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The Great Capital Reallocation
The required growth in investment is achievable, and we are already halfway through the reallocation.
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Contrary to popular belief, the buildout of renewable energy supply does not require a surge in capital expenditure (capex). As cleantech capex rises, fossil fuel capex falls. And the net growth in capex is only 2 percent a year, in line with the past seven years, and much lower than in the decade after 2000.
Meanwhile, there is plenty of money. Global capital formation in 2022 was $27 trillion, so the additional capex of $360 billion is 1 percent of global capex.
Furthermore, this reallocation is already underway. In 2015, 35 percent of energy supply investments went to clean energy. In 2023, half of the investments were clean, at $1.1 trillion. In 2030, it needs to be over 70 percent — around $1.8 trillion. The IEA estimates this year cleantech supply investments will grow by 7 percent, to account for nearly 55 percent of energy supply investment.
This is a story of capital reallocation. And it is already well underway.
This chart is taken from The Great Reallocation. See the full report here.
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