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Fall 2022 • Seminar

Tax Law, Finance, and Strategic Planning

Prerequisite: Taxation

Exam Type: No Exam

This course develops tools for understanding and evaluating the effect tax laws have on strategic planning in both business and personal contexts. The perspective taken is generally that of financial economics, with cash flows resulting from transactions being viewed as items which are subject to valuation using asset pricing techniques. This approach allows for a precise understanding of where the value in a transaction comes from and how careful tax planning can help maximize this value. Consideration is also given to policy responses to strategic planning.

No advanced coursework in finance is assumed, but a variety of concepts are introduced in the course, and students are expected to learn how to use them effectively in the context of arriving at optimal tax strategies. Techniques covered include present value analysis, the use of payoff diagrams, option pricing using simple models and the Black-Scholes formula, and, as time permits, application of tax strategies to data sets based on historical and simulated financial data.

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Multinational enterprises and corporate tax planning: A review of literature and suggestions for a future research agenda

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Tax Planning as a Basis of the System of Corporate Tax Management

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• First Online: 06 March 2018
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• Lyudmila S. Kirina 15 &
• Natalia A. Nazarova 15  

Part of the book series: Advances in Intelligent Systems and Computing ((AISC,volume 622))

Included in the following conference series:

• International conference on Humans as an Object of Study by Modern Science

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Topicality of the studied problem is predetermined by the necessity for improving the management of tax expenses of an economic subject, caused by the peculiarities of development of the taxation process in Russia and, as a consequence, by the taxpayers’ wish to optimize their tax liabilities. Thus, a need for theoretical and practical knowledge on formation of tax expenses and management of their volume on the basis of improving the tax strategy of an economic subject arises, which predetermines the emergence of independent sphere of financial management – tax management of organization (corporate tax management), which task is to optimize the management of tax liabilities at the micro-level. The purpose of the article is to determine and open the general tendencies and peculiarities of functioning and development of tax management at the corporate level. The leading approaches to studying this problem are the historical & legal and comparative & legal approaches, which allow for complex consideration of the process of functioning of tax management as an element of financial management and the object of economic & legal regulation. Results: the article views the causes of emergence of tax management: opens the general tendencies and peculiarities of its functioning; determines the most significant directions; reflects the stages and methods of tax planning; offers the algorithm of calculation of planned liabilities for the year and the variants of determining the effectiveness of tax management. The materials of the article are of practical value for specialists in the sphere of taxation and tax law; persons who conduct scientific research in the sphere of economic & legal regulation of tax policy of an economic subject; persons who conduct entrepreneurial and legislative activities.

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Braley, R., Mayers, S.: The Principles of Corporate Finance, 2nd edn. Olimp Business Publication (2008)

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Tikhonov, D., Lipnik, L.: Tax planning and minimization of tax risks. Alpina Business Books, Moscow (2004)

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Bablenkova, I.I., et al.: Forecasting and Planning in Taxation: Study Guide. Ekonomika, Moscow (2009)

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Financial University under the Government of the Russian Federation, Moscow, Russia

Lyudmila S. Kirina & Natalia A. Nazarova

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Volgograd State Technical University, Volgograd, Russia

Elena G. Popkova

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Kirina, L.S., Nazarova, N.A. (2018). Tax Planning as a Basis of the System of Corporate Tax Management. In: Popkova, E. (eds) The Impact of Information on Modern Humans. HOSMC 2017. Advances in Intelligent Systems and Computing, vol 622. Springer, Cham. https://doi.org/10.1007/978-3-319-75383-6_61

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Published : 06 March 2018

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Introduction to the Business Planning: Taxation exam

Helpsheets and support

Published: 21 Sep 2021 Update History

Introducing the Business Planning: Taxation exam

What to expect when sitting the exam, what to look out for, preparing for the business planning: taxation exam.

In this guide we will introduce you to the Business Planning: Taxation exam. We will cover what the Business Planning: Taxation exam is, what to expect when sitting the exam, what to look out for and preparing for the exam.

