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October 24, 2023

IEA: world is ‘hurtling towards’ renewable future, but more investment needed

New Volkswagen electric cars
The IEA estimates that the Inflation Reduction Act could lead to 50% of new car registrations in the US being electric by 2030 (Photo: Tobias Schwarz/Reuters)

The International Energy Agency’s World Energy Outlook 2023 report shows electric vehicles, solar PV and heat pumps are driving change, but poorer countries need to be brought along with greater clean energy financing

The clean energy transition is “unstoppable”, but governments, companies and investors need to step up their support rather than hindering the move away from fossil fuels, says the latest World Energy Outlook report from the International Energy Agency.

“Energy markets, geopolitics and the global economy are unsettled and the risk of further disruption is ever present,” says the report, underlining the already severe impacts of climate change in the form of “heatwaves and other extreme weather events”. It also highlights the energy sector as “the primary cause of the polluted air that more than 90 per cent of the world’s population is forced to breathe, linked to more than 6mn premature deaths a year”.

“Against this complex backdrop, the emergence of a new clean energy economy, led by solar PV and electric vehicles, provides hope for the way forward,” the report says. 

“Investment in clean energy has risen by 40 per cent since 2020,” the IEA continues, adding that with the right policies, all fossil fuels could peak before 2030.

The IEA’s most positive clean energy scenario sees the Inflation Reduction Act leading to 50 per cent of new US car registrations being electric by 2030; heat pump installations in the EU reaching two-thirds of the level needed for net zero by the same date; and in China, projected additions of solar photovoltaic and offshore wind to 2030 are now three times higher than two years ago.

Despite these developments, the agency insists that much more needs to be done at speed. “Simply cutting spending on oil and gas will not get the world on track [for net zero]; the key to an orderly transition is to scale up investment in all aspects of a clean energy system,” the report says.

It reiterates “the urgent challenge [of increasing] the pace of new clean energy projects, especially in many emerging and developing economies outside China, where investment in energy transitions needs to rise by more than five times by 2030” to get the world on track for net zero by the mid-century.

On Monday, the We Mean Business Coalition, on behalf of 131 companies representing nearly $1tn in global annual revenue, published a letter calling on governments at COP28 in Dubai, in November and December, to “seek outcomes that will lay the groundwork to transform the global energy system towards a full phase-out of unabated fossil fuels and halve emissions this decade”.

The letter also includes a call for “financial institutions to work collaboratively with us, and with policymakers, to ensure capital is being allocated to accelerate the clean energy transition — creating a financial system that safeguards future growth and returns for people and planet”.

Dave Jones, global insights lead at energy think-tank Ember, says the IEA report “signals a major upgrade to the outlook for renewables”, showing that governments “plan to build almost two-thirds more renewables by 2030 than they were planning this time last year”.

“We are hurtling towards an electric future faster every day,” Jones says in a statement. “It’s been a long time coming, but renewable electricity will soon be built at a scale that can at last halt the rise of fossil fuels, not just within the power sector, but across the entire economy.”

You can read the IEA report here.

A service from the Financial Times