Exploring The Financial And Investment Implications Of The Paris Agreement


An assessment of the costs associated with these early retirements and new facilities helps to highlight the economic impact of the fight against climate change. Scale is the main driver of capital costs, with each scenario averaging between $2.5 billion and $2.7 billion per GW in new production capacity (Figure 3). Investment costs for the “straight-to-2-C” scenario are the lowest ($1.9 trillion for the entire LAC between 2021 and 2050; see additional table 6), while the investment costs for the NdCs scenario at 1.5 degrees Celsius are the highest (nearly $2.6 trillion). These results are consistent with Figures 1 and 2 – while NdCs are not enough to limit warming to 2 degrees Celsius, they involve even more challenges in limiting warming to 1.5 degrees Celsius [7]. Overall, in the NdC scenario at 1.5oC, investment needs account for about 0.8% of ZONE A`s projected (exogenous) GDP between 2021 and 2050, even reaching 2.1% of GDP between 2031 and 2035. Failed assets are a central issue for Latin American and Caribbean (LAK) countries, although the region is responsible for less than 10% of global carbon dioxide emissions [32] and already produces more than half of its electricity from renewable sources [33, 34]. For example, a recent analysis showed that the region ranks second in terms of the total amount of non-defying oil and gas reserves (behind the Middle East) and that fossil fuel production is an important component of many of the LAC`s economies. However, the risks associated with human-owned assets within the CTC have been largely neglected, with few studies attempting to assess their impact on the region or countries [10]; There is a clear need for instruments and analysis that help policy makers better understand the potential of assets that have been stranded in the LAC and their impact on low-carbon development strategies [35, 36]. In addition, financial institutions are not as robust in THE ADAs as in other regions [37, 38], which can affect countries` ability to cope with instability caused by failed assets. Here, we focus on assets that are under construction and investment in the energy sector, an important sector linked to climate change mitigation [4], as a prudent measure of the size and value of assets that have been stranded in the LAC. In the mitigation scenarios examined in this study, between 60 GW (straight-to-2) and 128 GW (NDC—–1.5 degrees Celsius) of fossil fuel power plants are withdrawn prematurely before the end of their physical lifespan in the LAC energy sector from 2021 to 2050 (Figure 2; complementary table 5).

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