Low-carbon, ‘green’ economic growth is necessary to simultaneously improve human welfare and avoid the worst impacts of climate change and environmental degradation. Infrastructure choices underpin both the growth and the carbon intensity of the economy. This article explores the barriers investing in low-carbon infrastructure and some of the policy levers available to overcome them.
The barriers to decarbonising infrastructure ‘nest’ within a set of barriers to infrastructure development more generally that cause spending on infrastructure—low-carbon or not—to fall more than 70% short of optimal levels. Developing countries face additional barriers such as currency and political risks that increase the investment gap. Low-carbon alternatives face further barriers, such as commercialisation risk and financial and public institutions designed for different investment needs. While the broader barriers to infrastructure investment are discussed in other streams of literature, they are often disregarded in literature on renewable energy diffusion or climate finance, which tends to focus narrowly on the project costs of low- versus high-carbon options. Here, the authors discuss how to overcome the barriers specific to low-carbon infrastructure within the context of the broader infrastructure gap.