The exam is 2.5 hours in length and is structured as follows:

Q1 – 40 marks Q2 – 35 or 30 marks Q3 – 25 or 30 marks

The exam is 75% based on skills and 25% knowledge. This means it is how you apply your knowledge to the scenario in the question which is important rather than simply regurgitating a rule. This is an open book exam, meaning you can use any printed materials you like – course notes, study manual, question bank, your own notes etc. However, do not let this lull you into a false sense of security. The exam is highly time-pressured, and you will not have the time to look things up constantly. The pass mark is 55%.

The questions generally require a written response, often with accompanying computations. It is often tempting for accountants to ignore written elements and only produce numbers, but this strategy will always fail. You need to explain complex concepts in clear, jargon-free terms which a non-specialist will understand. Each question based on a scenario involving multiple taxes. One is likely to involve a large corporate group, another a smaller owner-managed business and the third more biased towards personal tax. Unlike Tax Compliance we never know which question will focus on which area. The questions will be broken down into sub-requirements, but we will not be given a mark allocation. One of the skills you will need to develop is knowing which sub-requirements are more important and therefore where to allocate your time most effectively. 

The questions can be very lengthy with multiple exhibits providing much of the information.

To date, exams have generally followed a pattern which includes:

• How to structure a business (unincorporated or incorporated)
• The tax implications of an incorporation (especially the choice of reliefs available)
• How to extract profits from a business in the most tax-efficient way
• The venture capital schemes available to smaller businesses
• Groups (including consortia which is new to you at this level)
• International aspect of both personal and corporate tax
• Anti-avoidance for small and large businesses
• Large corporate reorganisations (including hive-downs and management buyouts)

All questions will involve discussion of a range of taxes. You must read the questions carefully, some will specify exactly WHICH taxes to discuss, others will simply say discuss THE tax implications. In this latter case think broadly and don’t forget things like national, insurance, VAT and stamp duty.

You firstly need to become familiar with the syllabus – for many this will be a tuition course. Feel free to make some notes of your own, but do not spend too long doing this – a few one-page summaries of key topics should suffice. Then you need to get into the questions. Start with the self-test questions in the study manual and then progress to the exam standard questions in the ICAEW question bank. 

Retaking the Business Planning: Taxation exam

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State Rundown 6/6: A Tale of Two Tax Laws

June 6, 2024

.ITEP Staff

This week, it was the best of times or, in some cases, the worst of times for tax policy in two different states. Vermont has taken a big swing at fossil fuel companies by becoming the first state in the nation to require them to contribute to a superfund that will go toward paying for damages caused by climate change and the creation of climate adaptation projects. However, the new law is expected to face swift legal challenges. Hawaii enacted what are being described as its largest income tax cuts in state history, estimated to cost $5 billion in total once phased in by 2031. While proponents of the law say that the changes will be a boon to working-class families, the drastic fully phased in $1.4 billion annual revenue loss will surely impact key priorities that Hawai’i residents enjoy and rely upon.

Major State Tax Proposals and Developments

• HAWAII Gov. Josh Green signed into law a large state income tax cut . The law, which is estimated to result in more than $5 billion in lost revenue by 2031, once fully phased in, will alternate increases to the standard deduction and adjustments to income tax brackets. An ITEP analysis found that 42 percent of the overall benefits from the cuts would go to the top 20 percent of earners who, on average, earn $304,000 a year. – MILES TRINIDAD
• VERMONT became the first state in the nation to require fossil fuel companies to pay a share of the damage caused by climate change and for climate adaptation projects. The law comes after the state suffered from catastrophic summer flooding. Gov. Phil Scott allowed the bill to become law without his signature. Scott acknowledged that there will likely be a legal fight against oil companies, but something must be done to address climate change. – MILES TRINIDAD

