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Clean energy set for $1.4 trillion boost in 2022, IEA says

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Coal and a wind turbine in Hohenhameln, Germany, on April 11, 2022. A variety of major economies have formulated plans to scale back their reliance on Russian hydrocarbons in recent months.

Mia Bucher | Picture Alliance | Getty Images

Global energy investment is heading in the right direction to leap by greater than 8% in 2022 and hit $2.4 trillionwith a notable uptick for coal supply chains, but far extra money can be required if climate-related goals are to be met, in accordance with the International Energy Agency.

Published Wednesday, the most recent version of the IEA’s World Energy Investment report said clean energy investment is ready to exceed $1.4 trillion this yr and account for “almost three-quarters of the expansion in overall energy investment.”

While the agency welcomed this, it pointed to the massive amount of labor that lies ahead.

“The annual average growth rate in clean energy investment within the five years after the signature of the Paris Agreement in 2015 was just over 2%,” it said.

Since 2020, that rate had grown to 12%. The IEA described that as “well in need of what’s required to hit international climate goals, but nonetheless a vital step in the appropriate direction.”

The IEA’s executive director, Fatih Birol, highlighted the challenges and opportunities the planet faces, given the present situation.

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“We cannot afford to disregard either today’s global energy crisis or the climate crisis, but the excellent news is that we don’t need to choose from them — we will tackle each at the identical time,” he said.

Birol added that a “massive surge in investment to speed up clean energy transitions” is “the one lasting solution.”

“This sort of investment is rising, but we’d like a much faster increase to ease the pressure on consumers from high fossil fuel prices, make our energy systems safer, and get the world on course to succeed in our climate goals.”

Unevenly distributed spending

While the investment was welcomed, an announcement accompanying the IEA’s report noted that the rise in clean energy spending is unevenly distributed, with advanced economies and China accounting for almost all.

On top of this, it said some markets are seeing high prices and concerns related to energy security are prompting “higher investment in fossil fuel supplies, most notably on coal.”

In line with the IEA’s report, 2021 saw roughly $105 billion invested what it called the “coal supply chain.” That represented an increase of 10% compared with 2020. It’s forecasting that the industry will likely follow an analogous path this yr.

“Global coal supply investment is predicted to grow by one other 10% in 2022 as tight supply continues to draw recent projects,” it said. “At over USD 80 billion, China and India are anticipated to make up the majority of world coal investment in 2022.”

The U.S. Energy Information Administration lists a spread of emissions from the combustion of coal. These include carbon dioxide, sulfur dioxide, particulates and nitrogen oxides.

Greenpeace, for its part, has described coal as “the dirtiest, most polluting way of manufacturing energy.”

Difficult global environment

The IEA’s report comes at a time of rising inflation, a sustained surge in oil and gas prices, and geopolitical tensions related to the Russia-Ukraine war.

Those aspects have created a hugely difficult environment for businesses, governments and consumers. The energy sector isn’t any different.

“Almost half of the extra USD 200 billion in capital investment in 2022 is more likely to be eaten up by higher costs, slightly than bringing additional energy supply capability or savings,” the IEA said.

It added that the prices of solar panels and wind turbines — technologies crucial to the energy transition — are actually “up by between 10% and 20% since 2020” after a period of decline.

People around the globe are also feeling the pinch: The full energy bill for consumers in 2022 looks set to exceed $10 trillion for the primary time, the IEA’s report said.  

“High prices are encouraging some countries to step up fossil fuel investment,” the report stated, “as they seek to secure and diversify their sources of supply.”

A variety of major economies have formulated plans to scale back their reliance on Russian hydrocarbons in recent months, which has in turn led to some difficult situations.

In Europe, for instance, reduced flows of Russian gas and the specter of a full supply disruption have prompted some governments to contemplate a return to coal.

Germany, Italy, Austria and the Netherlands have all indicated coal-fired plants might be used to compensate for a cut in Russian gas supplies.

—CNBC’s Sam Meredith contributed to this report

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