All nations must work in tandem to achieve net-zero emissions by 2050

According to the UNCTAD report, the top 10 developing economies by international investment in renewable energy are Brazil 32%(share of renewable energy in total project value) , Vietnam, 31%, Chile 54% and India 14%

Both the developed and developing countries are committed to enhance their respective investments into clean energy projects so as to keep the global temperature at 1.5° C and achieve net-zero emissions by 2050. It is a herculean task and requires collective efforts of all countries to increase availability of clean energy and reduce dependence on fossil fuel energy. This requirement is extremely important as otherwise the impact on the planet, people and lives will be disastrous and adversely impact the economy, availability of food grains and water.

The recovery from Covid-19 and the current global energy crisis due to the geopolitical situation and the restrictive policies being pursued by oil producing countries have attracted more investment into clean energy.

According to the latest IEA report "World Energy Investment 2023", the recovery from Covid and the response to the global energy crisis have provided a major boost to global clean energy investment

"While we analyse the investment from 2019 onwards, the clean energy investment has gone up consistently and is much higher than investment in fossil fuels from 2020 to 2023,” it says.

According to the report, comparing their estimates for 2024 with the data for 2021, annual clean energy investment has risen much faster than investment in fossil fuels over this period (24% vs 15%). They estimate that around $2.8 trillion will be invested in energy this year. More than $ 1.7 trillion is going to clean energy, including renewable power, nuclear, grids, storage, low emission fuels, efficiency improvements and end use renewables and electrification. The remainder, slightly over $ one trillion, is going to unabated fossil fuel supply and power of which 15% is to coal and the rest to oil and gas. This is a welcome development and is in the desired direction. Several factors like greater focus on alternative energy, particularly oil importing countries, volatility and high prices of oil, thereby eating the forex reserves of such oil import dependent economies, a strong alignment of climate and energy security goals and as a matter of industrial strategy as countries seek to strengthen their footholds in emerging clean energy economy. (Report of IEA World Energy Investment 2023 Overview and key Findings)

Meeting the goal of net zero emissions by 2050 and restricting global temperature to 1.5° C is still possible, albeit a bit tougher. Accordingly, the report adds that meeting these goals will require tripling renewable energy capacities to 11,000 GW by 2030, increasing annual investment in clean energy from $ 1.8 trillion in 2023 to $ 4.5 trillion by early 2030, driving a large portion of the investment to emerging and developing economies, IEA said.

The current debt crisis faced by some low-income countries and the high interest rates due to inflation control are the challenges faced by those countries despite their desire to spend on alternative energy and clean energy projects. More than 90% of the increase in clean energy investment since 2021 has taken place in advanced economies and China. Bright spots available in India, Brazil, parts of the Middle East, notably in Saudi Arabia, the UAE and Oman. The total investment in renewable energy worldwide from 2004 to 2022, from a level of 32 billion dollars in 2004 moved to $315 billion in 2017, $363 billion in 2020 and $ 495 in 2022.

According to the UNCTAD report, the top 10 developing economies by international investment in renewable energy are Brazil 32%(share of renewable energy in total project value) , Vietnam, 31%, Chile 54% and India 14%. The other countries are Kazakhstan, 31%, Taiwan,63%, Egypt,14%, Mexico, 13%, Indonesia,11% and Morocco, 34%. To bridge the emissions gap, India must triple its solar and wind capacity, exceeding 500 GW in renewable power generation in the next decade, for which India has allocated an investment of Rs 2.44 lakh crore.

According to McKinsey, the energy transition requires substantial investment, $ 9.2 trillion in annual average spending on clean energy assets, which needs to scale up by $ 3.5 trillion more than what it is today, amounting to around $ 275 trillion between 2021 and 2050.

The G20 New Delhi Declaration recognises the need to reduce global greenhouse gas emissions by 43% by 2030 relative to 2019 levels and noted that global peaking must occur before 2025. The G 20 "encourages tripping of renewable energy capacity by 2030 and voluntary doubling the rate of energy efficiency improvement by 2030." The leader's declaration lays down that "$5.8 trillion - 5.9 trillion will be required in the pre 2030 period for developing countries, in particular for their needs to implement their NDCs as well as the need of $4 trillion per year for clean energy technologies by 2030 to reach net zero by 2050 ".

The report calls"on all relevant financial institutions, such as MDBs and multilateral funds to further strengthen their efforts including by setting ambitious adaption finance targets and announcing, where appropriate, revised and enhanced 2025 projections "

The world recognises the need to take effective steps towards mitigating the risk of climate change and recognises the need to step up.investments in alternative clean energy projects and bring parallel energy supply from solar, wind, hydrogen and other renewable sources to reduce dependence on fossil fuels even though its use cannot be avoided, as the global temperature if not restricted to the committed level to 1.5° C will have severe repercussions. Energy transition and decarbonisation need large capital investment, which at the current juncture is a staggering proposition. Moreover, with the high debt already contracted by most of the countries, particularly low-income nations, the space available for the government to take initiative towards decarbonisation becomes limited in spite of their desire and commitments to reach net zero emissions by 2050.

Hence corporates and the private sector should take this task on an emergency mode as they cannot look at short-term returns in terms of their CSR contributions.

(The author is former Chairman & Managing Director of Indian Overseas Bank)