State Roundup

• ALABAMA Gov. Kay Ivey signed into law a bill that c aps yearly property tax increases at 7 percent for both residential and commercial properties. The legislature will have to re-approve the bill every five years due to a sunset provision.
• The CALIFORNIA state Senate rejected a bill that would have ended about $1 billion in controversial special sales tax deals used to give large retailers significant tax breaks. The bill attracted a bipartisan coalition of 17 Senators in favor. While only 11 Senators went on record in opposition, another 12 abstained, which resulted as a “no” vote.
• Residents of the city of South Lake Tahoe CALIFORNIA are debating a proposed vacancy tax of $6,000 for owners of homes that are unoccupied for half the year. About 40 percent of the housing units in the town are used as vacation homes or rentals and are empty most of the year. Proponents argue the effort will help city—a popular mountain resort destination—stay affordable for its residents, who earn a median of about $68,000. Home prices in the town have tripled over nine years: From $345,000 in 2012 to $950,000 in 2021.
• CONNECTICUT looks to be headed toward a special session where lawmakers hope to address how vehicles are assessed. Options include full elimination of the car tax or HB 5172, which adds a depreciation schedule and a car tax cap.
• HAWAII Gov. Josh Green signed legislation that exempts medical and dental services provided to patients who receive Medicare, Medicaid, and TRICARE benefits from the state’s general excise tax.
• KANSAS lawmakers will start their special session on taxes in two weeks. Here’s an overview of how they and Gov. Laura Kelly got to this point and what to expect when they convene.
• MASSACHUSETTS lawmakers in the House will soon vote on a revised version of Gov. Maura Healey’s housing bond bill that does not include the proposed local-option real estate transfer tax on high-value homes. The bill does, however, include tax credits to help cover development costs for cities and towns looking to convert commercial properties into multi-family or mixed-use residential properties.
• A year after passing the most expansive state child tax credit in the nation, MINNESOTA has set up a structure for periodic payments. Qualifying families can get an advance on 50 percent of their child tax credit before tax filing season starting in 2025.
• MISSOURI voters will vote on whether to authorize an exemption of child-care facilities from property taxes in the state’s August 6 th primary.
• NEW YORK Gov. Kathy Hochul is working to delay implementation of the congestion pricing plan that is scheduled to take effect at the end of this month. The plan would raise additional transportation funds for New York City through a charge on commuters into Manhattan.
• Lawmakers in WEST VIRGINIA still don’t know what the state’s income tax rate will be in 2025, and are struggling to plan financing key programs, especially related to childcare. This is thanks to a state law authorizing automatic cuts to its personal income tax, which triggers when general revenue goes above an inflation adjusted target.

What We’re Reading

• The Off The Charts blog explains the troubling recent trend of states expanding or enacting private school voucher systems while also passing untargeted property tax cuts – and how prioritizing public-school investments and targeted property tax reductions instead is better for students, communities, and economic and racial justice.
• ITEP’s Jon Whiten argues that states should opt into the now-permanent IRS Direct File program to save their residents headaches and money.

If you like what you are seeing in the Rundown (or even if you don’t) please send any feedback or tips for future posts to Aidan Davis at [email protected] . Click here to sign up to receive the Rundown via email.

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State rundown 6/13: decisions are falling into place, but some states will come back for more, state rundown 5/30: sessions are in for summer, state rundown 5/22: when one legislative session closes, another opens.

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Onboarding New Employees in a Hybrid Workplace

• Dawn Klinghoffer,
• Karen Kocher,
• Natalie Luna

New research from Microsoft on how much time new hires should spend in the office during their first 90 days.

As you’re navigating hybrid work, it’s a good moment to assess how your onboarding processes enable or empower your new hires to thrive. Researchers at Microsoft have conducted and identified studies that suggest that onboarding to a new role, team, or company is a key moment for building connections with the new manager and team and doing so a few days in person provides unique benefits. But just requiring newcomers to be onsite full time doesn’t guarantee success. The authors explain and offer examples of how onboarding that truly helps new employees thrive in the modern workplace is less about face time and more about intention, structure, and resources.

