Investments in clean technologies will reach $2 trillion in 2024

Burning fossil fuels is responsible for 75%. global greenhouse gas emissions: “the poisonous source of the climate crisis”, says António Guterres, UN Secretary-General. But abandoning them is not easy.

According to the International Energy Agency, global investment in clean technologies will reach $2 trillion this year, almost double the amount spent on fossil fuels. Yet this is still less than half of the estimated $4.5 trillion in annual investment needed by the early 2030s to achieve net zero targets.

Progress at a global level has been slow, and the enormous growth in wind and solar capacity over the past few years has not kept pace with growing energy demand in economies such as China and India. Fossil fuels accounted for 81.5% of global energy consumption in 2023, a slight decline from 82% in 2022 and 86% in 1995, according to the Energy Institute’s Statistical Review of World Energy released last week.

“The (energy) transition probably hasn’t even started yet,” Nick Wayth, chief executive of the Energy Institute, told reporters. “Clean energy still doesn’t meet even the entire increase in demand, so it’s not displacing fossil fuels on a global level.”

It has been almost nine years since 193 countries and the EU signed the landmark 2015 Paris Agreement to limit global warming. Twenty-four countries, including the UK, Germany and France, and the EU as a bloc, currently have legally binding plans to reduce emissions to net zero by 2050, according to the Net Zero Tracker data platform.

Dozens of other countries, such as the United States, China and India, have set goals in policy documents or committed to later goals.

But no major economy is on track to meet its 2030 emissions reduction targets, let alone net zero, according to a Wood Mackenzie study last year. “The pace of change is simply not fast enough,” says Lindsey Entwistle, a senior research analyst at the energy consultancy. “There’s a very strong focus on accelerating action beyond 2030 if countries want to meet their targets.”

Moreover, several key political events this year raise the prospect of some countries pursuing less climate-friendly policies. Donald Trump, who while president briefly withdrew the US from the Paris Agreement in 2020, will be able to return to the White House after the November elections.

In the European Parliament elections held earlier this month, populists and far-right parties triumphed by promising to slow down the energy transition, while the Greens lost ground.

Higher interest rates have also hit the profitability of renewable energy projects. In addition, the United States and the EU are planning to raise tariffs on goods such as electric cars from China, raising concerns that the increased costs will slow deployment or tighten supply chains. “Seeing a withdrawal of cooperation is becoming a challenge,” Entwistle notes.

There is simply no pace of change. . . is largely focused on accelerating action beyond 2030

However, there are reasons for optimism. The overall data for last year shows some encouraging trends. According to an analysis by the Energy Institute, for the first time since the industrial revolution last year, fossil fuels accounted for less than 70 percent of primary energy consumption in the EU. The continent decided to reduce its dependence on gas in the wake of Russia’s invasion of Ukraine.

Meanwhile, in the US, fossil fuel use has fallen by 2 percent, accounting for 80 percent of primary energy use, and coal use has fallen by 17 percent over the past year. Several power plants have closed while President Joe Biden’s Inflation Reduction Act subsidy package has boosted the number of renewable projects.

EI believes that demand for fossil fuels has likely now peaked on both sides of the Atlantic. “It may be too early to call an absolute peak, but regardless of who ends up in the White House, it seems that the United States is likely to follow the European trend,” Wayth says.

Both the United States and the EU have managed to curb emissions from power generation while growing their economies, potentially boding well for other regions trying to break the link between emissions and economic growth. China’s emissions from burning fossil fuels rose 5.2 percent last year as the economy expanded, but they also accounted for almost 60 percent of the 510 gigawatts of new renewable energy capacity installed worldwide in 2023 — the fastest global growth rate in two decades.

Optimists argue that renewables’ long-term trajectory of falling costs and technological advances should continue, gradually pushing fossil fuels out of the system. For example, according to the Rocky Mountain Institute, a think tank, solar energy costs have fallen by more than 75 percent over the past decade. Some also note that the scale of the challenge is smaller than it might seem because so much energy is currently used to extract, refine and process fossil fuels.

“It doesn’t make sense to look at the size of the current fossil fuel system to determine where things are going,” says RMI’s Kingsmill Bond. “It’s like saying in the 1920s, ‘there are 10 million horses and only 100,000 cars; everything revolves around horses, aren’t horses the future?«. We need to look at the changes.”

According to RMI, since 2010, global solar energy production has doubled every two to three years, and battery capacity has doubled every year. New solar and wind power generation is expected to exceed growth in electricity demand this year, and electricity will account for most of the growth in final energy demand. Bond adds that China’s focus on clean energy technologies is likely to fuel a “race to the top” as the US and EU try to compete rather than hold back the transition.

“Net zero can be achieved if we continue to allow these technologies to develop along the S-curve,” he says, referring to the growth trajectory of renewable energy sources over time. But he agrees there are political risks: “If, of course, we elect politicians who try to stem the tide of change, we may actually be shooting ourselves in the foot and not reaching that higher world.”

John Bromley, managing director of clean energy strategy and investment at Legal and General, shares Bond’s optimism. “There is a real acceleration and huge progress,” he says. “Many of these technologies offer much better long-term investment prospects. … The long-term picture is clear.”