Clean energy investment is outpacing spending on fossil fuels as concerns over affordability and energy security drive the momentum towards sustainable options, according to a report by the International Energy Agency (IEA). The report states that global investment in clean energy is expected to reach USD 1.7 trillion in 2023, surpassing the USD 1 trillion investment in coal, gas, and oil. The report also highlights the significant growth in annual clean energy investment, projected to rise by 24% between 2021 and 2023, compared to a 15% increase in fossil fuel investment during the same period.
The rise in clean energy investment is mainly driven by renewables and electric vehicles, with advanced economies and China accounting for more than 90% of the increase. The IEA Executive Director, Fatih Birol, emphasized the speed at which clean energy is advancing, with the ratio of investment in clean energy to fossil fuels now standing at 1.7 to 1, compared to a one-to-one ratio five years ago. Solar energy investment is particularly noteworthy, as it is expected to surpass investment in oil production for the first time.
Low-emissions electricity technologies, led by solar, are projected to make up almost 90% of investment in power generation. Consumers are also contributing to the growth in clean energy investment through increased purchases of heat pumps and electric vehicles, with electric vehicle sales expected to rise by a third in 2023.
Several factors have contributed to the boost in clean energy investment, including strong economic growth, volatile fossil fuel prices, and concerns about energy security, particularly following geopolitical events. Policy support, such as initiatives in the US, Europe, Japan, China, and elsewhere, has also played a significant role in promoting clean energy investment.
However, the report highlights the need for increased clean energy investment in emerging and developing economies. While countries like India, Brazil, and parts of the Middle East have shown promising investments in solar and renewables, many other countries face challenges such as high interest rates, unclear policy frameworks, weak grid infrastructure, and financially strained utilities. The international community is called upon to drive investment in lower-income economies where the private sector has been hesitant to invest.
Although fossil fuel investment is expected to rebound in 2023, surpassing the levels required for the IEA’s Net Zero Emissions by 2050 Scenario, the report underscores the urgency of transitioning to clean energy and reducing dependence on fossil fuels. The record-high global coal demand in 2022 and the projected coal investment levels for 2023 highlight the need for accelerated clean energy transitions to achieve climate goals.
The report emphasizes that the growing gap in clean energy investment between advanced economies and other regions poses a risk to global energy transitions. Addressing this imbalance and increasing investment in clean energy worldwide is crucial to combat climate change and ensure a sustainable energy future.