During the pandemic, companies around the world explored new ways of working that challenged long-held assumptions and beliefs about where work gets done. Many companies, including Microsoft , saw the benefits of flexible work and wanted to offer employees a chance to continue to work in a hybrid environment, while balancing the needs of the organization.

• Dawn Klinghoffer is the head of people analytics at Microsoft.
• KK Karen Kocher leads the future of work, workforce of the future and talent & learning experiences at Microsoft.
• NL Natalie Luna is on Microsoft’s employee listening team, leading employee lifecycle and daily surveys, and researching onboarding, culture and hybrid ways of working.

Partner Center

• Start early
• Scholarships and grants
• Federal student aid

Other financing options

Affording college: your step-by-step guide.

Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate student loans to write unbiased product reviews.

• College costs have been rising in recent years; fortunately, there are many ways to pay for it.
• Scholarships and grants are two options that do not need to be repaid.
• Federal student loans should be your top choice for borrowing, with private loans as a last resort.

Start early: planning is key

Set a budget.

Before you sign any papers, estimate the cost for tuition , along with fees, books, living expenses, etc. Know exactly how much college and related expenses will cost, so you know what savings goal to work towards.

Start saving

To begin saving, consider opening a 529 plan or high-yield savings account dedicated to college expenses. A 529 plan is a type of investment account designed to help you grow the money you set aside for college. These are state-based and tied to a specific beneficiary — the student you're saving for — and as you deposit money, the funds are invested into a professionally managed portfolio. 

Explore career paths & earnings potential

Consider how your chosen field impacts potential salaries and loan repayment. A degree in engineering or medicine will be more financially fruitful than a degree in philosophy.

Free money first: scholarships & grants

Scholarships.

Scholarships are among the free options for paying for college. These are financial awards given to students based on need, merit, or achievement, and they do not need to be repaid. They can come from the school you attend, your (or your parent's) employer, community groups, professional organizations, and even the government.

Scholarship search strategies

You can find potential scholarships by talking with your high school guidance counselor or your college's financial aid office or browsing sites like FastWeb . 

"I know it might sound a bit wild, but I suggest that high schoolers should aim to apply for a minimum of 50 scholarships," says Robert Farrington, founder of The College Investor . "This holds true even if you're thinking about going part-time for your studies."

In addition to scholarships, there are grants for college , which also do not need to be repaid. The federal Pell Grant , for example, offers up to $7,395 to students who have "exceptional financial need." Again, you can apply for these and other federal grants using the FAFSA. Your state and college may also have grants and scholarships you can apply for, so be sure to check with your state's education department and your school's financial aid office, too.

Federal student aid: FAFSA is your gateway

Fill out the fafsa.

To apply for federal scholarships — or any other federal student aid, for that matter — you'll need to fill out the Free Application for Federal Student Aid ( FAFSA ).

Understand your award letter

Your financial aid award letter details your aid package, including grants, loans, and work-study opportunities. Keep in mind that financial aid award letters are only for one school year, and you'll need to fill out the FAFSA each year you're in school to determine what aid you're eligible for.

Federal loan options

If you have the option, you'll want to take out a subsidized loan over an unsubsidized loan. Subsidized loans are made based on financial need, and the government pays the interest on your loan while you're in school. Financial need doesn't factor into unsubsidized loans, and interest begins to accrue immediately.

Federal vs. private student loans

When looking at federal vs. private student loans , your first choice should always be federal student loans, which are offered through the US Department of Education. These have lower interest rates and require no credit check (private loans base your rate on your credit). Federal loans also come with more repayment and forgiveness options than most private student loans.

To apply for federal student loans, you'll need to file a FAFSA every year. Once your application is processed, you'll get your loan offers and can evaluate if additional aid is needed beyond that. If it is, private student loans — which are offered through private companies and lenders — may be an option. But as Farrington puts it, "Private loans are the last resort."

You can also consider a work-study program, which places you in a job with the goal of earning money for your education. 

"Work-study programs are a common choice on campuses," Farrington says. "They provide a flexible schedule and are tied to your financial aid. While the pay is usually minimum wage, the hours are adaptable to your class schedule."

