Source: AR6 Scenarios Database and Chapter 3). Historical investments are also shown for comparison (Source: IEA 2021; approximations are made for hydro and geothermal based on available data; solar and wind values are for 2020). T&amp;D: transmission and distribution of electricity. Bars show median values across models-scenarios, and whiskers the interquartile ranges. See Chapters 3 and 15 for additional information on investments and finance.

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[[File:a8adcb84437bb5c5575af20cb7c84093 IPCC_AR6_WGIII_Figure_6_33.png]]

'''Figure 6.33 | Regional average annual investments from 2023 to 2052 (undiscounted, in USD billion yr''' –1) '''for four of the largest sub-sectors of the energy system in scenarios that limit warming to 2°C (&gt;67%) or lower (C1–C3)''' (Source: AR6 Scenarios Database and Chapter 3). Historical investments are also shown for comparison (Source: IEA, 2016). T&amp;D: transmission and distribution of electricity. Extr.: extraction of fossil fuels. Bars show median values across models-scenarios, and whiskers the inter-quartile ranges. See Chapters 3 and 15 for additional information on investments and finance.

Investments into end-use energy efficiency are projected to also be substantial in mitigation pathways, potentially upwards of several hundred USD billion yr –1 on average to 2050, compared to USD270 billion yr –1 in 2019 ( [[#McCollum--2018a|McCollum et al. 2018a]] ; [[#IEA--2021f|IEA 2021f]] ). However, the literature is inconsistent in how demand-side investments are calculated, as boundary conditions are less clear than for energy supply investments. Taking a broader definition can result in estimates that are an order-of-magnitude higher, meaning as large or larger than supply-side investments ( [[#Grubler--2012|Grubler et al. 2012]] ; [[#IEA--2021f|IEA 2021f]] ).

Increasing low-carbon investment primarily requires shifting existing capital investment through regulation and incentives as well as removing existing investment barriers (McCollum et al. 2018; Hafner et al. 2020; Ameli, N. et al. 2021). While there is a considerable amount of capital in the world, it is not always available to those wishing to invest in certain projects. Total annual global investment in fixed capital was USD22.4 trillion in 2021, over an order-of-magnitude larger than energy sector investment (World Bank 2021).

Future investment patterns will vary by region, as they do now, due to differences in risk profiles, resource endowments and economic and governance structures (Fizaine et al. 2016; [[#Zhou--2019|Zhou et al. 2019]] ; Ameli, N. et al. 2021). In rapidly growing countries, investments to support a low-carbon energy system transition will be integrated with those needed to meet rapidly increasing energy demands, irrespective of whether efforts are made to reduce emissions. In less rapidly growing countries (Sun et al. 2019), investments will focus on transitioning current energy systems to low-carbon configurations. Most current energy investments are concentrated in high- and upper-middle-income countries ( [[#IEA--2021f|IEA 2021f]] ), but this will change as investment needs continue to grow in today’s lower-middle- and low-income countries ( [[#McCollum--2018a|McCollum et al. 2018a]] ; [[#Zhou--2019|Zhou et al. 2019]] ; [[#Bertram--2021|Bertram et al. 2021]] ; [[#IEA--2021f|IEA 2021f]] ).

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