A new economic brief from the European Commission highlights three major barriers hindering green investments: legislative challenges, a lack of specialized skills, and operational hurdles. The paper outlines potential policy measures and market-based solutions to address these obstacles and accelerate the transition to a low-carbon economy.
According to the report, climate finance reached $1.5 trillion in 2022, yet this falls significantly short of the $11.7 trillion needed annually by 2035 to meet the 1.5°C climate target. While global capital and liquidity appear sufficient to close the investment gap, persistent regulatory, knowledge-based, and financial barriers continue to slow down green project financing.
Key Findings:
- Regulatory Uncertainty: Inconsistent and complex regulations increase investment risks, discouraging capital flows into green projects.
- Skills Gap: A shortage of expertise in green finance and project preparation limits the development of bankable sustainability initiatives.
- High Costs & Low Returns: The perceived financial risks and high upfront costs deter private investment, necessitating the use of innovative financial instruments to enhance project attractiveness.
The paper emphasizes the need for stable policy frameworks, enhanced financial education, and targeted incentives to mobilize private-sector investment. It also calls for public-private collaboration to create new funding mechanisms that de-risk sustainable projects.
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