There are federal work-study programs, or your individual school may have one.  To apply for federal work-study, you'll need to fill out the FAFSA. 

Employer tuition assistance

See if your employer offers payment assistance. Some companies offer this benefit to their employees, especially if they're planning to study in a field related to their current role.

529 plan withdrawals

If you (or your family) have any money saved in a 529, this is the time to use it!

Affording college FAQs

It is absolutely possible to go to college without loan and with scholarships, grants, savings, and work. But it takes planning and effort.

The amount you'll need for college will vary widely by school and location. Research and budget accordingly.

The FAFSA deadline is usually June 30 of the academic year, but state and school deadlines can be earlier.

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Overview and key findings

Tracking cop28 progress.

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Cite report

IEA (2024), World Energy Investment 2024 , IEA, Paris https://www.iea.org/reports/world-energy-investment-2024, Licence: CC BY 4.0

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The world now invests almost twice as much in clean energy as it does in fossil fuels…, global investment in clean energy and fossil fuels, 2015-2024, …but there are major imbalances in investment, and emerging market and developing economies (emde) outside china account for only around 15% of global clean energy spending, annual investment in clean energy by selected country and region, 2019 and 2024, investment in solar pv now surpasses all other generation technologies combined, global annual investment in solar pv and other generation technologies, 2021-2024, the integration of renewables and upgrades to existing infrastructure have sparked a recovery in spending on grids and storage, investment in power grids and storage by region 2017-2024, rising investments in clean energy push overall energy investment above usd 3 trillion for the first time.

Global energy investment is set to exceed USD 3 trillion for the first time in 2024, with USD 2 trillion going to clean energy technologies and infrastructure. Investment in clean energy has accelerated since 2020, and spending on renewable power, grids and storage is now higher than total spending on oil, gas, and coal.

As the era of cheap borrowing comes to an end, certain kinds of investment are being held back by higher financing costs. However, the impact on project economics has been partially offset by easing supply chain pressures and falling prices. Solar panel costs have decreased by 30% over the last two years, and prices for minerals and metals crucial for energy transitions have also sharply dropped, especially the metals required for batteries.

The annual World Energy Investment report has consistently warned of energy investment flow imbalances, particularly insufficient clean energy investments in EMDE outside China. There are tentative signs of a pick-up in these investments: in our assessment, clean energy investments are set to approach USD 320 billion in 2024, up by more 50% since 2020. This is similar to the growth seen in advanced economies (+50%), although trailing China (+75%). The gains primarily come from higher investments in renewable power, now representing half of all power sector investments in these economies. Progress in India, Brazil, parts of Southeast Asia and Africa reflects new policy initiatives, well-managed public tenders, and improved grid infrastructure. Africa’s clean energy investments in 2024, at over USD 40 billion, are nearly double those in 2020.

Yet much more needs to be done. In most cases, this growth comes from a very low base and many of the least-developed economies are being left behind (several face acute problems servicing high levels of debt). In 2024, the share of global clean energy investment in EMDE outside China is expected to remain around 15% of the total. Both in terms of volume and share, this is far below the amounts that are required to ensure full access to modern energy and to meet rising energy demand in a sustainable way.

Power sector investment in solar photovoltaic (PV) technology is projected to exceed USD 500 billion in 2024, surpassing all other generation sources combined. Though growth may moderate slightly in 2024 due to falling PV module prices, solar remains central to the power sector’s transformation. In 2023, each dollar invested in wind and solar PV yielded 2.5 times more energy output than a dollar spent on the same technologies a decade prior.

In 2015, the ratio of clean power to unabated fossil fuel power investments was roughly 2:1. In 2024, this ratio is set to reach 10:1. The rise in solar and wind deployment has driven wholesale prices down in some countries, occasionally below zero, particularly during peak periods of wind and solar generation. This lowers the potential for spot market earnings for producers and highlights the need for complementary investments in flexibility and storage capacity.

