Decarbonization Comes at a Price

Talal Abu-Ghazaleh

Renewable energy sources have seen an investment surge in recent years, driven by rising natural gas prices and consumer energy efficiency. For the first time in the history of energy the global capital spending on wind and solar assets in 2022 has topped investment in oil and gas wells; a welcome development that promises to accelerate the much needed green energy transition. 

Unfortunately, in the light of the war in Ukraine’s and  the resulting major disruptions in energy supply chains, governments have begun to tighten their investment in renewables, greatly impeding the progress of  transition to green energy. This is problematic as economies globally go through a cost of living crisis which is impacting investment in much needed green alternatives needed to reach net zero emissions by 2050. Some renewable providers are even reconsidering their investments as they are becoming financially less attractive.

Internationally, delays with permits, increased taxes, higher costs, and price caps have all made investing in green energy less attractive. To speed up the green transition, governments must improve their incentives for investment in renewable sources. Removing bureaucratic and financing barriers, as well as adjusting policies to create better conditions for green energy projects must be done if the energy transition is to succeed. The International Energy Agency believes that such measures could increase renewable sources production by 25%, and the International Monetary Fund (IMF) estimates that tapping full renewable potential could generate millions of jobs worldwide in this modern technology sector.

Estimates from the IMF shows that although the cost of renewable energy has been falling due to technological advances, it is still far higher than the cost of energy coming from conventional sources. Achieving climate goals, requires governments to ensure that investing in renewables remains attractive, particularly when purse strings are being tightened across the globe and consumers are calling for cheaper energy prices after the huge energy price increases we have all been recently witnessing. 

As the Chairman of the Consortium for Sustainable Urbanization in New York, I call upon governments across the globe to strengthen their incentives to invest in renewables, to ensure that climate goals are met, without compromising the attractiveness of green energy investments. There may well be a financial price to be paid for this and the transition may not be an easy one, but it is necessary for our survival on this planet.