Editing IPCC:AR6/SR15/Chapter-4 (section)

=== 4.4.5 Strengthening Policy Instruments and Enabling Climate Finance ===

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Triggering rapid and far-reaching change in technical choices and institutional arrangements, consumption and lifestyles, infrastructure, land use, and spatial patterns implies the ability to scale up policy signals to enable the decoupling of GHGs emission, and economic growth and development (Section 4.2.2.3). Such a scale-up would also imply that potential short-term negative responses by populations and interest groups, which could block these changes from the outset, would need to be prevented or overcome. This section describes the size and nature of investment needs and the financial challenge over the coming two decades in the context of 1.5°C warmer worlds, assesses the potential and constraints of three categories of policy instruments that respond to the challenge, and explains the conditions for using them synergistically. The policy and finance instruments discussed in this section relate to Section 4.4.1 (on governance) and other Sections in 4.4.

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==== 4.4.5.1 The core challenge: cost-efficiency, coordination of expectations and distributive effects ====

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Box 4.8 shows that the average estimate by seven models of annual investment needs in the energy system is around 2.38 trillion USD <sub>2010</sub> (1.38 to 3.25) between 2016 and 2035. This represents between 2.53% (1.6–4%) of the world GDP in market exchange rates (MER) and 1.7% of the world GDP in purchasing power parity (PPP). OECD investment assessments for a 2°C-consistent transition suggest that including investments in transportation and in other infrastructure would increase the investment needs by a factor of three. Other studies not included in Box 4.8, in particular by the World Economic Forum (WEF, 2013) <sup>[[#fn:r1314|1314]]</sup> and the Global Commission on the Economy and Climate (GCEC, 2014) <sup>[[#fn:r1315|1315]]</sup> confirm these orders of magnitude of investment.

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