IEA’s Net Zero Climate Track is a $ 100,000 billion investment opportunity


Last month, the International Energy Agency (IEA) released one of the most important reports in its history. The influential organization has grown a global path to net carbon dioxide (CO2) emissions by 2050. This net zero target is considered essential to limit warming to 1.5 ° C above pre-industrial levels, the scientifically backed climate target. however, the world emitted more than 30 billion tonnes of CO2 last year, so getting to net zero requires fundamental economic changes.

The IEA said there was “no need to invest in new supplies of fossil fuels,” saying further expansion of fossil fuels is incompatible with global climate goals. While justified attention has been paid to reducing emitting activities, the IEA offers even more details on green activities requiring a massive increase. The coming economic transformation will be what UN envoy Mark Carney called “the greatest business opportunity of our time. “As you explore the net-zero world of the IEA, these opportunities will be highlighted.

Renewable energy installation

A low carbon future begins with the power generation sector. In the IEA scenario, by 2050, renewable energies will account for nearly 90% of global electricity production, with solar photovoltaic (PV) and wind power accounting for nearly 70%. A transition from today’s fossil-fueled world requires huge investments in new capacity, grid upgrades and energy storage. The IEA estimates that annual investments in clean energy must more than triple by 2030 to more than $ 4 trillion.

Renewable capacity has increased, with promising amounts of solar PV and wind power installed each year. However, the installation rate is expected to triple by 2030 and increase by almost 900% by 2050 to meet future demand. This means an average of 600 gigawatts of solar PV and 340 gigawatts of wind capacity installed each year from 2030 to 2050.

Connecting these new sources of energy to businesses and consumers will require significant upgrades to existing energy infrastructure. Smarter and more responsive distribution networks are essential to ensure that clean energy is reliable and flexible enough to meet future demands. Of the more than $ 4 trillion in annual investment required, nearly 25% must be devoted to energy infrastructure.

An essential element of this infrastructure will be energy storage. As the sun is not always shining and the wind is not always blowing, integrating large amounts of renewable energy into the grid requires efficient storage methods. Battery costs have dropped rapidly and deployment has increased, but battery deployment is only 3 gigawatts per year. The IEA suggests that this number must be multiplied by 40 by 2030 and by 80 by 2050 to meet the needs of a renewable energy system.

Energy and electricity efficiency

The IEA’s net zero scenario envisions the world prospering in 2050, with the global economy doubling in size and nearly 2 billion more people. Surprisingly, this richer and more populous world will require 8% less energy than today. This represents a strong decoupling between economic production and energy demand. Such progress can only occur with massive investments in energy efficiency and resource efficiency.

Real estate is a sector where increased efficiency is essential. The construction and operation of buildings use almost 40% of the world’s energy and produce an equal share of CO2 emissions. Ambitious retrofit programs can significantly improve energy efficiency. However, the IEA believes that the pace of modernization should triple from its current rate. Likewise, new construction must increasingly focus on net zero buildings. Net zero buildings currently represent less than 1% of the world’s real estate stock, but the IEA estimates that this share should reach 85% by 205. In all asset classes and real regions, capital expenditure will amount to trillions.

Electrification is at the heart of reducing energy consumption and emissions. In a sustainable future, electricity will power activities from industrial manufacturing to personal transportation. Within each economic sector, electrification presents unique opportunities for investors. Getting back to real estate, electric heat pumps can increase energy efficiency and reduce the need for fossil fuels. Currently, 180 million heat pumps are installed, but the IEA suggests a 10-fold increase in their installations by 2050. High-emission industrial processes such as steel production also need to be electrified.

Transportation is perhaps the most visible sector in the midst of the electrification revolution. Major automakers have announced new lines of electric vehicles, and governments have released plans to phase out internal combustion vehicles. Despite this progress, a lot of work remains to be done. Today, less than 1% of the 1.4 billion cars on the road are electric. However, that number is expected to rise to 20% by 2030 and almost 90% by 2050. Larger vehicles such as trucks and buses also need to be electrified. Municipalities need to invest heavily in electrified mass transit systems including electric buses and light rail. Like the expansion of renewables, the electrification of transportation suggests huge growth for batteries. The total demand for batteries for electric vehicles is expected to increase 90-fold over the next three decades, with an almost 40-fold increase by 2030.

A world of possibilities

Decarbonization requires transformation across the global economy. The IEA’s net zero path relies heavily on renewables and gains in energy efficiency and electrification, but also provides for the deployment of emerging technologies. In the net zero scenario, by 2050, “the vast majority of cars on the roads will run on electricity or fuel cells, airplanes will depend heavily on advanced biofuels and synthetic fuels, and hundreds of industrial plants. will use carbon capture. or hydrogen in the world. This vision suggests significant growth in new fuels and negative emission technologies. Hydrogen, synthetic fuels and biofuels have significant potential in maritime transport and aviation where electrification can be difficult. Likewise, carbon capture, use and sequestration (CCUS) can play a role in tackling emissions from hard-to-decarbonize industries. Investments in these technologies at an early stage are necessary to reduce their costs and allow them to evolve.

The challenge of climate change is looming. Fortunately, the IEA shows, investments in decarbonization offer positive social, environmental and financial returns. By seizing the opportunities that arise from creating a new sustainable economy, we can do well while doing good.

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