But in 2050, almost half the reductions come from technologies that are currently only at the demonstration or prototype phase.” Early on, these innovative technologies are often less competitive than fossil alternatives. This makes banks more hesitant to finance these higher risk activities. And innovative start-ups are often too small to attract capital market financing.
So currently, innovation investment is best aligned with the risk appetite of private equity firms. But they do not have a large presence around the world. So this is where governments come in. The bulk of the much needed investments will indeed have to come from the private sector – but there is a loud and clear sine qua non.