Investments in nuclear power are expected to pick up in 2024, with its share (9%) in clean power investments rising after two consecutive years of decline. Total investment in nuclear is projected to reach USD 80 billion in 2024, nearly double the 2018 level, which was the lowest point in a decade.

Grids have become a bottleneck for energy transitions, but investment is rising. After stagnating around USD 300 billion per year since 2015, spending is expected to hit USD 400 billion in 2024, driven by new policies and funding in Europe, the United States, China, and parts of Latin America. Advanced economies and China account for 80% of global grid spending. Investment in Latin America has almost doubled since 2021, notably in Colombia, Chile, and Brazil, where spending doubled in 2023 alone. However, investment remains worryingly low elsewhere.

Investments in battery storage are ramping up and are set to exceed USD 50 billion in 2024. But spending is highly concentrated. In 2023, for every dollar invested in battery storage in advanced economies and China, only one cent was invested in other EMDE.

Investment in energy efficiency and electrification in buildings and industry has been quite resilient, despite the economic headwinds. But most of the dynamism in the end-use sectors is coming from transport, where investment is set to reach new highs in 2024 (+8% compared to 2023), driven by strong electric vehicle (EV) sales.

The rise in clean energy spending is underpinned by emissions reduction goals, technological gains, energy security imperatives (particularly in the European Union), and an additional strategic element: major economies are deploying new industrial strategies to spur clean energy manufacturing and establish stronger market positions. Such policies can bring local benefits, although gaining a cost-competitive foothold in sectors with ample global capacity like solar PV can be challenging. Policy makers need to balance the costs and benefits of these programmes so that they increase the resilience of clean energy supply chains while maintaining gains from trade.

In the United States, investment in clean energy increases to an estimated more than USD 300 billion in 2024, 1.6 times the 2020 level and well ahead of the amount invested in fossil fuels. The European Union spends USD 370 billion on clean energy today, while China is set to spend almost USD 680 billion in 2024, supported by its large domestic market and rapid growth in the so-called “new three” industries: solar cells, lithium battery production and EV manufacturing.

Overall upstream oil and gas investment in 2024 is set to return to 2017 levels, but companies in the Middle East and Asia now account for a much larger share of the total

Change in upstream oil and gas investment by company type, 2017-2024, newly approved lng projects, led by the united states and qatar, bring a new wave of investment that could boost global lng export capacity by 50%, investment and cumulative capacity in lng liquefaction, 2015-2028, investment in fuel supply remains largely dominated by fossil fuels, although interest in low-emissions fuels is growing fast from a low base.

Upstream oil and gas investment is expected to increase by 7% in 2024 to reach USD 570 billion, following a 9% rise in 2023. This is being led by Middle East and Asian NOCs, which have increased their investments in oil and gas by over 50% since 2017, and which account for almost the entire rise in spending for 2023-2024.

Lower cost inflation means that the headline rise in spending results in an even larger rise in activity, by approximately 25% compared with 2022. Existing fields account for around 40% total oil and gas upstream investment, while another 33% goes to new fields and exploration. The remainder goes to tight oil and shale gas.

Most of the huge influx of cashflows to the oil and gas industry in 2022-2023 was either returned to shareholders, used to buy back shares or to pay down debt; these uses exceeded capital expenditure again in 2023. A surge in profits has also spurred a wave of mergers and acquisitions (M&A), especially among US shale companies, which represented 75% of M&A activity in 2023. Clean energy spending by oil and gas companies grew to around USD 30 billion in 2023 (of which just USD 1.5 billion was by NOCs), but this represents less than 4% of global capital investment on clean energy.

A significant wave of new investment is expected in LNG in the coming years as new liquefaction plants are built, primarily in the United States and Qatar. The concentration of projects looking to start operation in the second half of this decade could increase competition and raise costs for the limited number of specialised contractors in this area. For the moment, the prospect of ample gas supplies has not triggered a major reaction further down the value chain. The amount of new gas-fired power capacity being approved and coming online remains stable at around 50-60 GW per year.

