A Big Green Ray of Hope

It wasn’t that long ago that the green economy was seen as an outlier.  Traditionalists were banking on the rebuild of established sectors like automotive and finance.  The green economy was readily dismissed as tiny and although it might one day be important, that day was far off in the future.  Well, the future is here my friends.  Since 2009, I’ve been tracking the growth of the global green economy through the Green Transition Scoreboard®.  Every six months, I hunt for the best research to quantify private investments in the following sectors - Renewable Energy, Efficiency, Green Construction, Green Research & Development, and Cleantech.  Back in 2009, research was scarce and I had to scrounge for numbers.  Now, I’m finding robust numbers from some of the most respectable market research firms.  My initial finding of $1.4 trillion has blossomed into a massive $5.2 trillion.  Read the latest press release here.

Now before you get too excited, it’s important to understand that this is an aggregate figure (meaning that $5.2 trillion is the total amount invested since 2007).  The annual amount for 2012 was closer to $1 trillion.  How much is a trillion dollars?  Here’s a little video that quantifies it:

Now except for R&D and Cleantech (the smallest categories) these investments are in the form of capital expenditures (usually called capex).  Capex are investments in a large asset (like a factory or a solar farm) that will start generating revenue once it’s built.  What’s cool is that we can compare capex in the green economy (about $850 billion) to other capex benchmarks, and get a pretty good sense of how it’s stacking up.  

We’ll start with a little national context.  Total 2012 capex in Canada was $391 billion.  So the world invested more than twice as much in the green economy than all of Canada’s sectors did combined.  Not bad!  How about the USA?  Their 2011 capex was a total of $1.15 trillion.  The green economy has a little bit of work to do before it outgrows capital expenditures in the entire United States of America, but I’m pretty sure we’ll get there!

Although the green economy is made up of several sectors, we can still hold it up to more traditional sectors to compare how much is being invested.  The global mining sector accounted for $140 billion in capex during 2012, although that is expected to cool somewhat dramatically in 2013.  

Finally, capex in the Oil & Gas sector was about a trillion dollars in 2012.  Now this is a little scary because it means that investors are still investing heavily in exploration and production of fossil fuels.  Most of this activity is happening in deep ocean waters or is labeled ‘unconventional’, meaning that its investments in shale gas (accessible by fracking), and oil sands development.  I don't think this is very smart, considering the unburnable carbon theory that everyone is talking about.  If we’re serious about tackling climate change, then we’ll have to leave about two-thirds of existing fossil fuel reserves in the ground.  So why bother spending a trillion dollars a year finding new ones?

All of this is to say green sectors are now a huge part of our economy.  Economists and politicians who continue to ignore them are out of their mind.  These sectors represent an opportunity to grow our economy, create meaningful employment, and reduce pollution.  At the same time, this research shows that we are well on the path to meet the International Energy Agency’s goals to ensure that global temperatures won’t exceed a 2 degrees Celsius increase.  These figures reinforce our initial estimate that we’ll need a total of $10 trillion of private investments before 2020.  We’re halfway there with 5 years to go!

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