Worldwide Clean Energy Production Deficit | CEA
TL/DR –
To meet the International Energy Agency’s (IEA) target of global net zero carbon emissions by 2050, the share of renewable power generation needs to increase to 60% and the share of electric vehicles in global car sales needs to go up to 60% by 2030. Significant expansion in global clean energy technology manufacturing is required to meet these targets, which would need a cumulative global investment of around $640 billion between 2022 and 2030, according to the IEA. The Bipartisan Infrastructure Law and the Inflation Reduction Act, signed by President Biden, are aimed at reducing the global clean energy manufacturing gap by accelerating domestic production, reducing global production costs and funding research and development of clean technologies.
To Achieve Net-Zero Carbon Emissions by 2050
The International Energy Agency’s (IEA) roadmap for achieving global net-zero carbon emissions by 2050 outlines that by 2030, renewable energy must account for 60% of global power generation, up from 30%. Electric vehicle sales globally must also increase from 6% to 60%.
In order to meet these goals, a significant increase in global clean energy technology manufacturing is required. While countries have signaled plans to increase manufacturing capacity for solar photovoltaics (PV) and electric vehicle (EV) batteries, gaps remain in scaling up other clean energy technologies, such as wind turbines, heat pumps, hydrogen electrolyzers, and fuel cell trucks.
The Need for Investment in Clean Energy Technology Manufacturing
The IEA estimates that a total investment of $640 billion between 2022 and 2030 will be required to expand the global manufacturing capacity of these six clean energy technologies. This stands in context to the $4.8 trillion in gross private domestic investment recorded in 2022.
The Bipartisan Infrastructure Law and the Inflation Reduction Act, both signed into law by President Biden, aim to reduce the global clean energy manufacturing gap by promoting domestic production, reducing global production costs, and offering subsidies for research and development (R&D).
Stimulating Domestic Production
The Inflation Reduction Act includes tax credits, loans, and grants to incentivize domestic clean energy manufacturing. This includes support for key technologies such as solar PV, wind turbines, batteries, electric vehicles, and heat pumps. These measures aim to reduce risk in the clean energy market and stimulate private sector investments, with private companies already announcing $71 billion in commitments to clean energy.
Reducing Costs
The introduction of new clean energy technologies is expected to drive cost reductions through economies of scale and learning-by-doing. Both these factors contribute to lower costs at higher levels of output. For instance, Germany’s renewable energy law drove innovation in the solar PV market, reducing costs by over 50% between 2001 and 2012. The Inflation Reduction Act aims to replicate this success across emerging clean energy technologies.
R&D Subsidies
The Bipartisan Infrastructure Law aims to close the clean energy manufacturing gap by boosting domestic R&D. This is expected to produce significant global knowledge spillovers. Paired with the 2020 Energy Act, the law triples the Department of Energy’s annual funding for energy programs and significantly increases funding for R&D.
The investments outlined in both the Bipartisan Infrastructure Law and the Inflation Reduction Act represent the largest commitment to clean energy manufacturing yet. They aim to reduce costs and drive innovation across the globe, but even with these efforts, the world’s clean energy production may still fall short of the levels needed to achieve net-zero by 2050. This presents an economic opportunity and urgent need for global commitment to a clean energy future.
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