Investment in solar energy is set to exceed spending on oil production for the first time this year, the head of the International Energy Agency said, highlighting a surge in clean energy that will help curb global emissions if the trend continues.
“If these clean energy investments continue to grow in line with what we’ve seen over the last few years. . . we will soon start to see a very different energy system emerge and we can keep the 1.5C target alive,” Fatih Birol, executive director of the IEA, told the Financial Times, referring to the Paris Agreement’s goal of limiting global temperature increases. .
This year, an estimated $1.7 trillion will be spent on clean technologies, compared to $1 trillion on fossil fuels. Five years ago, annual energy investment of $2 trillion was split evenly between fossil fuels and clean technologies such as renewables, electric vehicles and low-emission fuels.
Birol said “a new global clean energy economy is emerging,” adding, “For someone like me who gets my hands dirty with data every day, this is a remarkable, dramatic shift.”
Increased clean energy spending is being driven by a strong recovery in economic growth after the Covid-19 pandemic, as well as concerns about price volatility and energy security sparked by Russia’s large-scale invasion of Ukraine last year, the IEA’s annual report said. World Energy Investment report, published on Thursday.
Enhanced policy support, such as the American Inflation Reduction Act, which provided $369 billion in subsidies and tax breaks for clean energy technologies, also helped, the report said.
As a result, the IEA expects annual clean energy investment to increase by 24 percent compared to 2021, while fossil fuel spending will increase by 15 percent, it added.
Solar power has been the “star of global energy investment,” with total spending expected to top $1 billion a day and exceed spending on oil production, Birol said.
The IEA chief attended the recent G7 summit in Japan and said he was encouraged by the level of alignment on energy issues between G7 members and invited countries such as Brazil, India and Indonesia. “I have rarely seen such a homogenous view of the future of energy markets,” he added.
But to keep the momentum going, G7 leaders needed to ensure that current clean energy spending spread to more emerging and developing countries, Birol said. “If there is one problem, it is whether developing countries will be able to finance the transition to clean energy on their own,” he added.
Despite a boom in clean energy spending, global energy-related carbon emissions rose 0.9 percent to a record 36.8 billion tons last year, the IEA said in March.
Birol also called on national and international oil companies to channel more of their spending into low-carbon energy solutions. The oil and gas industry’s total investment in low-emission energy sources is less than 5 percent of total spending on fossil fuel production, according to the IEA analysis.
“I hope there are more parallels between what the heads of international and national oil companies are saying about their concerns about climate change and what they are doing in terms of their investments,” Birol said.