Energy security, not climate change, is driving clean energy investment, IEA chief says

Environment

Wind turbines photographed off the coast of Wales. Clean energy investment could be on course to exceed $2 trillion per year by 2030, according to the International Energy Agency.
Ben Birchall | PA Images | Getty Images

International Energy Agency Executive Director Fatih Birol told CNBC Thursday that the main driver of clean energy investment was energy security rather than climate change.

Namechecking the Inflation Reduction Act in the U.S. and other packages in Europe, Japan and China, Birol said a “major increase in clean energy investment, about [a] 50% increase,” was being seen.

“Today it’s about 1.3 trillion U.S. dollars and it will go up to about 2 trillion U.S. dollars,” Birol told CNBC’s Julianna Tatelbaum.

“And as a result, we are going to see clean energy, electric cars, solar, hydrogen, nuclear power, slowly but surely, replacing fossil fuels.”

“And why do governments do that? Because of climate change, because of the greenness of the issues? Not at all. The main reason here is energy security.”

Birol went on to describe energy security as being “the biggest driver of renewable energies.” He also acknowledged the importance of other factors, including those related to the climate.  

“Energy security concerns, climate commitments … industrial policies — the three of them coming together is a very powerful combination,” he said.  

Birol was speaking after a new report from the International Energy Agency said clean energy investment could be on course to exceed $2 trillion per year by 2030, an increase of over 50% compared to today.

The projection is found within the Paris-based organization’s World Energy Outlook 2022, which was published on Thursday morning.

It’s based on the IEA’s Stated Policies Scenario, which factors in what it calls “the latest policy settings worldwide.”

Despite this increase, the IEA repeated its assertion that clean energy investment would still need to hit over $4 trillion by 2030 in its Net Zero Emissions by 2050 Scenario.

This, the IEA’s report said, highlighted “the need to attract new investors to the energy sector.”

The shadow of 2015’s Paris Agreement looms large over the IEA’s report.

The landmark accord aims to “limit global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels.”

Cutting human-made carbon dioxide emissions to net-zero by 2050 is seen as crucial when it comes to meeting the 1.5 degrees Celsius target.

The newest edition of the World Energy Outlook comes at a time of significant uncertainty and volatility in global energy markets.

According to remarks from Birol published Thursday, the changes taking place appear to be seismic ones.

“Energy markets and policies have changed as a result of Russia’s invasion of Ukraine, not just for the time being, but for decades to come,” he said. “Even with today’s policy settings, the energy world is shifting dramatically before our eyes.”

Birol added, “Government responses around the world promise to make this a historic and definitive turning point towards a cleaner, more affordable and more secure energy system.”

Peak demand for coal, gas and oil?

In a statement accompanying the report’s release, the IEA said its Stated Policies Scenario had “global demand for every fossil fuel exhibiting a peak or plateau.”

Under this outlook, “coal use falls back within the next few years, natural gas demand reaches a plateau by the end of the decade, and rising sales of electric vehicles … mean that oil demand levels off in the mid-2030s before ebbing slightly to mid-century.”

The IEA’s statement also noted, however, that there was a huge amount of work to be done in order to keep global warming to 1.5 degrees Celsius.

Under its Stated Policies Scenario, fossil fuels’ share in the planet’s energy mix would be a little over 60% by the middle of this century.

“Global CO2 emissions fall back slowly from a high point of 37 billion tonnes per year to 32 billion tonnes by 2050,” it added.

“This would be associated with a rise of around 2.5 °C in global average temperatures by 2100, far from enough to avoid severe climate change impacts.”

The above echoes a separate report published by U.N. Climate Change this week.

In an announcement Wednesday, the U.N. said that “the combined climate pledges of 193 Parties under the Paris Agreement could put the world on track for around 2.5 degrees Celsius of warming by the end of the century.” 

U.N. Climate Change said its new report also showed that countries’ pledges, as they stand now, would see emissions jump by 10.6% by the year 2030, compared to levels in 2010.

The U.N.’s analysis comes ahead of next month’s COP27 climate change summit in Sharm el-Sheikh, Egypt.

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