Global investment in the low-carbon energy transition grew by 17% in 2023, reaching $1.77trn, with China once again the largest market for investment in the sector despite a slowdown in growth in the Asia Pacific (APAC) region.

According to BloombergNEF’s (BNEF) latest report, Energy Transition Investment Trends 2024, APAC has driven global energy transition investment growth for several years, but eased off the accelerator in 2023, with investment growth slowing to 7% for the year.

The reason for the falloff in growth was attributed to renewable energy investment, which fell 9% to $331bn off the back of a difficult year in China. The country remains the biggest market for investment overall, standing at $676bn, but its lead is being cut short, with the European Union, US and UK outpacing China with a combined $718bn of investment in 2023 – a feat they did not manage to achieve in 2022. Investment in the US jumped 22% year-on-year, to $303bn, as the effects of the Inflation Reduction Act started to be felt.

“Last year brought new records for global renewable energy investment. Strong growth in the US and Europe drove the global rise, even as China, the world’s largest renewables market, sputtered, recording an 11% drop. Despite a year of tough headlines, a record amount of offshore wind capacity also reached financial close,” said Meredith Annex, BNEF’s head of clean power and co-author of the report.

Electric vehicle investment surging

However, the report also warns the current level of investment in clean energy technologies is not nearly sufficient to set the world on track for net zero by mid-century. Energy transition investment would need to average $4.8trn per year from 2024 to 2030 to align with BNEF’s Net Zero Scenario, a Paris Agreement-aligned trajectory from the 2022 New Energy Outlook. This is nearly three times the total investment observed in 2023.

“Our report shows just how quickly the clean energy opportunity is growing, and yet how far off track we still are,” said Albert Cheung, deputy CEO of BNEF.

“Energy transition investment spending grew 17% last year, but it needs to grow more than 170% if we are to get on track for net zero in the coming years. Only determined action from policymakers can unlock this kind of step-change in momentum.”

One area which is seeing a continued surge in investments is the EV sector, with spending on electrified transport climbing 36% in 2023 to $634bn. This figure includes spending on electric cars, buses, two- and three-wheelers and commercial vehicles, as well as associated infrastructure.

The value of the electrified transport market in the APAC region specifically has increased nearly fivefold since 2020, reflecting broader adoption and deeper penetration across the market. As a result, APAC still commanded 47% of the global sum of investment in low-carbon solutions.

In addition, BNEF’s report found investment in the global clean energy supply chain, including equipment factories and battery metals production for energy technologies, hit a new record at $135bn in 2023 (up from just $46bn in 2020), and is set to surge further over the next two years. BNEF projects this figure to rise to $259bn by 2025, based on currently announced investment plans.

Meanwhile, over the next two years, only the wind sector needs to increase its supply chain investment to get on track for a net-zero trajectory; the other areas are investing at a sufficient pace.

Antoine Vagneur-Jones, head of trade and supply chains at BNEF, added: “Abundant supply chain investment should continue to tamp down equipment prices across most sectors, which is good news for the energy transition. But the ensuing oversupply heralds an era of squeezed margins for solar and battery manufacturers.”