Moving to a Low-Carbon Economy: The Financial Impact of the Low-Carbon Transition

The report argues that transitioning to a low-carbon economy can increase global financial capacity rather than deplete it. For the electricity sector, the transition could provide a net benefit of $1.8 trillion by 2035, as significant operating savings from avoided fossil fuel extraction and transport outweigh higher capital costs and stranded assets. In the transport sector, the impact is more policy-dependent, ranging from a $2.5 trillion cost to a $3.5 trillion benefit, depending on whether the transition is driven by taxes or innovation. The authors emphasize that reducing the cost of capital for low-carbon infrastructure through regulatory and financial reforms is critical to maximizing these benefits.

• Transitioning to a low-carbon electricity system could increase the capacity of the global financial system by up to $1.8 trillion between 2015 and 2035.
• In the electricity sector, the primary driver of financial gain is the reduction in operating expenses, estimated at $4.6 trillion, largely due to avoided costs of extracting and transporting coal and gas.
• The electricity transition involves a net increase in depreciation and amortization of $1.1 trillion, resulting from a $2.8 trillion increase in low-carbon capital offset by a $1.7 trillion decrease in fossil fuel D&A.
• Existing fossil fuel assets used for electricity generation are estimated to lose $1.1 trillion in value during the transition.
• The financial impact of transitioning from oil to low-carbon transport varies significantly based on policy: a purely tax-based approach could reduce financial capacity by $2.5 trillion, while an innovation-driven approach could increase it by $3.5 trillion.
• Low-carbon energy assets generally have lower risk and lower required returns on investment compared to fossil fuel assets, although they are currently often subject to higher capital costs than their risk profiles justify.
• Incremental investment for a 2-degree scenario is estimated at $11 trillion over 15 years, which represents a modest 3% addition to the projected $400 trillion of total global fixed capital formation in that period.

APA

Nelson, D., Hervé-Mignucci, M., Goggins, A., Szambelan, S. J., & Zuckerman, J. (2014). Moving to a Low-Carbon Economy: The Financial Impact of the Low-Carbon Transition. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2014/10/Moving-to-a-Low-Carbon-Economy-The-Financial-Impact-of-the-Low-Carbon-Transition.pdf

Chicago

Nelson, David, Morgan Hervé-Mignucci, Andrew Goggins, Sarah Jo Szambelan, and Julia Zuckerman. Moving to a Low-Carbon Economy: The Financial Impact of the Low-Carbon Transition. Climate Policy Initiative, 2014. https://www.climatepolicyinitiative.org/wp-content/uploads/2014/10/Moving-to-a-Low-Carbon-Economy-The-Financial-Impact-of-the-Low-Carbon-Transition.pdf.

Wikipedia

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BibTeX

@techreport{nelson2014moving, author = {Nelson, David and Hervé-Mignucci, Morgan and Goggins, Andrew and Szambelan, Sarah Jo and Zuckerman, Julia}, title = {{Moving to a Low-Carbon Economy: The Financial Impact of the Low-Carbon Transition}}, institution = {Climate Policy Initiative}, year = {2014}, month = oct, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2014/10/Moving-to-a-Low-Carbon-Economy-The-Financial-Impact-of-the-Low-Carbon-Transition.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }