Nature Climate Change· 2026Q1
The impact of financing cost differences on global energy and industry decarbonization
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- Q1SCImago
- 2026year
Short summary
Accounting for country-specific financing costs (CoC) increases global decarbonization costs by ~9% through 2100 and shifts mitigation efforts to lower-risk regions, according to an updated energy model.
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Key points
- Estimates dynamic, country-specific costs of capital (CoC) for 8 energy/industry sectors in the IMAGE model.
- Assuming uniform low-risk CoC increases global mitigation costs by ~9% through 2100 for staying below 2°C.
- Cost-effective mitigation shifts to lower-risk regions when country-specific CoC is considered.
- Granular CoC estimates reduce grid investments in developing nations, favor natural gas for heat, and increase green hydrogen costs.
AI-generated from the title and abstract; the full text is not read.
Abstract
Abstract Integrated assessment models usually neglect differences in financing conditions across countries, sectors and time. This omission could distort outcomes concerning electricity generation and also other sectors. Here we estimate and implement dynamic, country-specific cost of capital (CoC) for eight energy and industry sectors in the IMAGE integrated assessment model. Compared with assuming a uniform low-risk CoC, accounting for developing countries’ investment risks increases global mitigation costs through 2100 for staying well below +2 °C by around 9% and shifts cost-effective mitigation efforts to lower-risk regions. Sector-level analysis shows that using granular CoC estimates reduces grid investments in developing countries, shifts centralized heat production towards natural gas and raises green hydrogen costs, slowing electrolysis uptake. In industries such as steel and cement, sector and country risks hinder capital-intensive carbon capture and electricity-based technologies. Our results reveal biases from omitting country-specific financing conditions and highlight the need for climate finance across many sectors.
The authors' abstract, as published at the source. Nature Climate Change, 2026 · DOI ↗
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Field: Economics and Econometrics
Economics and EconometricsEconomics, Econometrics and Finance