Just under $1.8 trillion was invested in renewable energy, low-carbon transport and other climate tech last year, led by China, the US, US and UK.
Investment in energy transition increased 17%, according to a report by BloombergNEF, with electrified transport overtaking renewable energy as the leading area of spending.
This was despite a second year of falling equity fundraising by climate and the energy transition, dropping to $84 billion in 2023 from $168 billion in 2021 and $127 billion in 2022.
The report noted that rising interest rates have made it harder for companies to raise capital.
Debt issued by companies and governments to fund the energy transition rose 4% to $824 billion in 2023 after dropping 10% in 2022.
EVs, renewable energy and hydrogen
Spending on electric vehicles and other green transport and infrastructure grew 36% to $634 billion, propelling it past the renewable energy sector, which also saw an 8% increase to $623 billion.
Power grid investment, crucial for enabling the energy transition, was the third-largest contributor at $310 billion, the BloombergNEF Energy Transition Investment Trends 2024 report found.
Investment in hydrogen tripled to to $10.4 billion, carbon capture and storage nearly doubled to $11.1 billion, batteries and other energy storage grew 76% to $36 billion and clean industry increased 7% to $49 billion.
Despite reports of wider government support for nuclear, spending was down to $33 billion, while slight declines were also seen for electrified heat and clean shipping.
Gap to China narrows
The biggest spender was China at $676 billion, or 38% of the global total. But thought it was a major source of momentum from 2019 to 2022, the report noted that it "played a much smaller role in driving the global total upwards in 2023", with investment climbing 6% as renewable energy investment slowed.
Second, with funding of $303 billion, was the US as the effects of Joe Biden's Inflation Reduction Act started to be felt, narrowing the gap to China.
Led by Germany's $95.4 billion the EU as a whole invested more than the US at $341 billion, while the UK’s $74 billion puts the European
total well above $400 billion.
"Our report shows just how quickly the clean energy opportunity is growing, and yet how far off track we still are,” said Albert Cheung, deputy CEO of BNEF.
“Energy transition investment spending grew 17% last year, but it needs to grow more than 170% if we are to get on track for net zero in the coming years. Only determined action from policymakers can unlock this kind of step-change in momentum.”