Speeding up energy transitions with a view to limiting global warming to 1.5°C by 2050 could increase global GDP by 2.4% within the next decade compared with current plans, or the Planned Energy Scenario (PES), according to the International Renewable Energy Agency (IRENA).
In its latest World Energy Transitions Outlook report, IRENA foresees up to 122 million energy-related jobs in 2050, more than double today’s 58 million, with the renewables sector alone accounting for more than a third of all energy jobs, or 43 million. Solar photovoltaic (PV) will account for the largest share of the jobs, followed by bioenergy, wind, and hydropower.
The needed investment is high but feasible, with benefits greatly exceeding the costs
The necessary annual investment in IRENA’s 1.5°C scenario is estimated at USD 4.4 trillion, which it says is high but feasible, equaling about 5% of global GDP in 2019. By 2050, a total of USD 33 trillion of additional investment is required in areas such as energy efficiency, renewables, power grids, hydrogen, and innovations, but the benefits will greatly exceed the costs, according to IRENA.
Every dollar spent on the energy transition will add benefits of between USD 2 and USD 5.5, which translates into between USD 61 trillion and USD 164 trillion in cumulative terms by the mid-century.
The payback is even higher when the impact on air pollution, human health and climate change is factored in, according to IRENA.
Energy transition technologies will find it easier to obtain affordable long-term loans
The 1.5°C pathway will require, among other things, phasing out coal and limiting investments in oil and gas. IRENA predicts that energy transition technologies will find it easier to obtain affordable long-term debt financing in the coming years, while fossil fuel assets will increasingly be avoided by private financiers and forced to rely on equity financing from retained earnings and new equity issues.
However, public financing will remain crucial, ensuring a swift, just, and inclusive energy transition and facilitating private finance, IRENA said, adding that its 1.5°C scenario envisages almost doubling such investments from USD 450 billion in 2019 to about USD 780 billion.
Government should scrap policies that favor fossil fuels, including subsidies
IRENA also calls on policy makers to eliminate market distortions that favor fossil fuels, including phasing out fossil fuel subsidies and changing fiscal systems to reflect the negative environmental, health, and social costs of fossil fuels.
International cooperation is an essential piece of the global energy transition
IRENA also called for enhanced international cooperation, which it believes is an essential piece of the global energy transition. A holistic global policy framework is needed to bring countries together to commit to a just transition that leaves no one behind and strengthens the international flow of finance, capacity and technologies, reads the report.