Clean energy spending out of state economic recovery packages in response to the COVID-19 crisis accounts for only 4%, or $710 billion, of the total $18.2 trillion mobilized to rebuild economies, according to the latest update of the International Energy Agency's (IEA) Sustainable Recovery Tracker on Tuesday.
Although green spending globally has shown an increase of 50% over the past five months, the IEA said the gap between advanced and developing economies is troubling.
The IEA Sustainable Recovery Plan developed in 2020 in collaboration with the International Monetary Fund (IMF), estimated that if governments mobilize $1 trillion in clean energy investments each year between 2021 and 2023, they would boost the global economy, create millions of jobs and put emissions onto a Paris-compliant trajectory that would also be aligned with the Net Zero Emissions Scenario.
Advanced economies account for over $370 billion of expenditure to be used before the end of 2023, equivalent to a level of short-term government spending that would help keep the door open for the IEA’s global pathway to net zero emissions by 2050.
Across emerging and developing economies, however, the total amount of financial resources that are dedicated to sustainable recovery measures is one-tenth of the amount in advanced economies, reflecting their very different financial and economic circumstances, the IEA said.
Around $52 billion of sustainable recovery spending is planned by the end of 2023 in emerging and developing economies, which the IEA said is well short of what is needed in a pathway towards net zero emissions by 2050.
- World still needs to massively expand clean energy deployment
The IEA said the gap is unlikely to narrow in the near term as governments with already limited fiscal means now face the challenge of maintaining food and fuel affordability for their citizens amid the surge in commodity prices following Russia’s invasion of Ukraine.
"Countries, where clean energy is at the heart of recovery plans, are keeping alive the possibility of reaching net zero emissions by 2050, but challenging financial and economic conditions have undermined public resources in much of the rest of the world," Fatih Birol, the IEA executive director, said on the key findings of the tracker.
He underlined that international cooperation will be essential to change these clean energy investment trends, especially in emerging and developing economies where the need is greatest.
"Governments who can remove red tape and quickly set up effective programs will be the ones to reap the benefits and position themselves in the new global energy economy that is emerging," said Birol.
"While the latest update of the Sustainable Recovery Tracker does point to promising signs in advanced economies, the world still needs to massively expand its clean energy deployment efforts throughout this decade, first and foremost in developing economies, if we are going to preserve the hope of limiting the global temperature rise to 1.5 °C."
Global green spending in the economic recovery packages is more than 40% larger than in those stimulus packages that governments enacted following the global financial crisis in 2008.
War pushes governments to enact measures to make energy affordable
According to the IEA, rising fossil fuel prices, which have been exacerbated by Russia’s invasion of Ukraine, have pushed governments both to enact immediate measures to make energy more affordable and to explore efforts to reduce fossil fuel dependency.
The IEA's tracking shows that emergency affordability support by governments worldwide for households and businesses has reached about $270 billion since the start of the winter heating season in the Northern Hemisphere in 2021.
However, many of the measures most effective in reducing oil and gas demand, such as installing heat pumps and expanding the use of public transport, bike lanes and high-speed rail, have not yet received the required level of government support to date, the IEA said.
"Overall, public spending on sustainable energy remains a small proportion of the unprecedented $18.2 trillion in fiscal outflows that governments have dedicated to countering the economic impacts of Covid-19," the IEA said.
The IEA estimates that government spending which had been earmarked before 2023 could support over $1.6 trillion worth of sustainable investments by mobilizing higher levels of private sector participation.
Source: Anadolu Agency