Clean energy investment is ramping up fast, but most of it is still not reaching beyond the world’s richest countries.  

Investment into renewable energy infrastructure will reach $1.7 trillion this year compared to just $1 trillion for fossil fuels, according to the International Energy Agency. Last year, the two were competing dollar for dollar. More than $1 billion per day is flowing into solar power alone, leading the way among all energy sources. Solar investments will likely surpass investment in oil production for the first time ever in 2023.  

Very little of that investment, just three dollars out of ten, is going to low- and middle-income countries, where most of the new demand for energy will occur in the coming decades. These countries need about $1.7 trillion annually in clean energy investment — equal to the total amount of global investment in renewables this year — but received only $544 billion last year, according to the United Nations. 

“The vast amount of investment is occurring in the economically developed democracies and China — something like 70%. Meanwhile, all of Africa gets at most 3%,” says Ajay Mathur, an India energy expert who heads the International Solar Alliance, a consortium of countries dedicated to expanding solar energy, especially in low- and middle-income countries. “That’s led to global solar energy capacity of more than 1,000 gigawatts. All of Africa is about 11 gigawatts, about 1% of the total.” 

Rapidly accelerating investment in poorer countries alongside wealthier countries is essential to reach the world’s decarbonization goal of net zero emissions by 2050. Jump starting the flow of investment from high income to low- and middle-income countries is arguably the single most important task slated for discussion at the United Nations climate summit (known as COP28) in Dubai at the end of this year.  

In the coming weeks, Cipher will publish a series of stories examining the following basic channels through which money has begun to flow from wealthy countries and deep-pocketed investors to poorer countries:  

• Reforming multilateral lending institutions: The World Bank, International Monetary Fund, Asian Development Bank, Africa Development Bank and other multilateral lending institutions that manage trillions of dollars in loans have been a focus of international debate all year. Barbados Prime Minister Mia Mottley started the push last year with the Bridgetown Initiative, an ambitious multilateral bank reform agenda. And Ajay Banga, the new head of the World Bank, has promised a new focus on climate. Yet several major international gatherings many hoped would lead to dramatic changes — including a June summit in Paris hosted by French President Emmanuel Macron — have so far mustered mostly proposals for incremental reform. 

• Transition partnerships: Two years ago, South Africa became the first country to participate in a bespoke deal where a group of wealthy countries offered $8.5 billion to facilitate a scale-down of the country’s coal industry. That deal was followed by announcements of others in Indonesia ($20 billion), Vietnam ($15.5 billion) and Senegal ($2.7 billion). Today, the South African Just Energy Transition Partnership — or JET-P — has yet to get underway amid process snags and doubts over whether South Africa is willing to reduce coal use during the global energy crisis following Russia’s invasion of Ukraine. Indonesia also missed an initial deadline last month to produce an investment plan.   

• Direct government aid: Wealthy countries are expected to finally, belatedly, come through on their promise to provide low- and middle-income countries with $100 billion annually in climate aid. Yet that is now seen as a tiny fraction of what those countries need. Even what’s being provided in the $100 billion depends in part on reclassifying existing funding streams rather than adding new ones, according to a recent study by the advocacy group, Oxfam. 

• Voluntary offset markets: A move to strengthen voluntary carbon markets and so-called emissions “offset” programs drew big endorsements from leading climate diplomats, including United States climate envoy John Kerry, during last year’s COP meeting in Egypt. And yet the industry, which produced about $2 billion worth of offsets and credits last year, has also endured another year of withering investigations and studies concluding they don’t reduce carbon emissions and have been used for rampant greenwashing. 

• Private investment: Despite these challenges, private investment from corporations and individuals is beginning to flow in new ways that could provide new models. We’ll look at some examples that combine private investment with some or all of the above channels. 

Each of the above channels is growing as the larger torrent of investment into clean energy expands. Yet the total investment remains a small fraction of what consultant McKinsey & Co. has estimated is the $9 trillion needed annually until 2050.  

More troubling — and already stirring controversy and criticism as COP28 approaches — are the political and financial logjams blocking dramatic breakthroughs. 

Many low- and middle-income countries have explicitly conditioned decarbonization targets on receiving aid or at least below-market rate loans. Many are also determined to press wealthy countries to make good on the agreement from last year’s COP to create a loss and damage fund that would help these nations cope with the impacts of a warming world.  

The lack of progress on decarbonization goals is expected to be front and center at COP28, when the first overall report taking stock of progress since the 2015 Paris Climate Agreement will be released. Progress on finance is critical if the upcoming conference has any chance of being seen as a success.  

“We’re really at a point now, with the global stocktake and its assessment that we’re off track,” Majid al Suwaidi, a former United Arab Emirates diplomat and designated director general of the upcoming COP, told Cipher in a recent interview. “We need to have big, game changing, visionary decisions that are going to make a huge difference.”