Turmoil in oil and gas markets, sparked by Russia’s war with Ukraine, has spurred a clean energy boom as countries scramble to secure power supplies.
One notable record: Solar investment outpaced oil investment for the first time last year, according to the International Energy Agency. global energy investment.
But the world is still overinvesting in fossil fuels, warned a Paris-based group. The IEA said investment in the sector is now double the maximum allowed if countries meet their emission reduction commitments.
Since 2018, far more money has gone into clean energy development than fossil fuels, and the gap continues to widen. Last year, a record $2.8 trillion was invested in the energy sector globally, with more than $1.7 trillion of that going to clean energy.
“For every dollar invested in fossil fuels, about $1.70 is now invested in clean energy. Five years ago, the ratio was 1:1,” IEA Director General Fatih Birol said in a statement. . “One shining example is investment in solar power, which will overtake investment in oil production for the first time.”
Russian brutal invasion of ukraine The policy, which began last year, has increased demand for all types of energy and increased investment in fossil fuels and clean electricity. The war caused oil and gas prices to soar. Russia is its major producer, supplying about 12% of the world’s crude oil and nearly half of the European Union’s natural gas.
Investors responded by doubling down on all options, investing in developing gas and oil resources outside Russia, as well as new renewable energy developments that do not require gas at all.
Natural gas is a fossil fuel that contributes to global warming.Long thought to be “cleaner” than older fuels such as coal and oil, recent research shows it could be much better. inflict damage To climate Its extraction releases a greater amount of material than previously thought methanea powerful heat-trapping gas.
The rapid acceleration of investment in clean energy is good news for the world’s pledge to meet climate change goals. If the pace of the past two years continues, “total spending on low-emission electricity, grids, storage and end-use electrification in 2030 will exceed the levels needed to meet the world’s announced climate commitments.” deaf,” the IEA wrote. “For some technologies, particularly solar power, this would match the investment required to put them on track to stabilize the global average temperature at 1.5°C.”
But that could only happen if planned oil and gas developments are significantly curtailed, the IEA warned.
“The risks of entrenching fossil fuel use are clear. Fossil fuel investment in 2023 is now more than double the level needed to meet much lower demand.” [net zero emissions] scenario,” the report said.
Fossil fuel prices create a dilemma
Still-high fossil fuel prices and record profits for oil and gas companies over the past year have baffled investors looking to get more out of commodity prices.
“The key dilemma for investors working on large, capital-intensive gas distribution projects is how to reconcile strong short-term demand growth with uncertain and potentially declining long-term demand. or,” the IEA wrote.
The agency said that if the clean energy boom is to continue, another important point needs to be addressed: equality. So far, investments in clean power have been limited to just a few countries, mainly China, the European Union and the United States.
“Remarkably, the growth in clean energy investment in developed countries and China from 2021 onwards will outpace total clean energy investment in the rest of the world,” the IEA researched.
The IEA said the high upfront costs and high interest rates of clean energy infrastructure have made many developing countries unable to use renewable energy, even though the use of renewable energy is cheaper and life-saving than fossil fuels in the long run. He said it meant they were not investing in energy.