Global investment in climate change plateaued at $359bn in 2012, roughly the same as the previous year, according to a new Climate Policy Initiative (CPI) study, “The Global Landscape of Climate Finance 2013.”

Once again the figure falls far short of what’s needed. The International Energy Agency projects that an additional investment of $5 trillion is required by 2020 for clean energy alone, to limit warming to two degrees Celsius. However, the gap is likely wider: The World Bank projects we are on a path to four degree Celsius warming, suggesting that efforts to scale up finance are falling further and further behind.

Public sector played a central role, private investment provided the lion’s share of finance

Public sources provided $135bn, or 38% of total finance, and played a critical role in enabling private finance through incentives, low-cost loans, risk coverage mechanisms, direct project investment, and technical support. These public measures facilitated $224bn in private investment, or 62% of total investment, from sources such as project developers ($102bn); manufacturers and corporations ($66bn); and households ($33bn).

While public support for climate activities was significant, it was still dwarfed by current government support to fossil fuel energy consumption and production, estimated at $523bn each year for developing and emerging economies alone, according to a recent report from the OECD.

“Investment to combat and adapt to climate change is happening around the world, but it’s short of where it needs to be and efforts to grow it have not been successful enough,” said Thomas C. Heller, Executive Director of Climate Policy Initiative, while announcing the report at the Global Green Growth Forum. “Leveling the playing field can help unlock significant additional finance.”

Most investment was domestic, less finance flowed between countries

Climate investment was split almost evenly between developed and developing countries, with $177bn and $182bn respectively. Private investment into renewable energy projects in Europe totaled $73bn, while investment in China was $68bn, the US $27bn, Latin America $7bn, and India $5bn. Notably, Latin America also received additional $19bn in public money.

However, 76%, or $275bn, of all spending was domestic: It originated in the country in which it was used. Of the remaining $84bn that flowed between countries, a significant amount was private money flowing between developed countries. On the other hand, public sector money made up the vast majority of developed to developing country flows. These figures illuminate a bias by private investors toward environments that are more familiar and perceived to be less risky.

“Currently, climate finance is mostly a domestic game,” said Barbara Buchner, Senior Director at Climate Policy Initiative. “This implies that effective national policy is critical to increasing climate finance globally. There may also be an opportunity to increase international flows, by addressing the perception of additional risk in overseas investments.”

In large-scale renewable energy, less finance is doing more

The study has some good news: that less finance is deploying more large-scale renewable energy. In 2012, there was less investment in large scale projects than in the past. This investment was focused on fewer projects, but resulted in greater capacity. This suggests that developers are achieving greater economies of scale and bringing technology costs down.

Climate Policy Initiative is a team of analysts and advisors that works to improve the most important energy and land use policies around the world, with a particular focus on finance. An independent organisation supported in part by a grant from the Open Society Foundations, CPI has offices and programs in Brazil, China, Europe, India, Indonesia, and the United States.