Global emissions are expected to peak in this decade, then decline to 2017 levels by 2030 and lead to a 3°C temperature rise by 2100 in a reference scenario. To keep the 1.5°C target possible, huge investments in decarbonisation are needed in the current decade, according to JRC modelling.
The results show that investment in the energy sector needs to increase by 70% this decade, reaching over $3 trillion by 2030, energy efficiency levels to double, and renewable energy deployment to reach 11 TW by 2030 .in the 1.5°C scenario. Increasing investments in clean technologies offset declining investments in fossil fuels, increasing investment demand in various sectors of the economy, such as the construction and manufacturing sectors. This requires a larger workforce in both direct jobs and jobs throughout the value chain.
Published in the Global Energy and Climate Outlook 2023 report, the findings show that the share of energy sector investment in global GDP in the future remains broadly the same as today, indicating that the global economy can cope with the burden of decarbonisation.
The report examines investments in energy production, conversion, supply and demand and how they need to accelerate in the current decade to align the global emissions trajectory with a 1.5°C compatible path. It also highlights the implications for employment.
Energy supplies: sharp investment growth that remains manageable
The initial investment in many low-emission technologies is higher than their high-emission competitors, but total lifetime costs, including running costs, are often lower due to lower operating costs.
According to the report, annual spending on energy generation and delivery equipment is set to increase by 70% this decade, rising from $2 trillion in 2022 to nearly double by 2045, reaching $3.8 trillion, with a particularly sharp increase in investments in clean energy production in the current decade.
But investment as a share of global GDP remains at the historical average of 1.4% over the projection period in the 1.5°C scenario, suggesting that the financial burden is manageable. Reflecting the sharp increase in investment during this decade, the share of global GDP spent on energy supplies increases in 2030, but then stabilizes and declines to be lower than today by 2050.
Clean energy technologies
Global annual investment in clean energy technologies increases 6-fold from 2022 to 2030 under a 1.5°C scenario, from $1.0 trillion today to $5.7 trillion in 2030. Annual investment in batteries for electric vehicles to increase 14 times by 2030, representing the largest investment in clean technology. This results in a 29-fold increase in deployment by 2030 and a 60% reduction in battery costs by 2030.
Annual investment in clean power generation technologies doubles from 2022 to 2030. Annual new offshore and onshore wind capacity increases by 8x and 2x, while unit costs are reduced by 16% and 20% respectively %. Total PV installed capacity increased by 270%, offset by a 35% reduction in unit costs.
Investments in hydrogen and hydrogen fuels (e-fuels and ammonia) account for about a quarter of total clean technology investments by 2050. Despite their minor role in total final energy consumption, they are critical to the decarbonisation of specific sectors such as aviation, shipping, and steel production and replacing gray hydrogen in fertilizer production.
The effect on supply chains and jobs
Increasing investment brings benefits beyond ensuring the energy transition and its environmental and climate benefits. Higher investments in clean technologies offset declining investments in fossil fuels, increasing investment demand in various sectors of the economy, such as the construction and manufacturing sectors.
Changes in investment in various energy technologies affect the jobs needed to supply the investment, called indirect employment. Although these indirect jobs have declined over time for the fossil fuel sector, overall there has been an increase in the number of indirect jobs created by energy technology investments caused by the expansion of renewable energy sources. From 2020 to 2050, there is a clear shift in indirect employment from fossil fuel sectors to renewables.
Investments from the electricity generation sectors indirectly lead to employment mainly in the sectors related to electrical goods, other equipment goods, construction, market services and land transport. For investments from the energy sector, construction and other equipment goods are the largest sectors responding to investment needs.
By 2050, under a 1.5°C scenario, there would be a total of 590,000 jobs worldwide in construction for the electricity generation sector. In addition, there are a total of over 800 thousand jobs in the “other equipment goods” sector for the production of power generation equipment.
Related links
Global Energy and Climate Outlook 2023 – Investment Needs in a Decarbonized World
