The extraordinary financial windfall for the oil and gas sector from current high prices could provide a major boost to clean energy investment, according to the International Energy Agency (IEA).

Based on a new IEA analysis, global net income from oil and gas production in 2022 is expected to be nearly $2 trillion higher than in 2021 and two-and-a-half times the average of the past five years.

“If the global oil and gas industry were to invest this additional income in low emissions fuels, such as hydrogen and biofuels, it would fund all of the investment needed in these fuels for the remainder of this decade in the Net Zero Emissions by 2050 Scenario.”
IEA

According to IEA, for oil and gas producing economies, this could be a once-in-a-generation opportunity to diversify their economic structures to adapt to the new global energy economy that is emerging.

“There are many ways to respond to the immediate energy crisis that can pave the way to a cleaner and more secure future. I believe the world does not need to choose between solving the energy crisis and the climate crisis – and it cannot afford to ignore either of them.”
IEA

Surge in Renewable Energy Investment Needed

Although Russia’s invasion of Ukraine is straining global efforts to quickly adopt renewable energies, and appears to be warranting investment of fossil fuels, Dr Fatih Birol said “nobody should imagine that Russia’s invasion can justify a wave of new large-scale fossil fuel infrastructure in a world that wants to limit global warming to 1.5 °C.

“We understand why some countries and companies are looking to move ahead with the exploration and approval of large longer-term supply projects. But it typically takes many years for such projects to start producing, so they are not a good match for our immediate energy security needs.”
Dr Fatih Birol

The IEA’s landmark report on the ‘Roadmap to Net Zero Emission by 2050’ published in May 2021 indicated that a massive surge in investment in renewables, energy efficiency and other clean energy technologies could drive declines in global demand for fossil fuels on a scale that would as a result require no investment in new oil and gas fields.

To reach net zero, clean energy investment surge is needed now more than ever today. For the IEA, the key solution to today’s energy crisis— and to get on track for net zero emissions— is a dramatic scaling up of energy efficiency and clean energy.

Indeed, the global economy has come a long way in limiting global warming to 1.5 °C. Even before Russia’s invasion of Ukraine, the world was far off track from achieving its shared energy and climate goals.

More to the point, positive steps were taken at the COP26 Climate Change Conference in Glasgow in November 2021 and the amount of clean energy spending in governments economic recovery plans is increasing, IEA noted.

Nonetheless, the massive level of policy and investment efforts worldwide that is needed to move the global economy towards a net zero pathway is still not seen.