Clean energy spending in governments’ pandemic recovery packages has surged by 50% in the past five months, pushing it over US$710 billion worldwide, despite “troubling imbalances between regions,” a new International Energy Agency (IEA) report concludes.
Advanced economies account for the bulk of the spending, with more than $370 billion to be spent before the end of 2023—a level of short-term spending that would help “keep the door open for net zero-emissions by 2050,” the Paris-based agency writes in a release.
“But challenging financial and economic conditions have undermined public resources in much of the rest of the world,” warned IEA Executive Director Fatih Birol. Clean energy investment in developing countries is one-tenth the amount in advanced economies, according to the latest data in the IEA’s Sustainable Recovery Tracker, which examines more than 1,000 national transition policies enacted since the pandemic.
Emerging economies have allocated only around US$52 billion to sustainable recovery spending by the end of 2023, “well short of what is needed” for climate targets, writes the IEA. “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.”
That means “international cooperation will be essential to change these clean energy investment trends, especially in emerging and developing economies where the need is greatest,” said Birol.
Even in developed countries, the IEA finds that progress is sometimes slowed by supply chain disruptions, labour shortages, financial uncertainty, and lack of information on measures like building retrofits and electric vehicles due to bureaucratic impediments.
“Governments who can remove red tape and quickly set up effective programmes will be the ones to reap the benefits and position themselves in the new global energy economy that is emerging,” said Birol.
The IEA found that rising fossil fuel prices from Russia’s war have pushed governments to try and make energy more affordable and explore ways to reduce fossil dependency. “But 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 needed level of government support.”
Though the spike in sustainable energy spending is “unprecedented,” it is still but a small proportion of the total $18.2 trillion that governments have allocated to pandemic recovery, the IEA added. Still, the agency estimated that the $370 billion earmarked for spending before 2023 could trigger more than $1.6 trillion in sustainable investments—if it mobilizes more private sector participation.