Coren & McDonnell reported in April, 2021, that for decades, infrastructure for coal, oil, and gas was seen as a relatively safe investment delivering strong returns, and renewables barely attracted the private sector’s attention. While banks put up trillions of dollars financing new fossil-fuel assets, from mines to power plants, government funds furnished about 50% of the annual investment (pdf) in America’s solar sector as recently as 2004.
Today, that equation is reversing. The cost to finance new fossil-fuel infrastructure, especially coal, is rising, while the cost for new renewables is falling fast, according to a new study by the Sustainable Finance Program at Oxford University in the UK.
The study focused on the cost of debt, since that’s the biggest cost factor for new energy projects. The researchers measured something called the loan spread, or the difference between lending and borrowing rates. Effectively, this is the gap between what a bank pays to depositors versus the interest rate it charges borrowers. It reflects how much risk the lenders to energy firms (85% of them are banks) are willing to accept to make loans: the bigger the spread, the higher
THE MOST PRESSING QUESTION
How do we get to net zero emissions?
The question will define the global economy for the next century. The IPCC estimates (pdf) we need to invest at least $1.6 trillion per year through 2050 to put the planet on a safe climate trajectory. We’re spending about 20% of that figure today. And that’s just for the energy sector. The climate economy means almost every aspect of our global system—agriculture, transportation, energy, construction—will need to be rethought and redesigned to reduce and then remove greenhouse gases from the equation. It’s the greatest challenge, and opportunity, of our time.
The Climate Economy (more).
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