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Global emissions will peak in 2025 if investment in renewables increases, according to IEA

Published: 10:46 27 Oct 2022 EDT

Pollution

The International Energy Agency (IEA) has said global carbon emissions from energy will peak in 2025 thanks to massively increased government spending on clean fuels in response to Russia’s invasion of Ukraine - though much more investment is still needed to avert catastrophic global warming.  

In its annual report on global energy, the IEA said that government spending on clean energy in response to the crisis would mark a “historic turning point” in the transition away from fossil fuels.

The invasion of Ukraine has prompted an energy crisis around the world, with global gas prices initially surging. 

But Fatih Birol, the IEA’s executive director said the energy crisis caused by Russia’s invasion “is in fact going to accelerate the clean energy transition”.

The IEA said planned investments in green energy in response to the crisis meant that – for the first time – government policies would lead to demand for polluting fossil fuels peaking this decade.

The agency cited notable contributions from the US Inflation Reduction Act, the EU’s emissions reduction package, and actions by Japan, South Korea, China and India.

More investment needed

However, the IEA forecasts global clean energy investment will rise by more than 50% from today's levels to US$2trn per year by 2030, which is still expected to leave global temperatures rising by around 2.5C by the end of the century, which many expect would significantly negatively impact the climate.

The IEA has another scenario to reach net zero emissions by 2050, which it believes is necessary to achieve the 1.5C warming target set in the Paris climate pact. To reach this target, the IEA believes investment in clean energy would need to increase enormously to US$4trn per year by 2030.

This was backed up by a report from the UN environment agency this week that found there was “no credible pathway” currently in place to avoid the 1.5C of global warming from pre-industrial levels and that “woefully inadequate” progress had been made on cutting carbon emissions.

This meant massive collective action on climate is still needed by the world to avoid climate tipping points, according to leading climate scientist Prof Johan Rockström.

He told the Guardian the world was coming “very, very close to irreversible changes” in order for emissions to fall by about half their current level by 2030 to meet the internationally agreed target of 1.5C of heating.

Current government plans for the present decade would still result in a rise in global heating of about 2.5C, according to the UN climate agency, level that is expected to result in devastating climate breakdown.

UK falling short

As for the UK, the report emerged a week after government figures showed the nation is on track to come wildly short of its legal climate targets to cut greenhouse gas emissions in the mid 2030s.

Based on existing policies or where funding is agreed but not finalised, the UK is projected to emit nearly double the amount of pollution as it should do under its 2030s goals, the Department for Business, Energy and Industrial Strategy (BEIS) said.

As part of the target to cut pollution to 'net zero', which became part of legislation in 2019, the UK has a stated commitment to cut emissions by 58% on 1990 levels in 2028-2032, and then by 77% by 2033-2037.

But the BEIS report showed the targets for the fifth carbon budget will be missed by 73mln tonnes of greenhouse gases, a 56% reduction on 1990 levels.

Reaction

Patrick Wood Uribe, CEO of sustainable data provider Util, said the IEA report was “sobering”, but the carbon emissions news was one of a number of encouraging findings.

“In a framework that gears competition towards maximising short-term profit, it’s unrealistic — in the absence of new incentives — to expect investors to prioritise environmental risks over financial returns. Capitalism is a petri dish for innovation, but it depends on capital (re)allocation, which, in turn, depends on top-down government action.

“The US climate bill is a powerful example of what fiscal policy can achieve. Having sowed enormous financial opportunity in the renewable sector, the bill is expected to attract investment to the tune of 50% by 2030 and reinforce the value of every industry exposed to energy transition and security.”

Antoine Argouges, chief executive of Tulipshare, the ethical activist investment app, said he welcomed the news on carbon emissions, but said "this should not be a signal to companies and governments around the world that the fight against climate change is over. Far from it; we need to move faster and harder than ever before to protect our planet for future generations.

“That is why companies must take greater responsibility to adopt and deliver more ambitious ESG commitments – and retail investors have a vital role to play in holding them to account. Through shareholder activism, we can push for CEO’s pay to be linked to ESG performance, and demand increased protection for the environment and worker’s rights across the economy.”

Stephen Derkash, manager of the Solar Energy UCITS ETF (LON:TANN), noted that the IEA report stated that much increased investment is still needed to avoid global heating above the Paris Agreement level of 1.5C above pre-industrial levels.

“Regardless of the exact investment size, the opportunity for clean energy investment appears bright and is being driven by three main factors: cost, environmental policy, and the desire for enhanced energy security," he said. 

“Regarding cost, solar and wind are now considered to be the lowest cost energy sources in many countries on a levelized cost of energy (LCOE) basis.

“In terms of environmental policy, increasing clean energy is considered imperative if countries have a chance to meet their net zero targets.

“Lastly, the Russia-Ukraine conflict has highlighted the risk of the weaponization of energy policy and resources, and driven countries to want to increase their own energy security, which can be enhanced and diversified by adopting clean energy sources.”

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