The Fossil Fuel Industry Is Being Chocked Out
But not fast enough.
We are barrelling towards a global catastrophe. The science is crystal clear that human-caused climate change is set to ravage the entire planet. In the coming decades, we will see billions of refugees fleeing their native countries as their local climates become too hot and too dry to support human life. Harvests are set to fail year after year as extreme weather grips every corner of the Earth. This extreme weather will cause trillions upon trillions of dollars of damage each year. Every economy on the planet is set to suffer enormous losses as these failing crops and growing damages take their toll. But we can stop this future from coming true. There is just enough time for us to phase out fossil fuels, adopt low-carbon energy, and save our future. Well, a recent report by the IEA suggests that we are finally taking these planet saving measures. But are they enough?
This report found that global investment in clean energy technologies and infrastructure, including renewables, electric vehicles (EVs), nuclear power, grids, storage, low-emissions fuels, efficiency improvements and heat pumps, is set to be twice that invested in fossil fuels. Total global energy investment is set to exceed $3 trillion in 2024, the most humanity has ever invested in energy. Of that $3 trillion, $2 trillion is earmarked to be spent on clean energy technologies!
This represents a 17.6% increase in global investment in clean energy technology compared to last year, which is huge! Such a significant increase could be damaging if it isn’t underpinned by good economic sense. Luckily, the IEA found that this increase was caused by an improved supply chain, dropping prices, and energy security concerns. The industry around building, supplying, installing and maintaining these technologies has started to reach maturity; as such, governments and companies can heavily invest in these technologies, knowing they can be supported by an already existing industry rather than them having to set up such an industry at enormous costs. This maturing market also decreases costs. In fact, solar power is now 30% cheaper than it was in 2022, thanks to better material supplies, more efficient factories and economies of scale. What’s more, over the past few years, governments have seen how insecure their energy infrastructure is, as the war in Ukraine has caused an energy crisis that reaches across the globe. As these clean energy technologies don’t (have to) import fuel from countries like Russia to work and instead harness energy in our local environment, they can significantly increase energy security.
As such, this significant increase in clean energy technology investment is based in solid economic sense.
But is it enough to kick fossil fuels into touch and save the planet? Sadly, no.
Firstly, this is nowhere near enough of an investment. IRENA has calculated that it will take an annual investment of $5 trillion in clean energy technologies every year to meet the Paris Agreement’s goal of limiting global warming to 1.5°C by 2050. Just a reminder here: We will still suffer immensely at that level of global warming.
Secondly, investment in fossil fuels is actually growing! The IEA also found that global oil and gas exportation and extraction investment is expected to increase by 7% in 2024.
But it doesn’t have to be like this. You see, fossil fuels will be phased out in the next few decades, like it or not. Clean energy is already significantly cheaper and, in many cases, more profitable than fossil fuels. Despite that, fossil fuel companies are only spending, on average, 4% of their investment budgets on clean energy projects. As such, over the coming decades, trillions of dollars worth of fossil fuel investments will be stranded as their value falls to zero as they are no longer needed, causing these once giant energy conglomerates to crumble and die as their core investments fail to pay off. If these fossil fuel companies wake up and realise the only way they can secure the future of their business is by heavily investing in clean energy, then we could take a significant leap towards the clean energy investment that is needed to stop a global catastrophe. But make the obviously right business decision? I doubt it…
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Sources: IEA, IRENA, EAT, The Guardian
Dollars to doughnuts there will be no debate! (That's an even bet these days)