Global low-carbon tech investment surges past the crucial $1 trillion mark

According to the latest data released by research group Bloomberg NEF (BNEF), global investment in the low-carbon energy transition totaled $1.1 trillion in 2022.

This new record is a huge leap from 2021 and according to Bloomberg Green columnist and Voyager venture partner Nathaniel Bullard, this record is bound to be broken in the near future.

The good news from BNEF doesn’t stop there. 2022 also marked the first year that clean energy investment equaled fossil fuel investment, indicating that investment in climate-change-inducing oil and gas may soon be reaching its peak if it hasn’t already. The trillion invested in the low-carbon economy is even more impressive considering the spike in investments in fossil fuels seen last year due to the global energy crisis.

“Our findings put to bed any debate about how the energy crisis will impact clean energy deployment,” Albert Cheung, Head of Global Analysis at BloombergNEF said in a statement.

“Rather than slowing down, energy transition investment has surged to a new record as countries and businesses continue to execute transition plans. Investment in clean energy technologies is on the brink of overtaking fossil fuel investments, and won’t look back. These investments will drive short-term job creation and help to address medium-term energy security objectives. But much more investment is needed to get on track for net zero in the long term.”

Within the $1.1 trillion record investment, almost every sector needed for the low-carbon energy transition set a new record including energy storage, electrified transport, electrified heat, carbon capture and storage (CCS), hydrogen, sustainable materials, and of course renewables which span solar, wind, and biofuels to name a few.

The only sector that flatlined was nuclear power. Historically, renewables lead the pack in terms of investment, however, this year electrified transport almost mirrored renewable investment. Where renewables accounted for $495 billion committed in 2022, up 17% from the year prior, electrified transport finished the year with $466 billion spent, up by a headlining 54% from 2021.

The bulk of electrified transport includes passenger EVs making up $360 billion with related transport infrastructure investment thrown into the mix. As Bullard points out, electric buses, commercial electric vehicles, and trucks followed behind. Aside from the $15 billion invested in buses, however, a recent analysis by Bloomberg shows that electrified public transport in the U.S. still has a long way to go.

Other notable data points in BNEF’s report include carbon capture investment tripling from 2021, totaling in at $6.3 billion, and hydrogen investment more than tripling with a total end-year investment of a little over $1 billion.

Outside of low-carbon investments, climate-tech corporate finance space totaled $119 billion in 2022. Not included in the $1.1 trillion benchmark, this new climate tech equity funding went down by 29% due to what BNEF refers to as a “challenging year.” However, in spite of the turmoil, venture capital, and private equity financings held up well, growing 3% on the year.

Low-carbon investments across the board were led by China, accounting for $546 billion or nearly half of the global total. It wasn’t even a close race, with the U.S. trailing behind at $141 billion, and if treated as a single bloc the European Union bested the U.S. with $180 billion.

China also dominated supply chain and manufacturing investment, underscoring what many officials in the U.S. and EU believe is a dangerous dependence on China. Because globally, major economies are vying with China, a new report by the climate transition forecasting consortium, Inevitable Policy Response (IPR), shows that this competition is serving as “a new catalyst of climate action.”

This catalyzation was seen last year with the “American-made” focus of the Inflation Reduction Act and will be seen this year as the EU drafts a funding response to the IRA, hoping to advance in the clean energy race. The response will be known as the EU Green Industrial Plan.

“From a supply chain diversification point of view, the picture has not changed much,” Antoine Vagneur-Jones, BNEF’s Head of Trade and Supply Chains research, said in a statement. “China is investing by far the most in building out its clean energy supply chain, and it remains to be seen if other regions can capture significant market share.”