$19 trillion — According to the International Renewable Energy Agency (IRENA), that’s amount the global economy stands to gain if countries rise to the challenge of meeting the goals outlined in the Paris Agreement on climate change.
In a new report released by IRENA for the German government, the energy body highlighted how investment in renewable energy and energy efficiency — crucial measures for keeping global warming below the agreed 2 degrees Celsius limit — has the potential to add approximately .8 percent to global GDP by 2050.
However, current rates of investment are not enough to achieve the desired outcome. The CO2 emission intensity of the global economy would need to be reduced by 85 percent in 35 years. This means reducing energy CO2 emissions by 2.6 percent per year on average, or .6 gigatons per year in absolute terms.
Investment would essentially need to double in order to speed up the transition to a low-carbon economy, a sum of around $3.5 million annually. IRENA and the International Energy Agency (IEA) — which co-authored the report — also pointed out that the percentage of renewables as a primary energy source would also need to change substantially, increasing to 65 percent by 2050 from 2015’s 15 percent.
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While companies such as DONG Energy and Royal Dutch Shell recognize the benefit and necessity of embracing a low-carbon future, the move is still a hard sell for many. The IRENA report suggests that the transformation of the energy sector to a low-carbon model would mean abandoning $10 trillion of coal, gas and oil assets. With investment in renewables, however, these losses could easily be offset, with an added advantage of creating around six million jobs.
Of course, these numbers are estimates and are based on best-case-scenario. The Paris Agreement did not commit countries to specific emissions reduction targets, rather countries have set their own “nationally determined contributions.” In addition to private sector initiatives, government must create the enabling policy framework to spur the acceleration of the transition, including long-term stability for private investments in renewables.
“The rapid phase-out of fossil fuel subsidies, CO2 prices rising to unprecedented levels, extensive energy market reforms and stringent low-carbon and energy efficiency mandates would be needed to achieve this transition. Such policies would need to be introduced immediately and comprehensively across all countries,” the IEA and IRENA stated.
Subsidies that sustain aging conventional energy industries should be abandoned in order to level the playing field. Modern energy access, fair competition and sustainable development need to underpin energy policy-making.