The world needs to shift energy investments to low-carbon energy sources and boost those investments by 30 percent to a total of US$131 trillion by 2050 if it is to achieve the 1.5 degrees Celsius goal of the Paris Agreement, the International Renewable Energy Agency (IRENA) said in a report on Tuesday.
Currently, government plans envisage U$98 trillion in energy systems by the middle of this century, but this should be boosted by 30 percent so that the world remains on the 1.5 degrees Celsius path of the Paris Agreement goals, IRENA said in its World Energy Transitions Outlook.
The US$131 trillion cumulative investment by 2050 would mean annual investments of U$4.4 trillion in clean energy solutions.
More than 80 percent of the investment over the next three decades, or some US$4 trillion a year, needs to be invested in energy transition technologies (excluding fossil fuels and nuclear) such as renewables, energy efficiency, end-use electrification, power grids, flexibility innovation (hydrogen), and carbon removal measures, according to IRENA.
According to the agency’s analysis, US$24 trillion of investment should be redirected from fossil fuels to energy transition technologies over the period to 2050.
In the 1.5°C Scenario, fossil fuel production should decline by more than 75 percent by 2050, with total fossil fuel consumption continuously declining from 2021 onwards.
Oil demand would decline significantly by around 85 percent by 2050 compared to the 2018 level, IRENA said, while coal as power generation has to be phased out for reaching a 1.5°C Scenario.
Currently, even if many forecasters say that peak oil demand will occur within a decade or two, all of them see demand plateauing, not plunging, after the peak, while coal demand in Asia continues to rise, led by China, India, and Southeast Asia.
The 1.5°C Scenario will not only need a drastic reduction of oil and coal demand. It will also need a significant increase in renewable energy capacity, which needs to grow tenfold. This would mean that annually, the world will need more than 840 GW of new renewable capacity additions, up from around 200 GW added each year in recent years, IRENA said.
“The recent trends show that the gap between where we are and where we should be is not decreasing but widening. We are heading in the wrong direction,” IRENA Director-General, Francesco La Camera, said in a note in the report.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.