Recovery Plans and the forthcoming all-time record for global emissions

As pandemic erupted early 2020, many institutions called for governments to adopt measures aimed at providing support to economies in a way to cope with the climate change threat. Among those, the IEA has been the very first one to stress the urgency to shape the recovery as sustainable and resilient as possible. Straight after the IEA Sustainable Recovery Plan provided a three year energy spending programme outlining what governments could have done to conjugate multiple objectives of boosting economic growth, create jobs, while putting global emissions on a trajectory towards net zero by 2050.

 Since then we have seen a proliferation of government announcements and commitments to “build back better” and ambitions to reach carbon neutrality by 2050. This is definitely encouraging, but one thing is making plans and announcements; another thing is to follow up with concrete policies and real implementation.

 As usual, there is only one way to assess if we are ‘walk the talk’ – make hands dirty with data.

 The new IEA Sustainable Recovery Tracker does exactly this. Such comprehensive analysis has two main objectives: on one side monitors in real time the measures implemented by the government as a response to the pandemic; on the other side, it estimates what those policies means in terms of clean energy investment and global CO2 trajectory.

 So far, countries around the world have deployed an historic and unprecedented level of fiscal support, that we estimate in the order of $16 trillion dollar, more than one-sixth of global GDP. G20 countries account for almost the entire sum, but here start the issues:

1. First, the split within the group is very uneven: advanced economies account for about 90%, while the rest takes place in emerging ones.
2. Second, and evenly more worrying, only 2% of total spending is for clean energy measures, or $380 billion that governments have committed to be spend throughout the current decade. The areas that have received most of attention include the power sector (solar/wind/networks); energy efficiency; mass transit systems and finally hydrogen.   

The first consideration emerging is that the pandemic is contributing to widening the gap between developed and developing world even in the clean energy domain. While in advanced economies, investment in clean technologies approach levels that would be needed to put their systems closer to a decabornised trajectory, the same is not true for poorer countries.

 There is a remarkable difference between advanced economies and emerging ones, but this is not only in terms of scale and size of measures adopted but also in the nature of such measures. In emerging economies, policies have mainly aimed at providing relief and support to population rather than looking for a substantial change in the system. This implies that those measures could be seen more as a subsidy and having short-live effect.

 A second element assessed by the analysis is what such government spending means for future investment and here the picture could be half-empty / half full. The stimulus plans adopted are estimated to help clean energy investment to increase by about $350 billion per year in the period up to 2023.

• The bad news is that this represents only one-third of what envisaged in the IEA Sustainable Recovery Plan we released last year and calling for a need of $1 trillion per year.
• The good news is that this is a remarkable 30% increase compared to levels of investment in clean energy seen over the last years – so short of targets but not negligible.

 However, the big scope of all this efforts is still out of sight. In terms of global emissions, while measure implemented allows to keep emissions lower than what would have been in their absence, policies implemented are insufficient to prevent emissions to go back to pre-pandemic levels as early as 2022. And keep growing afterwards, reaching an all-time high in 2023.

While spending remains short of what would be needed, some encouraging news come from the innovation sphere as many governments are trying to position their own domestic industry as global leaders in the clean energy transition. Hydrogen was the huge winner, but other big areas like CCUS, batteries, and advanced nuclear saw substantial attention. Advanced biofuels could see more, as well as many of the less glamorous categories, like advanced grid technology and hyper efficient appliances and materials.

 The overall conclusion is that - shocked by the worst pandemic of modern age - efforts seem mostly directed to come back to usual normal, rather than findings a new (and better) normal. But the last word has not said yet!