Clean-energy investment hits a record $1 trillion

Investment in cleaner energy is on the verge of overtaking spending on fossil fuels for the first time ever after topping a record $1 trillion last year, according to a recent report from energy and renewables research group BloombergNEF.

Investment in sectors such as renewables, nuclear, zero-emission vehicles or recycling projects totaled $1.1 trillion last year, matching spending on fossil fuels CL00, +0.37%, the report found. Global green spending was up more than 30% on the previous year, and marks the first time the investment total crossed the threshold to rank in the trillions.

Within the report BNEF makes a top-down estimate of global fossil fuel investments, including upstream, midstream, downstream and unabated fossil power generation. This figure, arrived at independently for the purpose of comparison, is estimated at $1.1 trillion in 2022 – the same figure as the energy transition investment total.

The energy crisis that followed Russia’s invasion of Ukraine drove the 2022 increase in renewables spending, the report said. At the same time, traditional energy investment also rose to shore up energy security.

While some lawmakers want the U.S. to pump more traditional energy sources, like oil and gas NG00, +2.53%, to cut reliance on major global producers Russia and the Middle East, others stress that geopolitical upheaval is a perfect incentive to push wind, solar, nuclear and other options that emit less carbon and can be controlled on a hyper-local basis, sometimes merely an extension of the factory or business that needs the power.

Almost every clean-energy sector covered in the report achieved a new record level of investment in 2022, including renewable energy, energy storage, electrified transport, electrified heat, carbon capture and storage (CCS), hydrogen and sustainable materials. Only nuclear power investment did not set a record, staying flat.

Globally, renewable energy ICLN, +2.88% was the biggest sector for investment at $495 billion, followed by electrified transport projects.

Hydrogen is the sector that received the least financial commitment at just $1.1 billion in 2022 (0.1% of the total), despite strong interest from the private sector and growing policy support, BloombergNEF says. Hydrogen is, however, the fastest-growing sector with investment more than tripling over the year before. It’s an energy source that may find particular headway in powering fleets of vehicles, such as delivery trucks or municipal buses.

Nearly half of the total global investment in new renewables was in China, particularly in steel recycling and the renewable energy and electric-vehicle sectors. China is typically listed as the world’s top polluter, followed second by the U.S., and third, by India. Some measures flip the U.S. and China depending if a per-capita allowance is considered.

Other report details showed that Germany maintained its place in third position, largely due to a sizable EV market. The U.K.’s pullback in offshore wind, meanwhile, fell by nearly a fifth last year.

The report also found that climate-tech corporate finance totaled $119 billion in 2022. This category of investment, not included in the $1.1 trillion above, describes new equity financing raised by companies in the climate-tech space, either from public markets or private investors. The figure represents a 29% decline from the year before, driven entirely by a fall in public share offerings during a challenging year in global equity markets. Despite the turmoil, venture capital and private equity financings held up well, growing 3% on the year.

Still, even with the trillion-dollar milestone, spending on energy-transition technology and resources will have to triple, and quickly, to meet the target of net-zero emissions by 2050, analysts at the group say.

Greatly slashing emissions in coming years and decades is viewed critical by some groups for slowing the acidification of oceans, erosion of coastlines and brutal heat and drought that is costing lives and economic health, especially in the developing world.

Including the additional $274 billion invested in the power grid, energy transition investment hit $1.38 trillion in 2022. By comparison, the world must invest an annual average of $4.55 trillion for the remainder of this decade in order to get on track under BNEF’s net-zero scenario.