A Call to Clean Energy

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The global energy crisis, triggered by Russia’s invasion of Ukraine, has intensified debate over which new energy projects should proceed and has "thrown investment plans across all energy sectors into turmoil."
Investment decisions face a considerable lag between commitment and project operation; failing to account for this lag risks future volatility.
The article emphasizes that "we do not have to choose between responding to today’s energy crisis and tackling the climate crisis" and that "massive investment in clean energy—including energy efficiency, renewables, electrification, and a range of clean fuels—is the best guarantee of energy security in the future."

Current and required spending:
- "The $1.4 trillion we expect the world to spend on energy transitions in 2022 would have to rise to well over $4 trillion by 2030 to get us on track to limit global warming to 1.5 degrees while also ensuring sufficient energy supply."
Recent trends:
- Clean energy investment grew "only 2 percent a year" in the five years after the 2015 Paris Agreement, but "since 2020, this rate has risen to 12 percent a year."
- Investment in battery energy storage "is hitting new highs and is expected to double in 2022."
IEA pathways:
- The IEA’s "Roadmap to Net Zero Emissions by 2050" suggests a "massive surge in investment in clean energy technologies and energy efficiency" could cut global fossil fuel demand so much "that there would be no need for investment in new oil and gas fields."
- Continued spending on existing assets—including investments to reduce upstream emissions—remains essential in that pathway.

Geographic concentration:
- Recent clean energy investment momentum is "concentrated in advanced economies and China," leaving "many emerging market and developing economies, particularly in Africa, unable to attract the clean energy investments and financing they need."
- "Except in China, clean energy spending in emerging market and developing economies is stuck at 2015 levels."
Funding shortfall:
- The overall amount for clean energy spending in these economies is "about $150 billion a year," described as "far short of what is needed."
- After the pandemic, "the number of Africans without access to electricity rose, wiping out years of progress."
Sustainable finance distribution:
- "Sustainable debt issuance in 2021 hit a record $1.6 trillion, but more than 80 percent was in advanced economies."

Growth areas:
- Increased spending on solar and wind power, including "a record year for offshore wind power in 2021."
- "Strong momentum" in low-emissions hydrogen, new battery technologies, and carbon capture, utilization, and storage (CCUS).
CCUS pipeline:
- "In 2021 plans for about 130 commercial-scale carbon capture projects in 20 countries were announced, and six CCUS projects were approved for final investment."
Other options:
- Opportunities to extend production from existing fields, utilize flared or vented natural gas, build liquefied natural gas import terminals that could later handle low-emission hydrogen or ammonia, and deploy nuclear power—including "small modular reactors that are in development."

Role of IFIs and development institutions:
- They can "work with local governments to develop policies to improve the investment environment," and their financing can "help de-risk private sector involvement."
ESG and standards:
- "Sustainable finance, and the wider world of Environmental Social and Governance (ESG) investing, would greatly benefit from clearer standards, definitions, and reporting obligations."
- The EU has introduced "risk management and reporting requirements for financial market participants regarding climate risks and sustainability practices."
- Clearer guidelines for financing credible transition plans in carbon-intensive sectors are needed so "ESG requirements do not prevent financing for essential-but-emitting energy sectors."
Oil and gas industry opportunity:
- The run-up in prices is "set to generate an unprecedented $2 trillion windfall for oil and gas producers this year, bringing their total income to a record $4 trillion in 2022."
- Despite that, "the oil and gas industry is still spending only modestly on energy transitions: on average, clean energy spending accounts for about 5 percent of total oil and gas company capital expenditure. That is up from 1 percent in 2019, but still far too little."
- The windfall is framed as "a once-in-a-generation opportunity for oil- and gas-producing countries to diversify their economies" and for companies to "seize leadership roles in some of the clean energy sources."

Pursue simultaneous short-term energy security and long-term decarbonization:
- "Immediate substitutes" for disrupted fuels are necessary to avoid economic collapse, but investments should avoid "locking in heavy emissions" or creating stranded assets.
Focus on judicious, flexible infrastructure:
- Prioritize options that can be repurposed for low-emission fuels (e.g., LNG import terminals convertible to low-emission hydrogen/ammonia).
Invest in demand-side measures and efficiency:
- The IEA’s "10-Point Plan to Reduce the European Union’s Reliance on Russian Natural Gas" includes renovating building stock to reduce demand and calls out better materials, insulation, efficient appliances, and smart electrical grids.
- Consumer actions such as adjusting thermostats are highlighted as immediate, collective savings.
Mobilize international finance and policy support for developing economies:
- International financial organizations should help de-risk projects and improve policy frameworks to attract private capital to emerging market and developing economies.
Strengthen ESG frameworks and engagement with emerging markets:
- Develop clearer standards, definitions, and reporting obligations, and ensure the ESG ecosystem "engage more with emerging market and developing economies" and account for their circumstances.

The crisis is described as "the first truly global energy crisis" and a moment that "can transform this crisis into a historic turning point toward a cleaner and more secure energy future" if the right investment decisions are made.
Examples of encouraging policy steps cited include the Inflation Reduction Act (United States), the REPowerEU package (European Union), Japan’s Green Transformation plan, and the growth of renewables in China and India.
The article underscores that "governments and businesses that invest early and wisely stand to reap the benefits."

Source: A Call to Clean Energy, FATIH BIROL, December 2022 (F&D Magazine).

A Call to Clean Energy
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