IEA calls for $3 trillion global investment in COVID-19 recovery
The International Energy Agency has unveiled a global COVID-19 recovery plan for the global energy sector which outlines a three-year series of actions designed to revitalize economies, boost employment and make energy systems cleaner and more resilient.
At a live-streamed press briefing, IEA executive director Dr Fatih Birol said: “Our numbers show that there has been a huge impact across the energy sector, some parts more, some parts less, and a big decline in carbon usage.
“We are putting on the table a road-map of how to get out this crisis in better shape, [meaning] a much more modern, cleaner, more resilient energy system, while energy policies give a boost to economic growth, and help to create new jobs.”
The IEA’s Sustainable Recovery Plan offers an energy sector pathway for governments to spur economic growth, create millions of jobs and put global emissions into structural decline.
By integrating energy policies into government responses to the economic shock caused by the COVID-19 crisis, the plan would also accelerate the deployment of modern, reliable and clean energy technologies and infrastructure.
In an analysis carried out in cooperation with the International Monetary Fund, the report shows that the set of policy actions and targeted investments over the 2021-2023 period that are outlined in the Sustainable Recovery Plan can achieve a range of significant outcomes, notably:
- Boost global economic growth by an average of 1.1 percentage points a year;
- Save or create roughly nine million jobs a year;
- Reduce annual global energy-related greenhouse gas emissions by a total of 4.5 billion tons by the end of the plan.
In addition, the plan proposes other improvements to human health and well-being, including driving a 5% reduction in air pollution emissions, bringing access to clean-cooking solutions to around 420 million people in low-income countries, and enabling nearly 270 million people to gain access to electricity.
The $3 trillion dollar question
Achieving these results would require global investment of about $1 trillion annually over the next three years. This sum represents about 0.7% of today’s global GDP and includes both public spending and private finance that would be mobilized by government policies.
“Governments have a once-in-a-lifetime opportunity to reboot their economies and bring a wave of new employment opportunities while accelerating the shift to a more resilient and cleaner energy future,” said Dr Birol.
“Policymakers are having to make hugely consequential decisions in a very short space of time as they draw up stimulus packages. Our Sustainable Recovery Plan provides them with rigorous analysis and clear advice on how to tackle today’s major economic, energy and climate challenges at the same time. The plan is not intended to tell governments what they must do. It seeks to show them what they can do.”
Based on detailed assessments of more than 30 specific energy policy measures, the Sustainable Recovery Plan considers cost-effective approaches, the circumstances of individual countries, existing pipelines of energy projects, and current market conditions. It spans six key sectors – electricity, transport, industry, buildings, fuels and emerging low-carbon technologies.
Employment is critical to the recovery
The IEA’s new energy employment database shows that in 2019, the energy industry – including electricity, oil, gas, coal and biofuels – directly employed around 40 million people globally. The special report estimates that 3 million of those jobs have been lost or are at risk due to the impacts
of the COVID-19 crisis, with another 3 million jobs lost or at risk in related areas such as vehicles, buildings and industry.
The largest portion of the millions of new jobs created through the Sustainable Recovery Plan would be in retrofitting buildings to improve energy efficiency and in the electricity sector, particularly in grids and renewables. The other areas that would see higher employment include energy efficiency in industries such as manufacturing, food and textiles; low-carbon transport infrastructure; and more efficient and new energy vehicles.
Renewed investment for ensured resilience
Recent IEA analysis has shown that global energy investment is set for an unprecedented plunge of 20% in 2020, raising serious concerns for energy security and clean energy transitions. According to the IEA, as a result of the Sustainable Recovery Plan, the global energy sector would become more resilient, making countries better prepared for future crises.
Investment in enhancing electricity grids, upgrading hydropower facilities, extending the lifetimes of nuclear power plants, and increasing energy efficiency would improve electricity security by lowering the risk of outages, boosting flexibility, reducing losses and helping integrate larger shares of variable renewables such as wind and solar PV. Electricity grids, the backbone of secure and reliable power systems, would see a 40% increase in capital spending after years of declining investment. This would put them on a stronger footing to withstand natural disasters, severe weather and other potential threats.
The Sustainable Recovery Plan is designed to avoid the kind of sharp rebound in carbon emissions that accompanied the economic recovery from the 2008-2009 global financial crisis and instead put them into structural decline. The IEA report highlights key aspects of today’s situation that make it a unique opportunity for government action.
Compared with the 2008-2009 crisis, the costs of leading clean energy technologies such as wind and solar PV are far lower, and some emerging technologies like batteries and hydrogen are ready to scale up. Global carbon emissions flat-lined in 2019 and are set for a record decline this year. While this drop, which results from economic trauma, is nothing to celebrate, it provides a base from which to put emissions into structural decline.
“This report lays out the data and analysis showing that a cleaner, fairer and more secure energy future is within our reach. The Sustainable Recovery Plan would make 2019 the definitive peak in global emissions, putting them on a path towards achieving long-term climate goals,” Dr Birol said.
“The IEA is mobilizing its analytical resources and global convening power to bring together a grand coalition that encompasses government ministers, top energy industry CEOs, major investors and other key players who are ready to pursue a sustainable recovery that will help steer the world onto a more resilient trajectory. This is why the Sustainable Recovery Plan will be a key element informing discussions at the IEA Clean Energy Transitions Summit on 9 July.”
The IEA Clean Energy Transitions Summit on 9 July will gather ministers from countries representing 80% of global energy use, as well as industry CEOs, big investors and other key leaders from the public and private sectors around the world.
The high-level virtual dialogue will review both near-term actions for sustainable recovery and measures to accelerate clean energy technology innovation for reaching long-term decarbonization plans.
View the full press briefing here: