To reach net-zero emissions by 2050 and limit global warming to 1.5C temperature, investment in renewable energy sources needs to exceed finance flows to fossil fuels by a factor of four over the next decade, according to a report published by BloombergNEF.
Currently, about 90 cents goes to low-carbon energy sources for every US$1 put toward fossil fuels. That ratio needs to change dramatically by 2030, with an average US$4 invested in renewables for every US$1 allocated to high-polluting energy supplies, analysts at BNEF said.
For context, that ratio was 0.9:1 last year and 0.97:1 in 2020 but has never crossed the 1:1 mark. The numbers show that the decarbonization of the global economy is an undertaking with few parallels in modern history.
BNEF is anticipating that the clean energy to fossil energy investment ratio this decade will need to be between 2.3:1 and 5.7:1 if the foundations are to be laid for the transition to net-zero by mid-century.
This is set to change, the report states, with US$815 billion set to be spent on low-carbon energy supply in 2022, up from US$718 billion in 2020. While fossil fuel energy supply investment is also likely to increase in this timeframe, a 6.3% increase is expected, compared with a 17.7% increase for low-carbon energy.
Investment in the global energy system may rise to as much as US$114.4 trillion by 2050, as dollars pour into renewable energy sources including wind and solar, according to BNEF.
This decade “is a vital time to kick-start investing in the energy transition and prevent back-loading emission reductions,” the BNEF analysts wrote.
Scientists have said global greenhouse-gas emissions need to halve by 2030 to avoid catastrophic impacts of climate change.
Regarding investment in fossil fuel supply, BNEF sees the quickest and steepest decrease coming in the coal sector. From 2030 onwards, there should be no additional investment in new assets for power generation, it states. For oil supply, investment will need to decline from more than US$5 trillion in the 2010s to around the US$1 trillion mark in the 2040s. The decrease for gas investment within the same timeframe is less steep, from just under US$4 trillion to just over US$1 trillion.
The report emphasizes that changing investment patterns in energy supply alone will not be sufficient to deliver net-zero – there will also need to be increased investment in energy efficiency, electrification, and fuel-switching from the demand side, along with investments in energy storage and grid upgrades.