Investment funds for low-carbon infrastructure (IF)

Duration: December 2018 until November 2021

Project coordination: Potsdam Institute for Climate Impact Research (PIK)

Cooperation partners: University of Kassel (Chairs of Empirical Economic Research and Corporate Finance)

Funding institution: Federal Ministry of Education and Research (BMBF), second phase of the funding priority "Economics of Climate Change" ("Ökonomie des Klimawandels")

Summary: The Paris Agreement does not only comprise ambitious climate goals, but also highlights the necessity to redirect capital flows for their achievement. A pivotal part of the required investments has to flow into the provision of low-carbon infrastructure, for example, renewable energies or energy-efficient buildings, and “stranded assets” have to be avoided. Academic literature has long recognized a tremendous investment gap and the central role of mobilizing private investments through institutional and individual investors. However, the mobilization of private investment is hampered by a variety of nested investment barriers, which are aimed be resolved by political measures at the national and European level. However, it must be feared that these measures are not sufficient to adequately address all investment barriers and to mobilize investments of different investor types, which would mean that climate policy goals cannot be met.

Therefore, the project IF empirically examines which barriers for low-carbon investments are already addressed by existing, but also potential future funding instruments (e.g. a public infrastructure or citizen fund at the national or European level). Thereby, IF pursues the overarching hypotheses that public infrastructure and/or citizen funds represent added value for existing investment instruments and are more appropriate to mobilize small investors. Therefore, risk-return-profiles of different instruments are derived and related to preferences of institutional and individual investors in order to evaluate their potential to mobilize investments. Moreover, simulations methods are applied to examine the potential contribution of different instruments as well as actors to close the investment gap for low-carbon infrastructure and thus to achieve the climate policy goals.

Official project website: Link

Contact: Dr. Gunnar Gutsche (gunnar.gutsche@uni-kassel.de)