Energy spending is forecast to recover to almost pre-pandemic levels this year – but the International Energy Agency (IEA) warns this is nowhere near enough to put the world on track for net zero by 2050.
The organisation has warned the gap between current investment trends and the required spending on climate mitigation is “a critical fault line in the clean energy transition“, stressing that significantly more investment needs to be directed into the clean energy sector, particularly in emerging markets and developing countries.
The IEA predicts a 10% rebound will see total energy spending around the globe hit $1.9 trillion (£1.34tn) in 2021, with clean energy investments rising by around 7% over the same period to a height of $750 billion (£530bn).
Although this sounds positive, the IEA says this level of financial commitment falls “far below” the expenditure needed to align the world’s energy systems to a truly clean future.
It states clean energy spending will need to triple in the 2020s to get on track to deliver net zero by 2050 and enable temperature increases to be limited to 1.5°C.
Fatih Birol, Executive Director of the IEA, said: “The rebound in energy investment is a welcome sign, and I’m encouraged to see more of it flowing towards renewables, but much greater resources have to be mobilised and directed to clean energy technologies to put the world on track to reach net-zero emissions by 2050.
“Based on our new Net Zero Roadmap, clean energy investment will need to triple by 2030.”
The report highlights that renewables are forecast to make up 70% of investment in new power generation capacity this year, with energy spending trends continuing to shift towards electricity markets.
The IEA notes 2021 is likely to be the sixth consecutive year in which spending on the power sector exceeds that in traditional oil and gas supply, and acknowledges although upstream oil and gas investment is expected to rise by a tenth, spending will remain “well below” pre-crisis levels.
It suggests the proportion of capital spending directed into clean energy by the oil and gas industry could rise to 4% this year, up from 1% in 2020. However, this figure still needs to increase by a significant margin to reach sustainability goals.
Dr Birol added: “As set out in detail in our recent Roadmap to Net Zero by 2050, governments need to go beyond making pledges to cut emissions and take concrete steps to accelerate investments in market-ready clean energy solutions and promote innovation in early-stage technologies.
“Clear policy signals from governments would reduce the uncertainties associated with clean energy investments and provide investors with the long-term visibility they need. Our Roadmap shows there are huge opportunities for companies, investors, workers and entire economies on the path to net zero. Governments have the power to unlock these broad-based benefits.”