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Allianz Climate & Energy Monitor 2016

The G20 nations are at risk of falling short of the climate goals they set in Paris in December 2015. The reason: a growing gap between current investments in renewable energy sources and future needs. The International Energy Agency (IEA) projects the need at USD 790 billion a year as early as 2020, and USD 2300 billion per year by 2035. Analyses by the Allianz Climate & Energy Monitor see the reasons for that in inadequate or nonexistent climate strategies, together with their deficient implementation in the energy sector.

The Allianz Climate and Energy Monitor measures the need for investment for an energy transition among the world’s most important 19 countries (the G20 includes these 19 countries plus the EU), and ranks them on their attractiveness as potential destinations for investments in low-carbon electricity infrastructure.

Whether and where investors will provide funds depends on a reliable climate and energy strategy in the country concerned, as well as on specific, transparent support mechanisms, fair competition with fossil energy sources, the influence of contrary lobbies, and market experience with renewable energy. These are in addition to general factors like inflation, an openness to foreign investors, and legal certainty.

Key results:

G20 policies are insufficient for decarbonizing the power sector

  • None of the G20 countries is currently taking sufficient action to combat the investment gap in the power sector, which would be necessary to be aligned to a 2ºC limit in global average temperature increase.
  • The countries vary widely in terms of their investment needs and attractiveness. For instance, while China will need to attract annual investments of USD 208bn to address its investment gap, Argentina’s shortfall is estimated at USD 5bn. And while countries such as Brazil or India are just beginning to introduce policies to promote transition torenewables, the UK and Germany already have a significant policy and installation track record.

Emerging countries face a huge investment gap while the OECD countries are leaders in policy framework

  • Together, the G20 countries will require roughly USD 710 billion annually in absolute investment until 2035.
  • Brazil, India, Indonesia, China and South Africa will need to bridge 50% of this investment gap – having the highest investment needs – owing to their market size and development needs. This percentage increases when the overall vulnerability of their power infrastructures to the impact of climate change is taken into account.
  • Most attractive in terms of investments are Germany, the United Kingdom and France due to good performance across all indicators. In the US, favorable general investment conditions and a large and ready market partially mask the generally low federal policy support.
  • Notably, China has unsurprisingly high overall investment needs, but also the fourth-best investment attractiveness.
  • Some of the countries with the highest investment needs – such as Brazil, India, Indonesia and South Africa – nevertheless have an insufficient investment framework and are therefore possibly unable to attract substantial private sector investment.
  • In India, ambitious green policies are encumbered by generally unfavorable investment conditions. It will need a rapid translation of policy euphoria into hands-on, focused deployment in order to realize its full potential in this market.
  • Being amongst the least attractive countries for investments, even countries with relatively low investment needs such as Mexico, Turkey and Argentina, still require substantial policy enhancement. These countries in particular need to level the playing field for investing in renewable energy as opposed to their massive fossil fuel sectors.

The G20 countries need to establish coherent strategies and policies to attract investments

  • A coherent climate strategy is a vital element in giving investors confidence in the political commitment, but it also needs to translate into concrete and transparent policy measures that make investment in renewables attractive in comparison with fossil fuels. It also demands a favorable general macroeconomic investment climate.
  • The G20 countries should further strengthen their leadership and market development role to attract investments, also by developing instruments to address specific investment risks. For example, they could allow development banks to mitigate political risks in order to increase the transparency and longevity of investments frameworks.

Country Performance Sheets

The Allianz Climate and Energy Monitor provides a performance sheet for each of the G20 countries, excluding the European Union as a single entity. Please access the report for the performance sheets here.

On the Climate & Energy Monitor‘s methodology

The Monitor assesses the G20 countries’ renewable electricity production, excluding fossil fuels, large hydro and nuclear6 as well as transportation and storage infrastructure.

The analysis concentrates on two major elements:

  1. General investment needs in the energy sector through to 2035, including absolute and relative investment requirements for the electricity infrastructure, and the vulnerability of the existing electricity infrastructure to the effects of climate change.
  2. The attractiveness of various circumstances to potential investors for renewable energy, including policy adequacy and reliability, market absorption capacity and general national investment conditions.

Each indicator is scored in relation to the others. Once calculated, the absolute scores were normalized for each indicator in a manner such that ratings lie between the best (100) and the worst (0) possible scores in the sample. Therefore, any given country is scored in relation to the performance of its fellow G20 countries.

In a previous version the report contained rounding errors in Table 1. These have been corrected on June 3 2016.
The NewClimate Institute for Climate Policy and Global Sustainability is a Germany-based research institute generating ideas on climate change and driving their implementation. They do research, policy design and knowledge sharing on raising ambition for action against climate change and supporting sustainable development. Their core expertise lies in the areas of climate policy analysis, climate action tracking, climate finance, carbon markets, and sustainable energy.
Germanwatch is an independent development and environmental organization that advocates for global equity and preservation of livelihood. They concentrate on politics and economies of the "global north" and its worldwide impacts. Starting point of the work are disadvantaged people from the "global south" and together with their members, sponsors and other actors from the civil society to lobby for sustainable development. Based on scientific analyses they inform the public sector, make educational as well as lobby work and demonstrate consumers how to act according their goals.
Allianz Climate Solutions is the competence center of Allianz Group for climate change and renewable energy. We offer insurance and advisory services on financing issues for renewable energy projects to both external clients and Allianz entities. Furthermore, we are responsible for climate-related advisory and strategy development of Allianz and are an incubator for climate-related product development.