Clean energy finance must urgently confront novel technology bankability gaps, systemic risks in emerging economies, and a historic shift in infrastructure spending

Abstract

Decarbonizing the global economy by midcentury will require annual investment in clean energy to more than double for several decades. Although global capital stocks are large enough, most investment flows to opportunities with risk and return profiles that differ from those of new clean infrastructure. Investors rarely commit funds to emerging clean technologies until these are proven commercially viable at scale, creating a persistent financing gap. This gap is widest in lower-income countries, where infrastructure needs are greatest and future emissions growth is likely to be highest. Many widely discussed financing solutions have not been tested for feasibility or for their ability to scale, and the macroeconomic impacts of shifting such vast sums into the energy sector are poorly understood. This article identifies three systemic challenges to mobilizing capital at the pace and scale implied by ambitious climate goals: (1) making novel technologies investable, (2) expanding affordable finance for clean energy in lower-income economies, and (3) managing the macroeconomic consequences of a historic reallocation of infrastructure spending toward energy. It advances the clean energy finance field by providing a critical framework for assessing these challenges, explaining why current solutions fall short, and setting a research and policy agenda to address them.