According to an IEA World Energy Investment report, global clean energy investment now significantly outpaces spending on fossil fuels. Investment in clean energy is predicted to reach $1.7 trillion in 2023.
Strong economic growth and erratic fossil fuel prices have contributed to clean energy investments in recent years. Governmental initiatives, including the Inflation Reduction Act in the United States and climate policies in Europe, Japan, and China, also serve as a major driving force.
Annual clean energy investment, directed towards electric vehicles and renewables, is predicted to increase by 24% between 2021 and 2023. Solar energy investment in particular is leading this growth and is expected to surpass oil production.
“Clean energy is moving fast – faster than many people realize. This is clear in the investment trends, where clean technologies are pulling away from fossil fuels,” said IEA Executive Director Fatih Birol. “For every dollar invested in fossil fuels, about 1.7 dollars are now going into clean energy. Five years ago, this ratio was one-to-one. One shining example is investment in solar, which is set to overtake the amount of investment going into oil production for the first time.”
Fossil Fuel Investment Remains Steady
Out of a $2.8 trillion overall energy investment in 2023, $1 trillion of global energy investments remain with fossil fuels. Fossil fuel investments are set to rise to more than double the levels needed in 2030 to meet IEA’s Net Zero Emissions by 2050 plan. The 2021 IEA plan, released leading up to the 2021 COP26, calls for an eventual end to fossil fuel investment.
Global coal demand also reached an all-time high in 2022 and is expected to reach nearly six times the 2030 levels needed to meet the IEA Net Zero Emissions scenario.
The oil and gas industry has largely failed to increase spending on low-emissions alternatives, representing less than 5% of its upstream spending in 2022. While many U.S. oil and gas companies have committed to strengthening their ESG commitments, less than a quarter of them have made net-zero commitments.
Clean energy investment continues to fall short in lower-income economies, showing an increased need for international support in areas where the private sector has not yet ventured.