Turmoil in oil and gas markets triggered by Russia’s war in Ukraine is helping to accelerate clean energy as countries struggle to secure their electricity supplies.
A remarkable record: Last year, for the first time ever, investment in solar power outpaced investment in oil, according to the International Energy Agency, which released a report this week. global energy investment,
But the world is still investing too much in fossil fuels, the Paris-based group warned. The IEA said investment in that area is currently double the maximum amount that would be allowed if nations were to meet their declared pledges to reduce emissions.
a growing gap
Since 2018, far more money has been invested in clean-energy development than in fossil fuels, and the gap continues to widen. Last year saw a record investment of $2.8 trillion globally in the energy sector, of which more than $1.7 trillion was devoted to clean energy.
“For every dollar invested in fossil fuels, about $1.7 is now going into clean energy. Five years ago, this ratio was one-to-one,” IEA executive director Fatih Birol said in a statement. “A shining example is investment in solar, which is set to overtake the amount of investment in oil production for the first time.”
of Russia Brutal invasion of Ukraine Which began last year has boosted demand for all forms of energy, driving fossil fuels as well as increased investment in clean energy. The war increased the price of oil and gas, of which Russia is a major producer – providing about 12% of the world’s crude and nearly half of the European Union’s natural gas.
Investors responded by doubling down on all options to put money into developing gas and oil sources outside Russia, as well as new renewable energy developments that don’t require gas at all.
Natural gas is a fossil fuel that contributes to global warming. While it was long considered “cleaner” than older fuels such as coal and oil, recent research suggests it may be even more so. Harmful As far as climate than was previously thought, because its extraction releases large amounts of methaneA powerful heat-trapping gas.
The rapid acceleration of clean-energy investment is good news for the world’s pledge to meet its climate goals. If the pace of the past two years continues, “in 2030 total spending on low-emission electricity, grid and storage, and end-use electrification will exceed the levels needed to meet the world’s announced climate pledges,” the IEA wrote. “For some technologies, solar in particular, this would match the investment needed to get on track for 1.5°C stabilization in global average temperatures.”
However, this can only happen if planned oil and gas development is scaled back significantly, the IEA warned.
“The risks of locking in fossil fuel use are clear: fossil fuel investment in 2023 is now more than double the levels needed to meet the world’s very low demand.” [net zero emissions] scenario,” the report found.
Fossil fuel prices pose a dilemma
Still-high prices for fossil fuels, and record profits for oil and gas companies last year, have created a quandary for investors eager to make the most out of commodity prices.
The IEA wrote, “A key dilemma for investors undertaking large, capital-intensive gas supply projects is how to balance strong near-term demand growth with uncertain and potentially declining long-term demand. “
If the clean-energy boom is to continue, the agency said, another important point needs to be addressed: equity. Until now, clean-energy investment has been limited to only a few countries – mainly China, the European Union and the US.
“Remarkably, the increase in clean energy investment in advanced economies and China from 2021 onwards exceeds the total clean energy investment in the rest of the world,” the IEA found.
The high upfront cost of clean-energy infrastructure and high interest rates mean many developing countries are not investing in renewable energy, the IEA said, even though its use in the long term would cost less than fossil fuels and prolong life. Will save
