Investing in a Low-Carbon World
12:00 - 13:00
We use the hybrid integrated model WITCH to quantify and analyze the financial investments needed to achieve low Greenhouse Gas concentration targets. Contrary to what commonly perceived, overall financial requirements in the electricity sector are not expected to increase. This result is driven by a contraction of electricity demand which offsets higher capital and operation costs of low-carbon electricity generation technologies. Criticalities in investment requirements emerge only when coal power plants with carbon capture and sequestration (CCS) and nuclear power plants are deployed around 2020-2040, both in high and low income regions. Investments in energy related R&D increase sharply and might cause stress in the short term. However, the financial requirements — both in electricity investments and in R&D — appear to be manageable, if compared to past large scale infrastructure and research projects. In particular, R&D financial needs can easily be accommodated using revenues from the carbon markets, which is expected to eventually become more important than the oil market in terms of traded value.