IEA sketches out vision for $1tr a year global green stimulus

Governments around the world have a unique opportunity to shift the world onto a sustainable development path over the next 12 months, or else risk locking in a new generation of high carbon infrastructure that would make it near impossible to meet the goals of the Paris Agreement.

That is the stark warning from the International Energy Agency (IEA), which today published sweeping proposals detailing how governments could help mobilise $1tr a year of investment in clean technologies and infrastructure over the next three years, averting a global depression and slashing greenhouse gas emissions in the process.

IEA Executive Director Dr Fatih Birol said the coronavirus crisis had presented governments with "a once-in-a-lifetime opportunity to reboot their economies and bring a wave of new employment opportunities while accelerating the shift to a more resilient and cleaner energy future".

Developed in partnership with the International Monetary Fund, the Special Report on Sustainable Recovery sets out a raft policy recommendations that governments could undertake over the next three years, providing an "energy sector roadmap for governments to spur economic growth, create millions of jobs and put global emissions into structural decline".

The analysis calculates that integrating clean energy goals into economic recovery and stimulus packages over the next three years could boost global economic growth by an average of 1.1 percentage points a year; save or create around nine million jobs; and reduce annual global energy-related greenhouse gas emissions by a total of 4.5 billion tonnes by 2023, ensuring that 2019 marks the year that global emissions peaked.

The IEA said the plan could be enacted with global investment of around $1tr a year over the next three years - a headline figure that only equates to 0.7 per cent of GDP and could be delivered in significant part through private capital.

The report also highlights how in addition to the short term economic boost a green investment surge would deliver multiple health and well-being benefits, at a time when air pollution and unhealthy lifestyles have been identified as an exacerbating factor in the coronavirus pandemic. The IEA said its plan would result in a five per cent reduction in air pollution emissions, bring access to clean-cooking solutions to around 420 million people in low-income countries, and enable nearly 270 million people to gain access to electricity.

Birol acknowledged that policy makers were "having to make hugely consequential decisions in a very short space of time as they draw up stimulus packages". But he stressed that the new report "provides them with rigorous analysis and clear advice on how to tackle today's major economic, energy and climate challenges at the same time".

"The plan is not intended to tell governments what they must do," he added. "It seeks to show them what they can do."

The report contains detailed assessments of more than 30 specific energy policy measures across six sectors: electricity, transport, industry, buildings, fuels and emerging low-carbon technologies. The bulk of the policies analysed have been successfully deployed in parts of the world and are shown to have been cost-effective.

For example, the report highlights how harnessing long term financing to undertake building retrofit programmes could create millions of jobs and help slash emissions and energy bills. Similarly, the widespread adoption of clean power auctions has been shown to drive down the cost of renewables and accelerate the deployment of clean energy capacity.

The report also highlights how targeted investment could help minimise the impact of the coronavirus crisis on energy security, after a recent IEA analysis warned global energy investment is set for an unprecedented plunge of 20 per cent in 2020, raising serious concerns for energy security and clean energy transitions.

"Investment in enhancing electricity grids, upgrading hydropower facilities, extending the lifetimes of nuclear power plants, and increasing energy efficiency would improve electricity security by lowering the risk of outages, boosting flexibility, reducing losses and helping integrate larger shares of variable renewables such as wind and solar PV," the report argues. "Electricity grids, the backbone of secure and reliable power systems, would see a 40 per cent increase in capital spending after years of declining investment. This would put them on a stronger footing to withstand natural disasters, severe weather and other potential threats."

The report warns that without concerted action to boost clean energy investment and marginalise high carbon projects the chances of meeting the goals of the Paris Agreement could be obliterated over the next three years.

The IEA said its plan was designed to avoid the kind of sharp rebound in carbon emissions that accompanied the economic recovery from the 2008-2009 financial crisis and instead put global emissions into structural decline.

Plummeting renewables costs and the rapid emergence of hydrogen and energy storage technologies mean the underlying economic case is much more favourable for green stimulus plans than was the case in 2008. But green businesses and campaigners remain fearful that increased investment in low carbon infrastructure could still be accompanied by similar support for high carbon projects.

Only yesterday, BP's latest Statistical Review highlighted how fossil fuels continue to dominate the global energy system, despite the rapid progress being made by renewables. Meanwhile, a new report from the LSE's Grantham Research Institute on Climate Change and SOAS' Centre for Sustainable Finance today revealed how only a handful of central banks are taking sustainability considerations into account in their economic recovery policies.

At the same time there is early evidence that emissions have rebounded sharply as economies have re-opened and campaigners now fear the coronavirus could lead to a surge in private car use, while also prompting emerging economies to step up fossil fuel investment as part of their recovery packages.

But Birol stressed governments now faced a unique opportunity to "make 2019 the definitive peak in global emissions, putting them on a path towards achieving long-term climate goals".

The IEA is now set to host a Clean Energy Transitions Summit on 9 July, bringing together politicians, policymakers, businesses, and investors from around the world to discuss how to advance its recovery plan.

There are encouraging signs that many of the IEA's recommendations could be embraced, at least in some countries. For example, the EU has promised to make its Green Deal strategy the centrepiece of its economic recovery package, while the German government has already approved a €40bn green stimulus plan.

The UK government has also signalled it is working on a raft of green recovery measures, while business groups, NGOs, academics, and opposition parties have all stepped up calls for climate action to be placed at the heart of the imminent stimulus package.

Today, the Lib Dems have unveiled proposals for a £150bn green recovery programme as part of a wider £350bn stimulus, calling for a national green jobs guarantee, skills programmes, home insulation upgrades, renewables investment, and new rewilding projects.

Interim Party Leader Sir Ed Davey said the government needed to seize the opportunity to mobilise unprecedented levels of green investment. "You've got to have a very high level of ambition, and the way the government is talking about it, I'm not yet convinced their level of ambition is high enough," he said. "With Johnson I think he may focus on some of the projects that get good headlines but not the ones we really need."

Meanwhile, business-led recovery packages are also continuing to advance.

For example, UK energy giant SSE yesterday announced it was strengthening its clean energy targets as part of a plan to invest more than £7bn over the next five years in low carbon infrastructure.

The energy firm confirmed it has given the green light to the £580m Viking wind farm on Shetland and the £3bn Seagreen offshore wind farm that it is working on alongside French oil giant Total.

The company said its green energy investment plans would see it spend almost £4m a day for the next five years in pursuit of an upgraded target to reduce the carbon share of its electricity generation by 60 per cent from 2018 levels by 2030

"It's easy to talk about a green recovery," said SSE chief executive Alistair Phillips-Davies. "But we're putting our money where our mouth is with £7bn of low-carbon infrastructure projects that can deliver a win-win for climate and economy."

• Tweet  
• Facebook  
• LinkedIn  
• Send to  

• Topics
• Policy
• Energy
• Infrastructure
• Investment
• IEA
• Green recovery
• Coronavirus