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Energy investments still ‘far from’ net zero alignment

Global spending on energy is set to bounce back by nearly 10% following the drop caused by the COVID-19 pandemic, according to a new report from the International Energy Agency (IEA). However, spending on the energy transition needs to ramp up far more rapidly to reach global climate targets, analysts warn.

Power sector investment is projected to increase by around 5% this year to over $820bn – its highest ever level – after stagnating in 2020. Renewables are expected to account for 70% of investment in new power generation capacity. 

At the same time, approvals for coal-fired power stations have fallen 80% below where they were five years ago – though the most polluting fossil fuel is not out of the picture yet. There was a slight increase in approval for coal plants in 2020, largely driven by China and other Southeast Asian countries. 

The outlook for oil and gas is also improving, with investment expected to rise by around 10% in 2021, but spending in the sector is still well below pre-pandemic levels. IEA data also shows that spending by some major oil and gas companies is beginning to diversify. In 2020, just 1% of capital expenditure by the industry was going to clean energy investments. This figure is set to quadruple this year, and could exceed 10% for selected European companies.

The report calls the expected $750bn in clean energy investment ‘encouraging’ but notes that this remains far below what’s needed to put the energy system on a sustainable path. Clean energy investment would need to triple in the 2020s to put the world on track to reach net-zero emissions by 2050 and achieve the targets of the Paris Agreement. 

‘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,’ says Dr Fatih Birol, the IEA’s Executive Director. ‘Clear policy signals from governments would reduce the uncertainties associated with clean energy investments and provide investors with the long-term visibility they need.’

The gulf between today’s investment trends and a Paris-compliant world is largest in emerging markets and developing economies, the report concludes. 

News Item details

Journal title: Energy World

Organisation: International Energy Agency

Subjects: Investment - Net zero -

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