Coal and a wind turbine in Hohenhameln, Germany, April 11, 2022. A number of major economies have formulated plans to reduce their dependence on Russian hydrocarbons in recent months.
Mia Bucher | Image Alliance | Getty Images
Global energy investment is expected to jump more than 8% in 2022 to $2.4 trillion, according to the International Energy Agency, but it will take a lot more money to meet climate-related targets.
Released on Wednesday, the latest version of the IEA’s Global Energy Investment Report indicates that clean energy investment is expected to exceed $1.4 trillion this year and account for “nearly three quarters of the growth in overall energy investment”.
While the agency welcomed this, they pointed to the huge amount of work ahead of us.
“The average annual growth rate of clean energy investment in the five years since the signing of the Paris Agreement in 2015 was just over 2%,” he said.
Since 2020, this rate had increased to 12%. The IEA described this as “far short of what is needed to meet international climate targets, but nonetheless an important step in the right direction”.
IEA Executive Director Fatih Birol highlighted the challenges and opportunities facing the planet given the current situation.
“We can’t afford to ignore today’s global energy crisis or the climate crisis, but the good news is that we don’t need to choose between them – we can tackle both at the same time. “, did he declare.
Birol added that a “massive increase in investment to accelerate clean energy transitions” is “the only sustainable solution”.
“This kind of investment is increasing, but we need a much faster increase to ease the pressure on consumers from high fossil fuel prices, make our energy systems more secure and put the world on the right path to achieve our climate goals.”
Unequally distributed expenses
While the investment was welcomed, a statement accompanying the IEA report noted that the increase in clean energy spending is unevenly distributed, with advanced economies and China accounting for the majority.
On top of that, he said some markets were seeing high prices and energy security concerns were prompting “greater investment in fossil fuel supply, particularly coal.”
According to the IEA report, 2021 has seen around $105 billion invested in what it called the “coal supply chain”. This represented a 10% increase from 2020. It is expected that the industry will likely follow a similar path this year.
“Global coal supply investment is expected to increase by a further 10% in 2022 as tight supply continues to attract new projects,” he said. “With more than $80 billion, China and India are expected to account for the bulk of global coal investment in 2022.”
The US Energy Information Administration lists a range of emissions from burning coal. These include carbon dioxide, sulfur dioxide, particulates and nitrogen oxides.
Greenpeace, for its part, has described coal as “the dirtiest and dirtiest way to produce energy”.
Challenging global environment
The IEA report comes at a time of rising inflation, a sustained spike in oil and gas prices and geopolitical tensions linked to the Russian-Ukrainian war.
These factors have created an extremely difficult environment for businesses, governments and consumers. The energy sector is no different.
“Nearly half of the additional $200 billion in capital investment in 2022 is likely to be absorbed by higher costs, rather than providing additional energy supply capacity or cost savings,” the IEA said.
He added that the costs of solar panels and wind turbines – crucial technologies for the energy transition – are now “up 10% to 20% since 2020” after a period of decline.
People around the world are also feeling the pinch: Total consumer energy bills in 2022 are expected to exceed $10 trillion for the first time, according to the IEA report.
“High prices are encouraging some countries to increase their investment in fossil fuels,” the report says, “as they seek to secure and diversify their sources of supply.”
A number of major economies have formulated plans to reduce their dependence on Russian hydrocarbons in recent months, which in turn has led to difficult situations.
In Europe, for example, the reduction in Russian gas flows and the specter of a total disruption of supply have prompted some governments to consider a return to coal.
Germany, Italy, Austria and the Netherlands have all indicated that coal-fired power plants could be used to offset a reduction in Russian gas supply.