The International Energy Agency’s (IEA’s) Sustainable Recovery Tracker’s latest update shows that clean energy spending earmarked by governments in response to the Covid-19 crisis rose by 50% over the past five months to more than $710-billion worldwide.
However, “troubling” imbalances persisted between regions.
The unprecedented amount of enacted spending was more than 40% higher than the global green spending contained in the stimulus packages that governments enacted following the global financial crisis in 2008.
The IEA reported on April 12 that advanced economies accounted for the bulk of this effort, with more than $370-billion earmarked for spending prior to the end of 2023 – a level of short-term government spending that would help keep the door open for the IEA’s global pathway to net-zero emissions by 2050.
Across emerging and developing economies, however, the IEA noted that the total amount of fiscal resources being dedicated to sustainable recovery measures was about 10% of the amount dedicated in advanced economies, reflecting their very different financial and economic circumstances.
In emerging and developing economies, about $52-billion of sustainable recovery spending is planned by the end of 2023 – well short of what is needed to reach net-zero goals.
The IEA believes the gap is unlikely to narrow in the near term, as governments with already limited fiscal means now face the challenge of maintaining food and fuel affordability for their citizens amid the surge in commodity prices following Russia’s invasion of Ukraine.
“Countries where clean energy is at the heart of recovery plans are keeping alive the possibility of reaching net-zero emissions by 2050, but challenging financial and economic conditions have undermined public resources in much of the rest of the world,” said IEA executive director Dr Fatih Birol, adding that international cooperation would be essential to change these clean energy investment trends, especially in emerging and developing economies where the need was greatest.
Even in advanced economies, some of the earmarked funds were at risk of not reaching the market within their envisaged timelines, the IEA noted. Delays in setting up government programmes, ongoing supply chain disruptions, labour shortages and financial uncertainty have clogged project pipelines, the agency stated.
In addition, consumer-facing measures – such as incentives for building retrofits and electric vehicles – were reportedly struggling to reach a wider audience because of issues including red tape and a lack of information.
“Governments that can remove red tape and quickly set up effective programmes will be the ones to reap the benefits and position themselves in the new global energy economy that is emerging . . . The world still needs to massively expand its clean energy deployment efforts throughout this decade, first and foremost in developing economies, if we are going to preserve the hope of limiting the global temperature rise to 1.5 °C,” Birol said.
Rising fossil fuel prices, which have been exacerbated by Russia’s invasion of Ukraine, have pushed governments both to enact immediate measures to make energy more affordable and to explore efforts to reduce fossil fuel dependency, the IEA said.
The agency’s tracking showed that emergency affordability support by governments globally for households and businesses had reached about $270-billion since the start of the northern hemisphere winter season last year.
However, many of the measures most effective at reducing oil and gas demand – such as installing heat pumps and expanding the use of public transport, bike lanes and high-speed rail – have not yet received the needed level of government support to date, the IEA said.
Overall, public spending on sustainable energy remained a small proportion of the unprecedented $18.2-trillion in fiscal outflows that governments have dedicated to countering the economic impacts of Covid-19.
Nonetheless, the IEA estimates that government spending that was earmarked for spending prior to 2023 could support more than R1.6-trillion worth of sustainable investments by mobilising higher levels of private sector participation.
The IEA’s Sustainable Recovery Tracker examines and publishes over 1 000 national policies enacted globally to accelerate clean energy transitions as part of fiscal measures to limit the economic fallout from the pandemic. The tracker was first published in July last year and its update was requested by Group of 20 (G20) leaders at their November meeting in Rome last year.
The IEA said it would continue to track government fiscal responses to the ongoing energy crisis, as well as track government spending directed at clean energy, in line with the G20’s request.
The IEA noted that, going forward, the Sustainable Recovery Tracker would broaden the government energy spending it monitors, including how governments use fiscal means to ensure security of supply, maintain affordability and advance clean energy transitions against the benchmark of the IEA’s Net Zero Emissions by 2050 scenario.