Investment in coal has been rising steadily in recent years, and more than 50 GW of unabated coal-fired power generation was approved in 2023, the most since 2015, and almost all of this was in China.

Investment in low-emissions fuels is only 1.4% of the amount spent on fossil fuels (compared to about 0.5% a decade ago). There are some fast-growing areas. Investments in hydrogen electrolysers have risen to around USD 3 billion per year, although they remain constrained by uncertainty about demand and a lack of reliable offtakers. Investments in sustainable aviation fuels have reached USD 1 billion, while USD 800 million is going to direct air capture projects (a 140% increase from 2023). Some 20 commercial-scale carbon capture utilisation and storage (CCUS) projects in seven countries reached final investment decision (FID) in 2023; according to company announcements, another 110 capture facilities, transport and storage projects could do the same in 2024.

Energy investment decisions are primarily driven and financed by the private sector, but governments have essential direct and indirect roles in shaping capital flows

Sources of investment in the energy sector, average 2018-2023, sources of finance in the energy sector, average 2018-2023, households are emerging as important actors for consumer-facing clean energy investments, highlighting the importance of affordability and access to capital, change in energy investment volume by region and fuel category, 2016 versus 2023, market sentiment around sustainable finance is down from the high point in 2021, with lower levels of sustainable debt issuances and inflows into sustainable funds, sustainable debt issuances, 2020-2023, sustainable fund launches, 2020-2023, energy transitions are reshaping how energy investment decisions are made, and by whom.

This year’s World Energy Investment report contains new analysis on sources of investments and sources of finance, making a clear distinction between those making investment decisions (governments, often via state-owned enterprises (SOEs), private firms and households) and the institutions providing the capital (the public sector, commercial lenders, and development finance institutions) to finance these investments.

Overall, most investments in the energy sector are made by corporates, with firms accounting for the largest share of investments in both the fossil fuel and clean energy sectors. However, there are significant country-by-country variations: half of all energy investments in EMDE are made by governments or SOEs, compared with just 15% in advanced economies. Investments by state-owned enterprises come mainly from national oil companies, notably in the Middle East and Asia where they have risen substantially in recent years, and among some state-owned utilities. The financial sustainability, investment strategies and the ability for SOEs to attract private capital therefore become a central issue for secure and affordable transitions.

The share of total energy investments made or decided by private households (if not necessarily financed by them directly) has doubled from 9% in 2015 to 18% today, thanks to the combined growth in rooftop solar installations, investments in buildings efficiency and electric vehicle purchases. For the moment, these investments are mainly made by wealthier households – and well-designed policies are essential to making clean energy technologies more accessible to all . A comparison shows that households have contributed to more than 40% of the increase in investment in clean energy spending since 2016 – by far the largest share. It was particularly pronounced in advanced economies, where, because of strong policy support, households accounted for nearly 60% of the growth in energy investments.

Three quarters of global energy investments today are funded from private and commercial sources, and around 25% from public finance, and just 1% from national and international development finance institutions (DFIs).

Other financing options for energy transition have faced challenges and are focused on advanced economies. In 2023, sustainable debt issuances exceeded USD 1 trillion for the third consecutive year, but were still 25% below their 2021 peak, as rising coupon rates dampened issuers’ borrowing appetite. Market sentiment for sustainable finance is wavering, with flows to ESG funds decreasing in 2023, due to potential higher returns elsewhere and credibility concerns. Transition finance is emerging to mobilise capital for high-emitting sectors, but greater harmonisation and credible standards are required for these instruments to reach scale.

A secure and affordable transitioning away from fossil fuels requires a major rebalancing of investments

Investment change in 2023-2024, and additional average annual change in investment in the net zero scenario, 2023-2030, a doubling of investments to triple renewables capacity and a tripling of spending to double efficiency: a steep hill needs climbing to keep 1.5°c within reach, investments in renewables, grids and battery storage in the net zero emissions by 2050 scenario, historical versus 2030, investments in end-use sectors in the net zero emissions by 2050 scenario, historical versus 2030, meeting cop28 goals requires a doubling of clean energy investment by 2030 worldwide, and a quadrupling in emde outside china, investments in renewables, grids, batteries and end use in the net zero emissions by 2050 scenario, 2024 and 2030, mobilising additional, affordable financing is the key to a safer and more sustainable future, breakdown of dfi financing by instrument, currency, technology and region, average 2019-2022, much greater efforts are needed to get on track to meet energy & climate goals, including those agreed at cop28.

