Public action is needed to drive investment by private finance in climate solutions and meet net-zero goals on schedule, with recent government announcements showing a clear commitment to facilitate the process. This paper focuses on the United States, Europe and the United Kingdom, given the concentration of the Financing the Transition to a Net-Zero Future (FTT) community’s presence in these regions, as well as noteworthy examples of relevant policy and regulations. These include the Inflation Reduction Act (IRA) in the US, which promises long-term tax credits to produce clean energy and technology and increase US production of renewable energy, including the Hydrogen Production Tax Credit, and the European “Fit for 55” package, which sets sustainable aviation fuel (SAF) blend mandates among other legislation, and the Net-Zero Industry Act, which ensures a more predictable and simplified regulatory environment. In parallel, private finance has made significant commitments in recent years, with more than 250 institutions across the spectrum of private capital providers, representing more than $80 trillion in assets under management, committing to align their portfolios with net-zero pathways by 2050 through the Glasgow Financial Alliance for Net Zero.

This paper refers to recent public-sector announcements, highlighting the role that the public sector has played in mobilizing investments in sustainable aviation fuel (SAF) and clean hydrogen in the US, Europe and the UK. These solutions will constitute the technology focus of this paper, building on the Financing the Transition to a Net-Zero Future initiative’s work to date and reflecting the community’s interest in these technologies.

In this renewed context of government support, the paper will consider the market response, and how sustained support from the public sector has been improving commercial viability for investors, all the while outlining the challenges that the financing community continues to face. Finally, the paper will summarize priority actions guiding the public sector’s efforts to mobilize private-sector funding, with reference to ongoing sector-specific work at the Forum.

The public sector can take on three roles as it directs investments, as referenced in this paper:

1. Driving action: for example, through tax incentives to spur production or mandates to commit demand
2. Creating certainty: by pushing for long-term regulatory support
3. Setting standards: by establishing better defined standards for investments in climate solutions (for example, definitions of what constitutes a clean hydrogen project)

Importantly, the successful deployment of funds for breakthrough technologies rests on close collaboration between all stakeholders involved. Immediate market-wide stakeholder action backed by enabling public policies is required to address the highly likely investment gap towards net zero.

This report was written in collaboration with World Economic Forum.