To achieve the Paris Agreement’s goals of achieving net-zero emissions by 2050, the United States will need to invest at least $250 billion in climate mitigation solutions each year during the next decade. Globally, estimates run $3-5 trillion annually. On top of this, the U.S. urgently needs to invest in adaptation to reduce the impacts of climate change: climate-related disaster damage exceeded $600 billion from 2016-2020, a new record.
Each year our organization, Climate Policy Initiative, publishes the Global Landscape of Climate Finance, the most comprehensive inventory of climate change investment. It is a key tool for policy makers and other financial actors to assess the scale of climate finance, identify the main actors in the market, reveal investment gaps, and highlight opportunities to mobilize finance to fulfill sustainable investment potential and catalyze sustainable growth.
Our data provides interesting information about the state of climate investment in the U.S. (All data are averages for 2017/18, the most recent years for which data are available. The Global Landscape is currently being updated to cover 2018/2019 and preliminary estimates for 2020.)
U.S. annual tracked climate investment is less than a third of what is needed.
U.S. private and public financial actors provided an annual average of $74 billion in climate finance. This is more than a three-fold increase since 2014, accounting for just under 13% of the global annual climate finance flows ($574 billion). Yet to put these figures in perspective, the U.S. possesses 29% of global wealth, U.S. retirement plan assets are more than 60 percent of the global total, and U.S. banks account for 15% of global assets under management in the global banking sector.
Renewable energy and low carbon transport dominate U.S. climate investment.
Renewable energy generation and low-carbon transport, the two largest and most mature climate investment sectors, play a dominant role in U.S. climate finance. Most climate finance in the U.S. is for renewable energy generation, largely wind and solar ($59.5 billion, 81% of the U.S. total), representing the world’s second largest renewable energy market after China.
Low-carbon transport is the next-largest sector, representing a $11.5 billion domestic market 16% of the U.S. total, and growing.
Investment in these and other key climate sectors could increase innovation, market opportunities and resilience in the US. For example, investments in adaptation and resilience can yield benefits of 4-7 times the initial investment.
Private investment far surpasses public investment.
90% of U.S.-originated climate finance comes from private sources. Private finance in the U.S. is dominated by corporations, including project developers and utilities (57%) as well as households and individuals (18%), driven by decreasing technology costs for renewables and EVs, as well as tax and regulatory incentives that help drive those investments. By contrast, the U.S. public sector – federal, state, and local – provides $7.5 billion, or 10% of the total U.S. climate finance that we have tracked to date (see caveats regarding data availability). Globally, almost half of public climate finance originates from national development finance institutions, which the U.S. does not have.
The U.S. is far less involved in international climate finance than other advanced financial markets, and has been since CPI started tracking these flows in 2011.
Of tracked U.S. climate finance from the public and private sectors, excluding its contributions to multilateral development banks (MDBs) and climate funds, an annual $4.4 billion was invested internationally, 6% of the total. The largest destinations of U.S. international climate finance in 2017 and 2018 were Canada ($272m per year), India ($261m), and Chile ($218m). No other country received more than $150 million per year in U.S. climate investment abroad. By comparison, 25% of global non-MDB climate finance crosses international borders, with some major financial markets outside the U.S., including Western Europe and Japan, investing substantially more in international projects (one third and more than half, respectively).
New fossil investments will make addressing climate change all the more challenging.
Finance flows to projects with climate benefits only tell part of the story. CPI’s recent Paris Misaligned reports show that the emissions profiles of new U.S. electricity generation financed in 2018 and U.S. light road vehicles sold in 2018 were not consistent with meeting the goals of the Paris Agreement. While these initial findings provide a window into the harmful nature of ongoing high-carbon investments, more granular data are required to understand the full extent of misalignment.
As much as we can learn from the data we have, there are some critical data gaps, especially as CPI has not to date conducted a comprehensive study focused on the U.S. Most significantly, our data sources on private investment globally are only for renewable energy and low-carbon transport projects, two of the main sectors for investment, and do not include energy efficiency, land use, and climate adaptation. Renewables and transport also represented most tracked domestic public finance, though we do have access to limited data for domestic public adaptation spending. The data also does not adequately capture state- and city-level investment, a missing piece since so much of climate action occurs at these sub-national levels. By contrast, we can access high-quality datasets with broad sectoral coverage of international public finance, including bilateral and multilateral development finance institutions.
U.S. climate policy is at an important turning point.
We cannot meet our ambitious national economic, environmental and security goals without strategic public and private climate finance; understanding where we are today is the first step to increasing investments that produce strong returns for our future.
Unless otherwise cited or linked to an external source, all investment figures in this post are from CPI’s proprietary Global Landscape of Climate Finance database. All percentages are weighted averages for 2017/18, the most recent years for which data are available.
 Climate Policy Initiative, Updated View on the Global Landscape of Climate Finance, 2020, Available at: https://www.climatepolicyinitiative.org/publication/updated-view-on-the-global-landscape-of-climate-finance-2019/. Unless otherwise specified, all totals in this blog are for 2017/18 combined, and percentages are weighted averages for 2017/18.