Global investments in renewable energy need to be tripled to keep the rise in global temperatures within the 1.5°C objective set under the Paris Climate Change Agreement by mid-century.
So says the International Renewable Energy Agency (IRENA), adding that although a massive investment of $1.8 trillion has been made in renewables over the past five years, this amount remains insufficient to meet the 2050 climate change goal.
A new report released by IRENA and the Climate Policy Initiative (CPI) states that to meet the global climate commitments, investment in diverse renewables technologies must triple annually to $800 billion by 2050.
To achieve this, governments need to set and adopt ambitious commitments, backed by supporting measures such as moving subsidies away from fossil fuels.
IRENA’s Director-General Francesco La Camera said: “The investment trend in renewable energy before COVID-19 was a positive one. But COVID-19 has shown us that much more effort is urgently needed to put us on a climate compatible pathway and help us recover better with a sustainable, resilient economy.”
The study recommends governments to draft and adopt policies that enable the integration of new renewables capacity additions into the energy systems leading to their decarbonisation and bringing wide socio-economic benefits.
IRENA’s post-COVID agenda showed that average annual investments of $2 trillion in renewables and other energy transition-related technologies in the 2021-2023-recovery phase could create 5.5 million additional jobs in the sector.
An additional 19 million energy transition-related jobs would be created by 2030, following average annual investments of $4.5 trillion up to 2030.
The majority of these investments could come from private sources, if government funds are used strategically to nudge investment decisions and financing in the right direction.
The capital is available, with a push from the governments to mobilise it. Public funds are able to leverage private investments by a factor of 3 to 4 if used strategically to steer investments toward clean energy solutions and away from fossil fuels.
Greater participation of institutional investors – which hold about $87 trillion in assets – will help to reach the scale of global investment needed. To this end, it is key to promote the use of capital market solutions, such as green bonds, that address the needs of these investors.
IRENA says that global renewable energy investment increased between 2013 and 2018, reaching its peak at $351 billion in 2017.
However, in 2018, renewable energy investment slightly declined and recorded modest growth through 2019. Although this was largely due to the decreasing costs of renewables, the total installed capacity continued to grow.
IRENA boss La Camera added: “Decision makers must design systemic approaches to policies that encourage and speed up the flow of investment into renewables, and away from fossil fuels, and doing so enable economic growth, social resilience and welfare.”
Dr Barbara Buchner, CPI’s Global Managing Director, said: “There is a very clear need for a rapid increase of investment in renewable energy coupled with a significant reduction and redirection of investment away from fossil fuel energy.
“We call for more effort and coordination among policymakers, public and private finance institutions, energy and non-energy producing corporations, and institutional investors to speed up the global energy transition. This action is fundamental to a more sustainable and resilient future.“
Financial commitments to off-grid renewables technologies in developing markets can help bring the world closer to achieving Sustainable Development Goal 7 on universal access to affordable, reliable, sustainable and modern energy by 2030, states the report.
While investments in off-grid renewables solutions kept growing, reaching an all-time-high $460 million in 2019, additional capital must be unlocked especially for income-generating activities and productive uses to improve the livelihoods and resilience of billions of women and men globally and to promote socio-economic benefits.
Read more about the report.