Global investments in energy transition technologies reached a record high of USD 1.3 trillion-IRENA report

In 2022, global investments in energy transition technologies reached a record high of USD 1.3 trillion, according to a report by the International Renewable Energy Agency (IRENA). This indicates that the recognition of the climate crisis and energy security risks associated with over-reliance on fossil fuels is growing. However, the current pace of investment is not enough to put the world on track towards meeting climate or socio-economic development goals. Here are five key takeaways from the IRENA report:

1. Annual investments need to at least quadruple: To achieve the energy transition in line with the 1.5°C Scenario laid out in IRENA’s World Energy Transitions Outlook 2022, annual investments of USD 5.7 trillion on average between 2021 and 2030, and USD 3.7 trillion between 2031 and 2050 are needed.
2. Fossil fuel investments are still on the rise: Fossil fuel investments bounced back up 15% to USD 897 billion in 2021, and preliminary data for 2022 suggest they might have almost returned to their pre-pandemic levels, reaching USD 953 billion. To achieve the energy transition, USD 0.7 trillion per year needs to be redirected from fossil fuels to energy-transition-related technologies.
3. Investment is still going into funding new oil and gas fields: It is estimated that USD 570 billion will be spent on new oil and gas development and exploration every year until 2030.
4. Banks have committed to financing fossil fuel development: Over the six years following the Paris Climate Agreement, some large multinational banks maintained and even increased their investments in fossil fuels at an average of about USD 750 billion dollars per year. The world’s 60 largest commercial banks invested around USD 4.6 trillion in fossil fuels between 2015 and 2021.
5. Fossil fuel companies based in emerging markets and developing economies continue to attract substantial volumes of financing: Between 2016 and 2022, fossil fuel companies based in emerging markets and developing economies attracted USD 1.4 trillion in financing, compared to USD 1.1 trillion for those based in developed countries.

In conclusion, the report highlights that although global investments in energy transition technologies are increasing, they are still not enough to put the world on track towards meeting climate or socio-economic development goals. Urgent action is required to redirect investments from fossil fuels to energy-transition-related technologies to achieve the energy transition in line with the 1.5°C Scenario. Governments, investors, and financial institutions need to work together to accelerate the pace of investment in energy transition technologies.