Economic Insider

Energy Crisis Prompts Countries to Invest in Clean Energy, not Climate Change

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IEA Director Faith Birol said that nations invest in clean energy resources, not due to climate change but because of energy security.

Birol added that there was a 50% increase in clean energy investments, most notably in the United States, Europe, Japan, and China.

“Today, it’s about 1.3 trillion U.S. dollars, and it will go up to about 2 trillion U.S. dollars. And as a result, we are going to see clean energy, electric cars, solar, hydrogen, and nuclear power slowly but surely, replacing fossil fuels. And why do governments do that? Because of climate change, because of the greenness of the issues? Not at all. The main reason here is energy security,” he said in an interview.

“Energy security concerns, climate commitments … industrial policies — the three of them coming together is a very powerful combination,” he added.

According to Birol, the prospect of the crisis primarily drives nations to push for investments. However, climate commitments also force many countries to invest in clean energy. The director further explained that the recent report of the International Agency prompted him to inspect the energy investments of countries and the reasons behind the investment. As a result, the IEA revealed that countries’ investment in clean energy could exceed $2 trillion yearly.

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More energy investments, says Birol

However, the IEA said more is needed even with the report. According to the organization, the international community should hit the $4 trillion per year mark. With this, they could stave off the effects of climate change and achieve Net Zero Emissions by 2050 Scenario. In addition, the IEA highlighted the importance of attracting investors to bolster clean energy investments in many countries.

Apart from the investors, the IEA said regulatory agencies should strictly enforce the climate commitments of each country. The Paris Agreement intends to “limit global warming to below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels.”

Therefore, if countries stay committed to the accord, nations should reduce global temperatures. Meanwhile, the World Energy Outlook kicks off during market uncertainty and volatility. Countries like the United States and the United Kingdom are bracing for a global recession, and the recent cutbacks on oil production harm the distribution of oil and energy.

“Energy markets and policies have changed due to Russia’s invasion of Ukraine, not just for the time being, but for decades to come. Even with today’s policy settings, the energy world is shifting dramatically before our eyes. Government responses around the world promise to make this a historic and definitive turning point towards a cleaner, more affordable and more secure energy system,” Birol added.

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Greater demand for coal

The IEA worries about the increased demand for oil, pushing others to produce coal. According to them, the massive cuts in oil production drive many governments to explore fast-extracted sources like coal. This pushes the demand for coal to go high.

“Coal use falls back within the next few years; natural gas demand reaches a plateau by the end of the decade, and rising sales of electric vehicles. It means that oil demand levels off in the mid-2030s before ebbing slightly to mid-century,” said the organization.

Photo Credit: Irfan Khan

Source: CNBC

Opinions expressed by Economic Insider contributors are their own.

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