IEA: States should invest $3 trillion in sustainable energy

Solar and wind farms should be supported with 180 billion USD over three years, the International Energy Agency recommends [Love Silhouette/ Shutterstock]

The International Energy Agency (IEA) has presented its COVID-19 economic programme to facilitate the transition to an environmentally friendly energy economy. In doing so, it has distanced itself unusually clearly from the fossil market and is focusing entirely on renewables. EURACTIV Germany reports.

In its Special Report on Sustainable Recovery, the IEA presented a plan on Thursday (18 June) to boost the economy with the help of the energy sector from 2021 to 2023. It was drawn up together with the International Monetary Fund.

The report is addressed clearly to the 30 IEA member state governments. “The reason why we have been so quick with the report is that governments are now making decisions with huge implications within a short period of time,” said IEA Executive Director Fatih Birol.

The pandemic is a unique opportunity to sustainably transform energy systems. “But we at the IEA don’t live on another planet either. We know that many governments are currently concerned primarily about their economies and jobs,” said Birol.

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The last year with rising emissions?

The report is designed as an economic programme primarily intended to stimulate investment, promising annual global economic growth of 1.1%.

Economists had calculated that global GDP could fall by up to 6% in 2020 due to the pandemic. The IEA also fears that investments in energy infrastructure could fall by 20% this year.

It therefore proposes to invest $3 trillion over three years from public and private sources in power lines, building refurbishment and renewable energies. One-third of the money is to go into energy efficiency in transport, buildings and industry.

This would maintain or create nine million jobs, because in the energy sector alone, COVID-19 threatens around three million jobs, according to the IEA. A positive side effect: if governments were to follow the recommendations, around 4.5 billion tonnes of greenhouse gases could be saved annually.

The IEA assumes that global CO2 emissions could fall by 8% this year directly as a result of the reduced economic output. However, due to the currently very low prices for oil and gas, there is a threat of a so-called rebound effect as already seen after the 2008 economic crisis.

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“But this year could be the last year in which we see an increase in CO2 emissions,” Birol said.

Michael Jacobs, professor of political economy at the University of Sheffield, sees this as an important positioning by the IEA. “For an organisation traditionally close to the oil and gas industry, it is a big step to say that investing in fossil structures is going in the completely wrong direction,” he told EURACTIV Germany.

However, he is missing more concrete statements. Firstly, the IEA does not mention the individual commitments of the countries (NDCs) under the Paris Agreement, which should serve as a basis for the stimulus measures.

Additionally, there was no mention of the massive corporate aid already underway: “It should have been made very clear that it is not okay to support airlines or oil companies unconditionally.”

Germany plans to promote 'green' hydrogen with €7 billion

The German government adopted its national hydrogen strategy yesterday (10 June), with plans to ramp up production capacity to 5 GW by 2030 and 10 GW by 2040. To achieve this, €7 billion will be invested in new businesses and research. EURACTIV Germany reports.

15 billion for nuclear power

The IEA’s economic stimulus plan focuses primarily on energy efficiency and the expansion of renewable energies. Investments in power lines are to be increased by 40% and will amount to $110 billion. Another $180 billion is to be invested in wind and solar plants and $20 billion in hydropower.

According to Birol, nuclear power is also “an important adjustment factor in reducing CO2 emissions.” Therefore, $15 billion should be invested in the maintenance and expansion of new nuclear power plants.

To reduce overall energy consumption, governments should invest a total of €250 billion in the renovation of buildings, for example by boosting investment through auctions and grants.

To this end, the use of CO2-neutral fuels and electric cars should be promoted in the transport sector and public transport should be supported with $30 billion. According to the IEA, this would save a total of two million barrels of oil per day compared to the same period last year.

However, the programme does not mention an end to fossil fuel production. Instead, it is said that the currently very favourable oil and gas prices offer an opportunity to “dismantle inefficient subsidies for fossil fuels without increasing final consumption prices.”

In addition, investments in CO2 capture and storage technologies should be made, for which the report foresees $45 billion.

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The IEA, generally regarded as an important voice for the energy policy of many countries, has been criticised in the past for continuing to advise governments to invest in fossil fuels.

To what extent the member states of the IEA will follow its advice remains to be seen. Jacobs is optimistic that this will be the case in the EU, at least. “But the problem is the developing countries. You’re going to need some help. Aid that international banks are currently reluctant to give them,” he said.

[Edited by Sarah Lawton/Zoran Radosavljevic]

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