Redirect fossil fuel investment to transition: Irena

The International Renewable Energy Agency (Irena) said today that around $1 trillion/yr of planned fossil fuel investment needs to be redirected towards transition technologies and infrastructure by 2030 in order to keep the goal of the Paris climate agreement within reach.

Around 41pc of planned energy investments by 2050 remain targeted at fossil fuels, Irena said, adding that "new investment decisions should be carefully assessed to simultaneously drive the transition and reduce the risk of stranded assets".

The organisation has looked at two energy scenarios — one based on governments' energy plans with a focus on G20 countries, and a 1.5°C global warming scenario aligned with the Paris climate goal. In a preview of its World Energy Transitions Outlook (WETO) released today, it said that global investments in energy transition technologies, including energy efficiency, electrification, grid expansion and flexibility projects, need to quadruple to over $5 trillion/yr, from $1.3 trillion in 2022 to stay on course to limit temperature rises to 1.5°C, in line with the most ambitious goal under the 2015 Paris agreement.

The Paris deal called for global warming to stay "well below" 2°C compared with pre-industrial temperatures by the end of the century, ideally limiting the rise to 1.5°C. A total of $35 trillion will need to be invested in transition technologies by 2030, according to Irena.

"To keep 1.5°C alive, [renewable energy] deployment levels must grow from some 3,000GW today to over 10,000GW in 2030, an average of 1,000GW annually," it said, adding that most developing nations are being left behind as two-thirds of global renewable power additions last year were in China, the EU and the US. The African continent only accounted for 1pc of additional capacity in 2022, according to Irena.

The organisation notes that renewables accounted for 40pc of installed generation in the power sector globally in 2022, representing 83pc of capacity additions. "A total of 295GW of renewables was added worldwide in 2022, the largest-ever annual increase in renewable energy capacity," Irena said.

The WETO, which will be released later this year, will contribute to the UN Framework Convention on Climate Change's (UNFCCC) first global stocktake, which is due to conclude at the UN's Cop 28 climate summit in Dubai, by giving effective ways to accelerate progress over the next five years, Irena said.

In a preview of potential steps that could be taken to accelerate the transition this decade, Irena said fiscal policy measures could be introduced such as obligations to reinvest windfall profits from fossil fuel energy in energy transition technologies, reducing subsidies for fossil fuels and raising CO2 prices when fossil fuel prices fall.

By Caroline Varin