IEA says: Go green now, save €11 trillion later

"There are legitimate reasons to be hopeful. There is a clean energy economy emerging," said IEA executive director Fatih Birol. "The path towards 1.5 degrees Celsius warming is narrowing, but the spectacular growth of clean energy keeps the goal open."

Achieving this will cost €4.5 trillion per year during the peak investment years (between 2036-2040) and then fall to over half that amount by 2050.

Meanwhile, the fuel-saving benefit grows over time. While the clean technologies like solar and wind — especially offshore — needed to reach net zero by 2050 require a large upfront investment, they cost next-to-nothing to run once installed.

By comparing the future cumulative cost of fuel and green investment under the current state policy scenario and the net zero scenario that implies higher green investment, the IEA calculated the cumulative fuel savings to exceed €11 trillion, reducing the overall cost of the transition for later generations.

The cost-saving figure would be even higher if the health benefits associated with cleaner air and preventing extreme drought and flooding would also be included in the calculation, the IEA concludes.

The 1.5 degrees pathway also implies the availability of green tech jobs will increase "much faster" than fossil fuel-related jobs will disappear.

According to the report about 65m people are employed in "energy-related sectors," half which are already focused on clean energy," the IEA notes.

If countries commit to what is required to keep warming below 1.5 degrees, 30m more new clean energy jobs will be added by 2030, while only 13m fossil fuel jobs will be lost. This means that for every job lost, more than two new ones are added.

Electrification is the way

Since the last (and first) net zero report by the IEA was published in 2021, growth in solar power and electric vehicle sales have surged and are now in line with IEA's net-zero pathway.

The growth in heat pumps is also increasing but needs to double before 2030. The deployment of wind power is currently lagging "way behind," and "policy support is clearly needed," the IEA concluded.

The report notes that almost all of the clean-tech deployment is in rich countries and China, representing less than 40 percent of the world's population, which according to the IEA will need to change to keep the 1.5 degrees Celsius target in sight.

Crucially, the IEA report clarifies that the green transition is primarily an electrification process.

Over 70 percent of the green transition can delivered by electrification of fossil fuel-burning through wind and solar (25 percent), electrification of transport and heating (20 percent), and energy efficiency and behavioural changes (24 percent) such as switching cars with bikes and planes with trains.

"To bring about these changes, issues such as the high cost of train travel need to be addressed," the IEA concludes.

Reduced role for hydrogen

Due to an increased focus on electrification, the report has slightly reduced the importance of hydrogen for the transition.

Gas lobbyists like Eurogas, the European Heating Industry and big automotive companies like BMW have pushed the EU towards a maximalist adoption of low-emission hydrogen to be used as fuel for cars and public transport, residential heating and home cooking.

On Tuesday, EU Commission president Ursula von der Leyen touted the use of hydrogen buses in Prague, produced by Czech automotive company Škoda, and partly funded by €1.6bn out of the EU Just Transition Fund.

However, none of these use cases are mentioned in the IEA's net zero pathway for hydrogen.