The International Renewable Energy Agency (IRENA) report titled, ‘Transforming the Energy System – And Holding the Line on the Rise of Global Temperatures,’ argues that the cost of “climate-proofing” the global energy mix is lower than the cost of inaction, “even without factoring in the payoffs of mitigating climate change and achieving long-term sustainability.”
According to the study, to stay below the 1.5°C limit, recommended by the Intergovernmental Panel on Climate Change (IPCC), the world must shift nearly USD 18.6 trillion of its cumulative energy investments until 2050 from fossil fuels to low-carbon technologies.
This achievement, the report notes, would require USD 110 trillion worth of investments in the energy sector by 2050, compared to USD 95 trillion currently planned. The global “power bill” would subsequently fall to USD 547 billion, or “about half of what the fossil fuel industry invested in 2017,” according to the report.
IRENA further estimates that over nine-tenths of the cuts needed in energy-related carbon emissions could be achieved through substantially redirecting annual investments in renewables in the coming decade to more than double the current spending, coupled with investments in energy efficiency and rapid electrification of end-use sectors.
The analysis is based on two broad future paths: “Current Plans” (the course set by current and planned policies); and the path for a clean, climate-resilient “Energy Transformation.” The report explores: investments needed “to hold the line,” including a focus on energy efficiency and renewable power generation; drivers of the energy transformation and the “socioeconomic footprint” involved in both current plans as well as a shift to renewables; and policies to ensure equitable outcomes.
Examples of energy transitions highlighted in the report include:
- More than a billion electric vehicles worldwide by 2050, which would require combined investments in charging infrastructure and the electrification of railways “that could reach USD 298 billion yearly”;
- More than 300 million highly efficient heat pumps, which equates to more than ten times the number in operation today, amounting to investments of USD 76 billion each year;
- Meeting nearly 19 exajoules of global energy demand by renewable hydrogen, which would require adding nearly 1 terawatt of electrolyser capacity by 2050, at an average investment cost of USD 16 billion per year worldwide; and
- A near-tripling of investments in renewable heating, fuels and direct uses from 2018 levels of approximately USD 25 billion over the coming three decades.
The study estimates that the energy transformation could create about USD 98 trillion – or 2.5% in additional gross domestic product (GDP) gains – by 2050 compared to current plans, as well as seven million more jobs. In addition, the report estimates that savings from reducing net energy subsidies and curtailing environmental health damage “would exceed investments by three to seven times.” Other potential benefits highlighted include an estimated 64% growth in jobs across all energy technologies by 2050, with new jobs expected to outweigh the decline in jobs in the fossil fuel industry.
The study emphasizes, however, that renewable energy technologies alone are not enough to achieve massive decarbonization and will need to be accompanied by steady improvements to energy efficiency and increased electrification of end-use sectors. Moreover, “the cost equation also matters,” the study notes, as affordable renewable power is expected to allow for faster, more viable displacement of conventional coal- and oil-burning systems.
Welcoming the “positive” market signals, as evidenced by the growth of cost-competitive technologies, the report urges policymakers to put the enabling frameworks in place to accelerate climate-proof investments. It underscores, however, that given the interlinkages between energy and other sectors, plans and investment strategies must be accompanied by a clear, integrated assessment of how the energy system interacts with the broader economy, “for a just and timely transition.”
Based in Abu Dhabi, United Arab Emirates (UAE), IRENA supports countries in their transition to a sustainable energy future by promoting the widespread adoption and sustainable use of all forms of renewable energy, including bioenergy, geothermal, hydropower, ocean, solar and wind energy.