Green bonds’ are set to fill most of a €2.9 trillion ($3.9 trillion) capital hole required to build low-carbon infrastructure in Europe from 2011-20, according to a report by Barclays and consultancy Accenture.
Capital markets will supply €1.65 trillion, or 73% of the capital required, the report predicts, with banks playing an increasing role as the intermediary between projects and institutional capital.
Green bonds, or asset-backed securities linked to low-carbon technology, will allow infrastructure projects access to €1.4 trillion of capital, the report forecasts.
“Banks could provide primary debt, securitise it into ‘green bonds’ and place the securities on the mainstream public markets with minimal impact on their balance sheets,” the report says.
Other financing mechanisms will include energy efficient equipment leasing.
Out of the €2.9 trillion figure, the report says €2.3 trillion will finance low-carbon equipment and infrastructure, with the remainder being spent on research and development.
Solar and wind installations require €617 billion
Solar and wind installations will eat up the biggest piece of the pie, requiring €617 billion, according to the report – assuming that costs reduce over time. Retrofitting buildings to increase energy efficiency, smart buildings and decentralised residential power production will require €600 billion and will deliver 18% of the emissions reductions.
Smart grid and smart metering will require another €529 billion.
Barclays and Accenture have based their calculations on what they call “realistic adoption rates” for 15 commercially viable low-carbon technologies, rather than how much investment would be needed to meet emission reduction targets.
As such, the report suggests that the EU will miss its goal of a 20% reduction in carbon dioxide emissions by 2020, compared to 1990 levels. Instead, the report predicts that emissions will be at 83% of 1990 levels by 2020. The investment predicted in the report represents a saving of 2.2 gigatonnes of carbon dioxide equivalent.
By. Jess McCabe