Why investment in energy transition to net-zero is critical in the next decade
The International Renewable Energy Agency (IRENA) World Energy Transitions Outlook 2022 report estimates energy infrastructure investment needs at least $5.7trn annually through 2030. This gap in funding needs to be addressed.
With the one-year anniversary of the war in Ukraine rapidly approaching, Europe’s reliance on Russian energy sources saw prices rise astronomically, highlighting the key vulnerabilities of the current global energy mix and its overreliance on fossil fuels and exposing the near-term issue of energy security and energy transition.
As the threats to energy security have increased, so have the risks of falling behind the International Panel on Climate Change’s (IPCC) critical target of limiting global warming to 1.5°C by 2050, which will be reached only if we halve CO2 emissions by 2030.
Halving CO2 emissions by 2030 will involve some critical issues, that will require, investment from all sectors. Energy consumption is the starting point. Governments must decouple energy consumption and GDP growth.
As economies grow, energy demand rises; when energy is constrained, GDP growth slows. Asia is currently at the forefront of developing countries as GDP across the region has exploded over the last 40 years, with almost 60% of the world’s population residing in the region.
Which is why Asia can take a lead in energy transition over the next decade. Replacing fossil fuel energy-based systems with renewable energy solutions is one obvious starting point. Currently, fossil fuel’s mix of the energy supply is around 80%. This needs to drop to 20% with renewable energy making up the majority 80%.
Achieving this complete reversal, in the most expedient manner, will take investment.
Investment in clean technology again is the low-hanging fruit. This includes backing firms developing and applying rapidly evolving technologies like energy storage, green/blue hydrogen, and grid technology, as well as mainstream renewable energy, such as solar and wind.
But looking beyond the “invest in clean technology” mantra, we need to examine investment in the raw materials that support the clean energy transition – rare earth elements that are essential for capturing wind power; magnesium is a key component of fuel cells, as well as wind and photovoltaic technology; cobalt and natural graphite are critical for batteries and fuel cells.
All of these need to have serious investment to achieve the net-zero goal.
We only have one opportunity to avert the climate crisis – and governments must work together globally, and with the private sector globally, to prevent this slow-motion car crash.