Insufficient: International Energy Agency: Investments are not enough to solve energy crisis | news

news-container">Nevertheless, from their point of view, the expenditure will prove to be insufficient to achieve the global climate goals or to get the rapidly rising energy prices under control.

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The worst global energy crisis in decades, sparked in part by Russia’s invasion of Ukraine, has left energy investments torn between years of efforts to transition to clean energy and the urgent need to rapidly increase supply to stem rising demand Prices are torn.

The latest figures, published by the Paris-based agency in its annual report, suggest that energy investment is struggling on both counts. “Today’s energy investment trends show that the world is lagging behind on climate targets and reliable and affordable energy,” the report said.

Total investment in the energy sector is expected to grow 8 percent this year to $2.4 trillion, above pre-pandemic levels. Most of the increase comes from a jump in spending on clean and renewable energy sources – a promising sign for global efforts to cut carbon emissions after years of weak growth, according to the IEA.

Climate goals are a long way off

In the five years since the landmark 2015 Paris Climate Agreement, investment in clean energy has grown by an average of 2 percent per year. They have grown by 12 percent since 2020, a significant increase but still far from the level needed to meet climate targets, the IEA said.

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Clean energy spending will exceed $1.4 trillion in 2022, well below the roughly $2.8 trillion it would take to meet current climate targets by 2030 and beyond behind the more than $4 trillion needed to reach net-zero emissions by 2050.

Oil and gas prices have skyrocketed since Russia invaded Ukraine. Russia, one of the world’s largest oil exporters, has been deprived of much of its supplies by Western countries. The sanctions have stranded millions of barrels of oil in the country and forced oil companies to shut down their wells. At the same time, Russian gas supplies to Europe were curtailed due to geopolitical tensions.

Inflation drives value of investments

While the IEA expects energy investment to increase this year, much of the dollar value of these increases is being driven by inflation, which is making new energy projects more expensive to build. Almost half of the additional $200 billion that will be invested in energy this year will be eaten up by higher costs. High energy prices have been one of the main reasons for the increase in the price of steel, aluminum and cement, which require large amounts of electricity to produce.

A lack of investment in metals and minerals, which are needed for many clean energy sources, poses another challenge for the energy transition, according to the IEA. Rising input costs threatened to reverse a long-standing trend that green technologies have steadily fallen in price in recent years, the agency said. As electric vehicle battery prices have fallen, the metals they contain, such as lithium, cobalt and nickel, have risen to more than 20 percent from 5 percent of the total cost less than a decade ago, according to the IEA.

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Clean energy investment has been heavily concentrated in developed countries and China, leaving developing countries behind and threatening a global divide. China spent around $380 billion on clean energy in 2021, while the European Union spent $260 billion and the US $215 billion. Clean energy spending in emerging and developing countries, with the exception of China, remains at 2015 levels, according to the IEA.

DJG/apo/mgo

LONDON (Dow Jones)

Image sources: kaczor58 / Shutterstock.com, Alexandr Shevchen / Shutterstock.com

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