As the global energy crisis reignited demand for oil, the International Energy Agency (IEA) said investment in renewable energy needs to triple by 2030 if the world hopes to effectively fight climate change and keep volatile energy markets under control.
In its latest annual World Energy Outlook, the global energy watchdog warns clean energy and infrastructure need a $4 trillion a year investment, stating that such outlay would mean the world could limit the rise in global temperatures to 1.5 degrees above pre-industrial levels, as agreed in Paris six years ago.
“It’s very simple to say, but it is the issue of the governments in order to incentivise those investments in order to fill the gap [in energy supplies] which is lacking from fossil fuels,” IEA noted.
According to the Paris-based watchdog, the world is not investing enough to meet its future energy needs although it admitted that transition‐related spending is gradually picking up, however, it “remains far short of what is required to meet rising demand for energy services in a sustainable way”.
The IEA warned that renewables like solar, wind and hydropower along with bioenergy need to form a far bigger share in the rebound in energy investment after the pandemic.
“Clear signals and direction from policymakers are essential. If the road ahead is paved only with good intentions, then it will be a bumpy ride indeed,” IEA added.
Renewables will account for more than two-thirds of investment in new power capacity this year, the IEA noted, yet a sizeable gain in coal and oil use have caused the second largest annual increase in climate change-causing CO2 emissions.
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The IEA said a faster energy transition will better shield consumers in the future because a commodity price shock would drive up costs for households 30percent less in its most ambitious Net Zero Emissions by 2050 (NZE) scenario versus in its more conservative Stated Policies Scenario (STEPS).
The agency noted that the shortage of gas and coal across the biggest economies, which has caused energy markets to rocket, could trigger a faster-than-expected rebound in the oil market and drive demand to above pre-pandemic levels as soon as next year.
The Paris-based agency said this would greatly increase costs for energy-hungry industries which, along with power outages, could lead to lower industrial activity and a slowdown in the world’s economic recovery from the pandemic.
“Record coal and gas prices as well as rolling blackouts are prompting the power sector and energy-intensive industries to turn to oil to keep the lights on and operations humming,” the IEA said.
The IEA report says governments need to go much further in their emissions reduction than they have already announced, if they are to reach the Paris targets.
It suggests incentives could be introduced through the tax system, easier access to finance and changes in regulation,
A clear move towards solar, wind and other clean power sources is underway, according to the IEA, but the pandemic has hindered efforts to cut coal and oil use.
That means this year the world is on course for the second biggest increase in CO2 emissions ever.
Investment in new technologies can lead to higher bills for households and businesses, so the report calls for governments to provide up-front funding.
This development will be welcomed by households and businesses who have been struggling with high prices triggered by the extra demand for energy the world has seen as the global economy recovers from the pandemic.