Spending on clean energy amounts to 3% of the USD 16.9 trillion that governments have so far mobilised to bolster their economies from the recession triggered by the Covid-19 pandemic, according to the latest update from the International Energy Agency. The share is up from around 2% in July but still leaves global carbon dioxide (CO2) emissions on an upward trajectory, with this year set to be the second largest annual increase in history.
In the past three months, 40 new funding announcements have been made, and 140 previously announced spending programmes have added new details or spending.
In total, governments have now earmarked an estimated $470Bn for clean energy investment between now and 2030, an increase of $90Bn, or 20%, from the level seen in July.
Government spending rose substantially in energy efficiency, clean fuels and innovation funding, as well as in low-carbon and efficient transport, adding to already strong levels of government support for these areas.
This spending has the potential to mobilise an additional 400 USD billion a year in public and private clean energy and sustainable recovery measure investment over the 2021-2023 period. This increase would be 40% of the levels envisioned by the IEA Sustainable Recovery Plan over the same period, up from 35% in July.
However, mobilising the additional investment is dependent on the bulk of government spending reaching market actors in the crucial 2021-2023 recovery period. Long lead times for project development and lags in implementation could significantly delay the impact on the real economy.
Besides, the spending is highly imbalanced geographically, with most of it taking place in advanced economies rather than the developing world, and still falls short of what is needed to put global CO2 emissions into sustained decline.
“We are witnessing an uneven and unsustainable recovery from last year’s economic crisis, a recovery that consists of huge growth in fossil fuel consumption while leaving behind nearly 80% of the world’s population in the shift towards a new and cleaner energy economy,” said Fatih Birol, the IEA Executive Director. “On the eve of the G20 Leaders’ Summit and the COP26 Climate Change Conference, governments of major economies need to show they are ready to drive a massive scaling up of investments in clean energy globally and steer the world onto a safer path. Failure to put their money where their mouth is could well mean failure to keep the door open to limiting global warming to 1.5 °C.”
The analysis of the policies and investment announced by advanced economies shows that developed countries are moving strongly towards sustainable recoveries, but as said before the global total would amount to only around 40% of the level called for under the IEA Sustainable Recovery Plan just if these policies succeed mobilising enough private investments.
The IEA Plan recommended $1 trillion of annual spending on clean energy measures worldwide over a three-year period that could put the world on track with international climate goals while boosting global economic growth and employment.
Lack of skilled workers, may result in major bottleneks for the clean development pace
For the first time, the IEA Tracker also assessed the employment impacts associated with sustainable recovery spending. It estimates current government spending plans are set to create demand for an additional 5 million jobs in clean energy globally by 2023, most of them in the buildings sector, as well as in electricity infrastructure, renewables and electric vehicles.
A lack of skilled workers to fill these positions could be a major bottleneck, underscoring the central role of training, particularly developing new skills for workers moving to different industries, in ensuring a successful sustainable recovery.
Uneven and unsustainable economic recovery with emissions set for 2nd largest rebound in history: India, the exception among emerging economies
Some advanced economies, including France, Japan, the United Kingdom and the United States, are in the process of crafting and approving new investment programmes. This could put advanced economies within reach of their share of the Sustainable Recovery Plan, assuming government support quickly reaches viable projects amid supply chain disruptions and market turbulence.
However, emerging and developing economies, where the majority of clean energy investments need to occur in the next decade, are being left behind. Across emerging and developing economies as a whole, spending on clean energy measures is projected to be only around 20% of the level recommended in the Sustainable Recovery Plan, with little new spending in the pipeline due to tightening fiscal constraints as a result of the pandemic.
“The shortfall in sustainable recovery spending in emerging and developing economies is a global problem that requires a global solution,” said Dr Birol. “These countries don’t have the luxury of cheap financing that many advanced economies enjoy. The world urgently needs to come up with bold measures to mobilise and channel clean energy investment to emerging and developing economies on a major scale. This is where it is needed most and has the biggest bang for its buck in tackling emissions.”
Not all developing economies are contributing to the shortfall in clean investments. India stands out as an exception. Potentially substantial new spending has been announced through the Gati Shakti infrastructure plan, which could include new provisions for clean energy investments.
More data and insights from 4th November
The IEA will provide more insights on the state of the clean energy transition on 4 November when it releases the latest update of its Tracking Clean Energy Progress online resource, which assesses the current state of play across dozens of key energy technologies and provides recommendations on how to align them with long-term climate and energy goals.
All of the IEA’s tracking indicators will be brought together on a new Clean Energy Transitions Indicators page that will be launched on Friday 29 October and freely available to everyone. These indicators will be updated regularly and help governments, companies and other global actors track how the world is progressing on advancing clean energy transitions.