Putting Public Finance on the Right Side of History
With the urgency of the climate crisis becoming clearer by the day, governments and multilateral lenders must end public financing for fossil fuels and increase their support for renewables as soon as possible. This year's United Nations climate-change conference offers the perfect opportunity to lock in such commitments.
BRUSSELS – The economics of renewable energy have improved beyond recognition. Solar power is now the cheapest form of electricity in history. Over 90% of power-generation capacity added around the world last year was in renewables. But to stand a chance of limiting global warming to 1.5° Celsius above pre-industrial levels, the world’s energy systems must transform even faster. And that requires governments and public financial institutions to stop supporting fossil fuels and instead emphasize international support for the clean-energy transition.
The science is clear. To meet the 2015 Paris climate agreement’s 1.5°C target, the global energy transition needs to progress 4-6 times faster than it currently is. Fossil fuels still supply 84% of the world’s energy and account for over 75% of global emissions. The International Energy Agency’s Net Zero by 2050 roadmap shows that global energy systems must be fossil-fuel-free by 2040. Yet since the Paris agreement was concluded, G20 governments have provided more than three times more public finance for fossil fuels ($77 billion) than for renewables every year.
This year’s catastrophic storms, floods, and wildfires have shown why we need climate action now, not later. And because future prosperity lies in clean energy investment, there is also a clear economic development case for redoubling our efforts. Wind and solar are now cheaper than new coal and gas power plants in two-thirds of the world. The dramatic cost reduction over the past decade has transformed global energy options, particularly in the very poorest countries, where renewables-based mini grids offer real opportunities to alleviate energy poverty and provide energy access.