Bad news for the European Union. Clean energy investment has fallen almost two-thirds since 2011, according to data from Bloomberg New Energy Finance. Renewable energy, low carbon services and energy smart technologies, including efficiency saw only $40bn (€36.5bn) of investment last year, the lowest level since 2005. As a proportion of EU GDP that's just 0.2% - around the same as the Lithuanian economy.
Compared to China, the EU looks in a desperate state. In 2015, China invested more than twice as much as the EU in clean energy. Scaling by GDP shows China has been investing proportionally more in clean energy than the EU in almost every year since the data began in 2004, and the gap is widening.
Chart 1: Clean energy investment in Europe and China
EU investment in clean energy is well below where it should be
Perhaps the EU has already invested enough in clean energy to not worry about the decline? No such luck. The EU needs to have a near-zero carbon economy by the second half of the century if we are to achieve the Paris agreement's aim to keep climate change well below 2 degrees. To get there it has been estimated that the EU needs to invest around €380bn per year in clean energy. On this basis there's a current shortfall of well over €300bn. The EU is lagging and most of the work is yet to be done.
It is clear that far more money needs to be invested in clean energy in the EU. How can this be achieved? Unsurprisingly, there is no silver bullet; action is needed from governments, the private sector and at EU level.
Chart 2: Clean energy investment as a proportion of GDP, % nominal GDP
Note: Bloomberg clean energy investment numbers are not adjusted for inflation so nominal GDP data has been used. World Bank nominal GDP data is up to 2014. 2015 data has been estimated using nominal GDP growth figures from national statistical bodies.
The Capital Markets Union can help make the clean economy a reality
The European Commission's Capital Markets Union initiative is an important piece of the puzzle. It needs to get its financial reforms right to ensure private capital is mobilised at the scale required to make the transition to a near-zero carbon economy. Altering regulations to make it easier for insurance companies and banks to invest in infrastructure - which the Commission plans to do - is a useful start. But more must be done.
There are three areas where progress can be made. First, the Commission should 'mainstream green' to ensure financial flows are consistent with a pathway to a clean economy, as the Paris agreement aims to do. Promoting the growth of existing green financial instruments, like green bonds, and developing new ones where they could play a useful role - like green securitisations - would be a helpful start. As would clearly linking the Energy Union - which aims for secure, affordable and carbon-friendly energy - with the Capital Markets Union, to ensure it can be financed.
Second, risk-sharing tools (such as EU Project Bonds) should be expanded and further innovative financial instruments should be developed. These will help increase private-sector investments in clean energy. This is particularly important in areas that are tricky to attract private investors. For example, infrastructure investments are illiquid, complex investments that are risky at the beginning and only generate cash flows after many years. Even though they match many institutional investors liability structures, they will not invest unless these problems are addressed. Energy efficiency is also hard to attract private capital too in unless financial instruments are developed, as its benefits come in the form of savings. Getting this one right is vital - investment in efficiency is needed most, it accounts for around two thirds of European clean energy investment requirements.
Third, we need to be able to track the progress we are making in shifting capital from high to low-carbon uses. This means developing a high quality, publically available dataset.
Given enough time the private sector might solve these problems on its own, but we don't have forever and the cost of not acting is high. The Commission should act this year to develop proposals to green the Capital Markets Union to ensure the Paris Agreement can be implemented in Europe. Only then will the current trend in European clean energy investment reverse.