$1 trillion spending on energy transition globally., Electric Vehicle News Bitesize
$1 trillion spending on energy transition globally., Electric Vehicle News Bitesize

$1 trillion spending on energy transition globally.

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In 2021, the world will spend a record $920 billion on clean energy deployment and innovation. But a report from Bloomberg New Energy Finance on Thursday warned that to meet net-zero emissions targets by 2050, that number must at least triple over the next few years.

This report provides an important snapshot of where public and private sector funding is helping to shift economies away from fossil fuels and achieve climate goals.

Global energy investment for clean energy deployment totaled $755 billion last year, up from $595 billion in 2020, while funding for new climate technologies totaled $165 billion, the report showed.

On the supply side, while the largest sector may be renewable energy, worth $366 billion, electrified transport stands out, at $273 billion. That’s a 77% increase from a year earlier, Bloomberg New Energy Finance found.

If current trends continue, electric vehicles and associated charging infrastructure will outpace renewable energy investment in 2022.

While investment in all regions grew to record levels, the fastest growth was in Asia Pacific, which also saw the highest investment at $368 billion. Most of this occurred in China, where energy deployment funding reached $266 billion.

The only industry not seeing an increase in investment in 2021 is carbon capture and storage deployments, totaling $2.3 billion.

Although funding for clean energy deployment has steadily increased since 2013, it is still far from avoiding the worst impacts of global warming, the report said.

According to Bloomberg New Energy Finances scenario of achieving net-zero emissions by 2050, the budget for clean energy deployment between 2022 and 2025 would, on average, be about $2.1 trillion, about three times the level of the previous year.

Only the transport sector is likely to increase spending at levels consistent with a net-zero scenario, the report found. Spending on renewable energy deployment has grown at a relatively slow rate of just 6% over the past five years.

To reach the net zero target, investment in the clean energy transition needs to double again between 2026 and 2030, to about $4.2 trillion per year.

Shifting the global economy to net-zero emissions by mid-century will have high initial costs but deliver huge benefits in reducing climate damage and industrial innovation, according to two new reports.

Each report describes the enormous benefits of limiting the severity of global warming, as well as the growing dangers of inaction.

The first report, from the Deloitte Economics Institute, shows that rapidly decarbonizing the U.S. economy during the next 50 years could generate $3 trillion, and add nearly 1 million more jobs to the economy by 2070.

Deloitte analysis puts everyone in a world where global warming remains relatively uncontrolled and averages 3°C (5.4°F) above pre-industrial levels with the Paris temperature target limiting warming to “significantly below” 2°C.

The analysis takes into account how climate change is likely to affect productivity, economic output and growth, and warns that inaction is far more expensive than spending money to transition to clean energy.

If emissions reductions are not enough to prevent global warming from reaching 3°C, the U.S. economy could take a $14.5 trillion (current value) hit over the next 50 years.

Deloitte notes that such a loss would be equivalent to nearly 4% of U.S. GDP in 2070, or about $1.5 trillion. Insufficient action can also lead to job losses, with nearly 900,000 jobs expected to disappear by mid-century due to climate disruption.

By comparison, Deloitte notes that the country’s transition to net-zero emissions will cost the country about 0.1 percent of GDP by 2050, or about $35 billion a year.

The Deloitte report states that the costs of the energy transition will be borne in advance, with a break-even point or “tipping point” in 2041-2050.

Taking a global perspective, a second report from the McKinsey Global Institute found that achieving net-zero emissions by 2050 would require cumulative global capital expenditures of $275 trillion, or about 7.5 percent of global GDP between 2021 and 2050.

Like the Deloitte team, the McKinsey researchers noted that there are upfront costs to driving net zero, with fixed asset spending rising to 8.8% of GDP between 2026 and 2030, before falling.

The report found that the transition to net-zero emissions around the world could lead to net job gains, although these may be unevenly distributed.

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$1 trillion spending on energy transition globally., Electric Vehicle News Bitesize
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