JAKARTA, Indonesia — Energy security concerns, which have worsened since the war in Ukraine, and policy support from rich countries are likely to help clean energy investment outpace spending on fossil fuels, the International Energy Agency said in a report on Thursday.
But coal investment will need to rise by about 10% in 2023, about six times the IEA’s estimate, for the world to end its reliance on fossil fuels and meet emissions reduction targets to combat climate change.
“We’re in a significantly better place than we were a few years ago,” IEA chief energy economist Tim Gould said Thursday when the report was released. “There is still a long way to go, but finally there are some encouraging signs for us all to welcome.”
About $2.8 trillion is expected to be invested in the global energy sector in 2023, with more than $1.7 trillion expected to go into clean technologies, including modern power grids, energy storage, low-emission fuels and electric vehicles, according to the organization’s latest World Energy : Investment report.
A little over $1 trillion will go to coal, gas and oil. fossil fuels, which are the main source of emissions that contribute to global warming.
Part of the problem is that energy demand is outpacing supply growth in many parts of the world. Powerful energy industry interests also influence decisions about investment in future capacity, often in favor of fossil fuels.
Global coal demand is set to reach an all-time high in 2022, and nearly 40 gigawatts of new coal-fired power plants have been approved, the highest since 2016, almost all of them in China, the report said.
However, the trend is changing in favor of renewable energy. For every dollar spent on fossil fuels, $1.70 is now spent on clean energy. Five years ago, the ratio was 1:1, according to the report.
Clean energy investment has been boosted by a number of factors in recent years, including periods of strong economic growth and volatile fossil fuel prices that have raised concerns about energy security, particularly since Russia’s invasion of Ukraine.
Enhanced policy support, such as the Deflation Act in the US and initiatives in Europe, Japan, China and elsewhere, have also played a role.
“Solar is the star producer, with more than $1 billion a day expected to be spent on solar investment by 2023 ($380 billion for the year), surpassing upstream oil spending for the first time,” the report said. he said, referring to crude oil production.
Sales of electric vehicles are expected to grow by a third in 2023, following growth in 2022, it said.
More than 90% of the growth in clean energy investment comes from advanced economies and China, with much less in less affluent countries. Factors such as high interest rates, weak power grid infrastructure and unclear policies are holding back investment in renewable energy in many countries, the report said.
Vibhuti Garg, South Asia director of the Institute for Energy Economics and Financial Analysis, said the focus for rich countries was to invest in their own economies rather than making that capital available to poorer countries.
Since 2009, rich countries have pledged $100 billion in climate aid to poor countries, with much of it aimed at weaning them off fossil fuels like coal and building clean energy systems. But these financial obligations were not fulfilled. Garg said this means developing countries will continue to rely on dirty coal.
“How do you expect these developing countries to transition when they have no money?” he said.
Aniruddha Ghosal reported from New Delhi, India.
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