Transitioning energy systems towards net zero by the mid-century could lead to cumulative global GDP gains of US$98tn (£79tn) over the next three decades compared to a “business-as-usual” trajectory, according to a report published in April by the intergovernmental organisation, International Renewable Energy Agency (IRENA). As per the Global Renewables Outlook: Energy Transformation 2050 report, “energy-related CO₂ emissions need to fall by 3.8% per year on average until 2050” to keep the rise in global temperatures well below 2°C and towards 1.5°C.
The outlook presents several possible scenarios for the evolution of energy-related CO₂ emissions. The “Baseline Energy Scenario”, reflecting the policies set around the time of the Paris Agreement in 2015, would see a compound annual increase of emissions by 0.7%, resulting in a temperature rise of 3°C from 2050 onwards. Forecasts reflecting international governments’ current policies to cut emissions, referred to as the “Planned Energy Scenario”, indicate a drop in energy-related CO₂ emissions to 33Gt by 2050. This is approximately 23.5Gt more than what is needed to keep in line with the current agenda set by the Paris Agreement. IRENA’s “Transforming Energy Scenario”, in contrast, illuminates a pathway which incorporates the objectives set by the Paris Agreement by emphasising greater deployment of renewable energy sources and improved energy efficiency measures. In this scenario fossil-fuel use would drop by about 75% by 2050.
Simply put, the Transforming Energy Scenario would involve widespread adoption of renewables and related technologies, as well as improvements in energy efficiency. Together, these initiatives would account for 90% of the mitigation measures required. Unlocking this would necessitate capital to be fully mobilised and redirected towards clean energy technologies and efficiency measures, while subsidised fossil fuels would be phased out completely. The total investment required in this scenario would reach US$110tn (£89tn) by 2050 or 2% of average annual GDP during the period. Following COVID-19 these investments could include developments in flexible power grids, efficiency solutions, electric vehicle charging, energy storage, interconnected hydropower and green hydrogen.
As well as obvious environmental and health benefits, the savings from spurring the deployment of renewables and energy efficiency measures is greater than the costs. IRENA finds that every US$1 (£0.81) spent on these measures would yield returns of around US$3 (£2.40) and US$8 (£6.50). Over the course of the three-decade duration, this would deliver a payback of between US$50tn (£40tn) and US$142tn (£114tn) for an initial investment of US$19tn (£15tn). This would be compounded by job growth of up to 42mn by 2050, which is 64% more than the current expected growth rate of employment under the Planned Energy Scenario.
In the Transforming Energy Scenario, investments in non-renewables will require US$11.8tn (£9.5tn) of existing assets to be stranded by 2050. This could increase if deployment is further delayed. The recent slump observed in WTI crude-oil prices exposes the price volatility and increasing risk associated with oil and gas resources. IRENA argues that this is likely to accelerate the speed of electrification of transport and undermine the viability of investment in fossil-fuels in the future.
The foregoing report argues that the crisis wrought by COVID-19 offers a unique opportunity to reverse the trajectory set under the Planned Energy Scenario and could further help to bolster the deployment of renewables and improve energy efficiency. Stimulus and recovery packages implemented now to mitigate the looming economic turmoil generated by the crisis could, if harnessed correctly, encourage a different type of socio-economic system – a system premised on clean growth and renewable energy. As echoed by the International Energy Agency (IEA), stimulus packages focused on clean energy technologies could serve the “twin benefits of stimulating economies and accelerating clean energy transitions.” In other words, the international response to this Black Swan threat to the global economy could serve broader environmental and social goals, as well as help stimulate economic recovery.