Today’s investment trends are not aligned with the levels necessary for the world to have a chance of limiting global warming to 1.5°C above pre-industrial levels and to achieve the interim goals agreed at COP28. The current momentum behind renewable power is impressive, and if the current spending trend continues, it would cover approximately two-thirds of the total investment needed to triple renewable capacity by 2030. But an extra USD 500 billion per year is required in the IEA’s Net Zero Emissions by 2050 Scenario (NZE Scenario) to fill the gap completely (including spending for grids and battery storage). This equates to a doubling of current annual spending on renewable power generation, grids, and storage in 2030, in order to triple renewable capacity.

The goal of doubling the pace of energy efficiency improvement requires an even greater additional effort. While investment in the electrification of transport is relatively strong and brings important efficiency gains, investment in other efficiency measures – notably building retrofits – is well below where it needs to be: efficiency investments in buildings fell in 2023 and are expected to decline further in 2024. A tripling in the current annual rate of spending on efficiency and electrification – to about USD 1.9 trillion in 2030 – is needed to double the rate of energy efficiency improvements.

Anticipated oil and gas investment in 2024 is broadly in line with the level of investment required in 2030 in the Stated Policies Scenario, a scenario which sees oil and natural gas demand levelling off before 2030. However, global spare oil production capacity is already close to 6 million barrels per day (excluding Iran and Russia) and there is a shift expected in the coming years towards a buyers’ market for LNG. Against this backdrop, the risk of over-investment would be strong if the world moves swiftly to meet the net zero pledges and climate goals in the Announced Pledges Scenario (APS) and the NZE Scenario.

The NZE Scenario sees a major rebalancing of investments in fuel supply, away from fossil fuels and towards low-emissions fuels, such as bioenergy and low-emissions hydrogen, as well as CCUS. Achieving net zero emissions globally by 2050 would mean annual investment in oil, gas, and coal falls by more than half, from just over USD 1 trillion in 2024 to below USD 450 billion per year in 2030, while spending on low-emissions fuels increases tenfold, to about USD 200 billion in 2030 from just under USD 20 billion today.

The required increase in clean energy investments in the NZE Scenario is particularly steep in many emerging and developing economies. The cost of capital remains one of the largest barriers to investment in clean energy projects and infrastructure in many EMDE, with financing costs at least twice as high as in advanced economies as well as China. Macroeconomic and country-specific factors are the major contributors to the high cost of capital for clean energy projects, but so, too, are risks specific to the energy sector. Alongside actions by national policy makers, enhanced support from DFIs can play a major role in lowering financing costs and bringing in much larger volumes of private capital.

Targeted concessional support is particularly important for the least-developed countries that will otherwise struggle to access adequate capital. Our analysis shows cumulative financing for energy projects by DFIs was USD 470 billion between 2013 and 2021, with China-based DFIs accounting for slightly over half of the total. There was a significant reduction in financing for fossil fuel projects over this period, largely because of reduced Chinese support. However, this was not accompanied by a surge in support for clean energy projects. DFI support was provided almost exclusively (more than 90%) as debt (not all concessional) with only about 3% reported as equity financing and about 6% as grants. This debt was provided in hard currency or in the currency of donors, with almost no local-currency financing being reported.

The lack of local-currency lending pushes up borrowing costs and in many cases is the primary reason behind the much higher cost of capital in EMDE compared to advanced economies. High hedging costs often make this financing unaffordable to many of the least-developed countries and raises questions of debt sustainability. More attention is needed from DFIs to focus interventions on project de-risking that can mobilise much higher multiples of private capital.

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