EY: Financial Hurdles Could be the Biggest Barrier to Achieving Net Zero Goals

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Despite the COVID-19 pandemic, global renewable energy capacity investments grew 2% to $303.5 billion in 2020, according to EY. But that momentum may slow as companies face financial hurdles in their quest to meet net zero emissions targets.

A new report, “EY Renewable Energy Country Attractiveness Index (RECAI),” estimates that future development to achieve net-zero will require a further investment of $5.2 trillion and highlights the role institutional investors will need to play in financing the energy transition.

RECAI 57 finds that environment, sustainability, and governance (ESG) goals are increasingly being prioritized on the investor agenda while institutional investors’ interest in renewables continues to grow.

The forthcoming 2021 United Nations Climate Change Conference of the Parties (COP26) presents an opportunity to close the gap between what governments have promised to do and the level of action they have undertaken to date. RECAI finds that current policy and pledge trajectories from leading nations indicate an increased commitment to greater accountability and transparency, with representatives expected to outline clear roadmaps and detail on policy measures to spur investment in renewables.

In the run-up to COP26, the International Energy Agency (IEA) issued a strong warning on the need to drastically scale back fossil fuels in its May 2021 Net-Zero by 2050 Report and roadmap for the global energy sector. The Agency calls for no new fossil-fuel cars to be sold beyond 2035, and for global investment in energy to more than double from $2 trillion a year to $5 trillion. The result would not be an economic burden, as some have claimed, but a net benefit to the economy.

EY says that convening moments like COP26 present a collaborative platform to drive conversations around national and business net-zero commitments. The report notes the need for collaboration across industry ecosystems, geographies, and governments, harnessing the power of technology to accelerate the world’s transformation to a more sustainable future.

RECAI 57 also examines green hydrogen case studies in Europe and China that illustrate the great potential of this new technology, but also show the barriers that need to be overcome to reach commerciality and widespread use.