Last year, the leading economies in renewable energy investment growth were not to be found in North America or even Europe — the leaders in growth were countries often described as developing, such as China, Brazil, Egypt, the United Arab Emirates and Argentina.
These big shifts in renewables investment have, in fact, been emerging since 2004, and portend a strong outlook for continued growth in global renewable energy investment and reaching carbon-reduction targets.
In 2016, renewable energy investments in poorer countries eclipsed investments in wealthier countries for the first time ever. Since then, the upward trajectories of their growth have held steady or increased.
China was the prime mover in 2017 and has been a reliable leader in the pack in recent years. According to the Renewables 2016 report from the Renewable Energy Policy Network for the 21st Century, China has played a “dominant role” in the industry, increasing its investment by 17 percent and contributing a staggering 36 percent of total global investment.
From 2016 to 2017, China ramped up investments by 31 percent, imbuing a record $126.6 billion. Thanks to its commitment, China is home to half of the world’s solar energy capacity.
In the 2018 Global Trends In Renewable Energy Investment Report from Bloomberg New Energy Finance and the United Nations Environment Programme (UNEP), nations in Africa, Southwest Asia and Latin America blew their 2016 contributions out of the water.
In Latin America, Mexico increased investments by 810 percent, Argentina by 777 percent, Chile by 55 percent, Peru by 66 percent, and Costa Rica by 31 percent.
Looking at the other side of the world, Egypt grew renewables investments by 495 percent, the UAE by 2,815 percent, Rwanda by 8,665 percent, and Jordan by 26 percent.
By comparison, the wealthiest economies invested significantly smaller amounts into their renewable sectors. The UK’s dropped by 65 percent to $7.6 billion, Germany’s was down 35 percent at $10.4 billion, Japan’s fell by 28 percent to $13.4 billion, while US investment slipped 6 percent to $40.5 billion.
With the most developed economies faltering in their renewables commitments, they’re losing their leadership position to poorer countries. Way back in 2006, Kenya led the world in solar panels installed per capita. As recently as 2015, Costa Rica subsisted on total renewable energy for 75 days, and the newly elected president declared the country would become the first carbon-neutral country by 2021.
And looking at trends in new investments since 2004, countries in Asia, Latin America (minus Brazil), Africa and Southwest Asia have maintained generally steady increases while Europe and the US have faltered in keeping an upward trajectory. Dollar for dollar, the developed economies still hold incredible leads over the rest world (sans China), but the growth trends show a serious commitment by these developing countries to renewable energy.
There are very powerful motivators driving these surges in renewables investment, driven in part by agreements and mostly by opportunities.
For starters, the Kyoto Protocol bound many developed countries to reduce their greenhouse gas emissions to levels that “would prevent dangerous anthropogenic interference with the climate system,” and went into force in 2005. Some criticized it for not including countries such as China and India, and the second phase of its commitments — codified in the Doha Amendment — still hasn’t gone into effect. Given the chance, developed countries scaled back their investments, partly causing the drops seen above.
The Paris Agreement, signed in 2016 and due to come into effect in 2020, holds 195 signatory states to reduce greenhouse gas emissions and work to keep the global temperatures from rising above 2°C. With so many developing countries onboard, the investment growth shows they’re doing the necessary work to start meeting their targets.
On top of these agreements, there are environmental factors (non-ecological, that is) contributing to the growth. With the US set to pull out of the Paris Agreement in 2020, sincerely motivated countries are working hard to pick up the slack and selfishly motivated countries are likely seeking to gain prestige and recognition in the wake of the US’s missteps.
Finally, the economic factors surrounding renewable energy are making investments a much more favorable activity. A 2017 report from Lazard showed a precipitous drop in the cost of solar energy and a steady drop in the cost of wind.
And as more countries invest and overall investment grows, renewable energy will become even more efficient and affordable, thanks to greater scale and more innovation. We’re already seeing a marked increase in renewable energy jobs. Increased demand will also encourage more suppliers to enter the market, fostering greater innovation and lowering costs further.