Low-carbon technologies, such as high-frequency chargers and hydrogen refuelling infrastructure, which are vital for the widespread adoption of EVs and other clean fuel technologies, could be beneficiaries.59 Equity considerations are paramount in this transition. Ensuring that low-income communities can access affordable, low-emission transport options is essential for a just and inclusive transition. This involves providing subsidies and/or incentives for EV purchase (as in China and Norway) and developing green public transport systems that are both efficient and affordable (as in the Netherlands and Sweden). Equity-focused policies can help prevent the exacerbation of social inequalities, ensuring that all demographic groups benefit from improved air quality and GHG reduction. Achieving market tipping points for low-carbon transport solutions, where they become competitive with high-carbon alternatives, is essential for driving private sector investment.60 This would involve creating a favourable regulatory environment, financial incentives and enabling infrastructure for innovators. Public policy must induce the market to favour green innovation by setting ambitious emission standards, offering tax incentives for green technologies and investing in enabling public transport infrastructure. Additionally, consumer behaviour and demand- side options, such as promoting public transport, efficient urban planning and digitization, remain vital for reducing emissions and driving the transition to sustainable transport systems.61 Energy sector Estimates of the cumulative capital that the energy sector needs to achieve the Paris climate goals exceed $125 trillion by 2050,62 with annual investments of $4.5 to $5.7 trillion by 2030. The International Energy Agency (IEA) estimates that in 2023, global investments in clean energy reached approximately $1.74 trillion, reflecting a growing commitment to renewable technologies. However, these investments fall significantly short of the estimated $2.7 trillion needed to be on track to meet Paris goals.63,64 The discrepancy underscores the difficulty of meeting global climate objectives, particularly as $1.05 trillion was simultaneously invested in new fossil fuel projects over the same period.65 This indicates a persistent investment in high- carbon infrastructure and the need for emphasizing a stronger shift towards renewables. Managing consumer behaviour and demand-side strategies are an essential part of this shift. Policies can encourage energy conservation – such as the adoption of energy-efficient appliances and smart grid technologies – and significantly lower energy demand. Key policy frameworks include eliminating fossil fuel subsidies, implementing carbon pricing to address the market failure implications of climate change as a negative externality and establishing renewable energy mandates. The result would be consumer adoption of clean energy technologies, such as EVs and solar panels, that can accelerate the sector’s transition. Decarbonization of the energy sector offers significant long-term benefits, including reduced GHG emissions, improved air quality and energy security. The path forward involves a comprehensive approach that includes technological innovation, robust international partnerships and, most importantly, public engagement. Policy-makers must engage in meaningful consultation with consumer groups and take due consideration of the effects of policies on the most vulnerable in society – all core elements of climate policy-making. These issues are addressed in Chapter 4. Buildings and infrastructure Decarbonizing the building sector is core to meeting global climate targets and requires an estimated $731 billion annually through to 2050.66 This investment must focus on energy efficiency improvements, retrofitting existing structures and integrating renewable energy sources within the built environment. The sector’s energy consumption, particularly for heating and cooling, contributes significantly to GHG emissions.67 However, despite the potential for substantial economic benefits, decarbonization of built infrastructure often presents limited financial attraction to private investors as standalone projects, necessitating the deployment of innovative financing mechanisms to further de-risk them. Policy can play an important role in changing this paradigm by updating rules for the built environment, an approach that has been introduced with success in the EU. For instance, energy performance standards and building codes have been fundamental in setting benchmarks for energy efficiency in new and existing buildings; this has made investment by energy service companies (ESCOs) financially attractive due to legislation increasing demand for buildings that comply with performance standards. Carbon pricing also helps to internalize the environmental costs of carbon emissions, thus making energy-efficient solutions more competitive. Additionally, incentives for adopting renewable energy technologies, such as tax credits or rebates for installing solar panels and heat pumps, can drive consumer uptake and investment in clean technologies. Governments can also implement mandatory retrofitting policies for existing buildings, requiring upgrades to meet modern efficiency standards.$1.74 trillion global investment in clean energy in 2023. $2.7 trillion investment needed to be on track to meet Paris goals. $1.05 trillion global investment in new fossil fuel projects in 2023. Decarbonizing the building sector is core to meeting global climate targets and requires an estimated $731 billion annually through to 2050. Bridging the Gap: How to Finance the Net-Zero Transition 10

Bridging the Gap How to Finance the Net Zero Transition 2025