European firms and governments will need to spend £2.9tn over the next decade to deliver the renewable energy and low-carbon infrastructure necessary to meet 2020 emissions reductions targets.
That is the stark conclusion of a new study from Accenture and Barclays Capital released today, which aims to quantify the cost to Europe of meeting climate change targets that aim to reduce emissions across the bloc by 20 per cent againt 1990 levels.
The report predicts that on average Europe will need to boost its annual spending on low-carbon technologies to £290bn over the next decade, up from the £32bn spent in 2009 - a figure that was down on the 2008 peak of £36bn.
It also warns that given the current state of public finances, banks will be expected to supply £2.2tn of the capital required to build low-carbon infrastructure.
Banks have been reluctant to lend in the wake of the financial crisis, particularly to low-carbon projects that are deemed high-risk by some lenders. However, the new report argues that up to £1.4tn of financing could be delivered by securing debt through new "green bonds".
The study urges governments to take three steps to ensure that capital flows into the low-carbon sector increase: introduce fiscal incentives and reduce the risk of investments in higher-risk technology; set compliance standards for low-carbon technology investments which benefit from public incentives; and set standards for green bonds to kick-start the market.
The report predicts that of £2.3tn invested, 27 per cent should be used to retrofit existing buildings, 27 per cent should be used to improve transport networks, 23 per cent should be earmarked to overhaul energy grids, and 23 per cent should be used to fund low-carbon electricity production.
The report does not cover nuclear or carbon capture and storage projects, but warns that both technologies will be needed in the longer term to ensure Europe meets its goal of cutting emissions 80 per cent by 2050, and as a result additional funding on top of the £2.9tn will be required to support the development of these technologies.
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