So far, the global economy in 2020 has been defined by plummeting carbon emissions and big government spending. By 2023, the two forces together can lead to both unprecedented environmental and economic benefits with $1 trillion dollars of investment each year.
Global GDP would grow 3.5 percent higher, if investment is geared towards climate change solutions, against other recovery approaches, while energy-related carbon emissions would drop by nearly 14 percent of last year's total
In a joint analysis with the International Monetary Fund, International Energy Agency (IEA) made these claims. The Paris-based IEA yesterday released a special edition of its annual World Energy Outlook, saying the world now has a great opportunity to meet the goals enshrined in the 2015 Paris climate change agreement.
The findings come at a moment when many nations are beginning to consider what the next phase of pandemic stimulus should look like, giving its recommendations unusual urgency.
The report looks at more than 30 individual policies with the potential to both lift the world out of its Covid-19 economic slump and generate climate-safe growth. Together they would create 9 million jobs across a variety of energy-intensive sectors.
The new analysis focuses on potential job gains and targeted policies in six sectors: electricity, transport, buildings, industry, fuels, and technology. Retrofitting buildings to make them more efficient users of energy would create the most jobs, followed by the solar and power-grid work.
Many of the recommended policies would accelerate changes already enabled by technology and welcomed by markets, like electric vehicles, batteries and renewable power. The policy catalog also encourages urgent development of expensive or new technologies that have yet to reach market scale, including carbon-capture and storage, modular nuclear reactors, and high-speed rail networks.
The $1 trillion in annual investment required in the IEA's estimates would come from public and private sources, and is equivalent to about 0.7% of global GDP. About 30% of that would come from governments, which amounts to less than 10% of the funds committed to coronavirus economic relief, according to the IEA. And it would come on top of already planned investments in clean energy, the report says.
The majority of private investment would flow into the industrial and buildings sectors, guided by public policy incentives or mandates. The economic impacts from Covid-19 have hit energy and related industries including automobile particularly hard.
"Investors want Covid-19 economic recovery plans that deliver a cleaner and greener future. The IEA has shown this is not only desirable, but economically astute and essential in addressing the climate crisis," says Stephanie Pfeifer, CEO of the Institutional Investor Group on Climate Change.
Not everyone was full of praise, however. "The IEA assumes very high levels of public and private spending in developing countries," says Brian O'Callaghan, a climate researcher at the University of Oxford. "Their numbers are completely unrealistic without significant external support."
While global CO₂ emissions from energy plateaued in the mid-2010s, they began to grow again in 2018 and 2019. Even the slowdown wasn't enough to bring the world in line with international climate goals.
The economic pain inflicted this year by Covid-19 may cause an emissions drop by 8% - more than UN's recommendation. But to reduce emissions permanently, the world must accelerate the transformation of energy-related industries.
To highlight the situation, IEA's Executive Director Fatih Birol points to the 2008 financial crisis which resulted in falling carbon emissions but a shock rebound in 2010 to highest levels in recorded history.
The report's three-part focus on growth, jobs, and sustainability is particularly clear in detailed case studies of how emerging economies can benefit from particular reforms. India, the report says, has installed 500,000 electric irrigation pumps since 2010. The pumps, which can be powered by the sun, help make farming more efficient. Every 10% increase in crop yields would cut poverty by 7% in Africa and 5% in Asia.
The report further positions the IEA, founded by rich nations in 1974 in the wake of the first oil shock, as a bridge between debates about climate change and the future of energy.
"One thing is clear for me: The problem is not the energy," Birol says. "The problem is the emissions. We need energy—energy is a good thing. But we have to reduce emissions."