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Clean energy investments are finally outpacing fossil fuel

For the first time, investments in solar energy are set to overtake those in oil production.

Clean energy investments are finally outpacing fossil fuel
[Source photo: Andriy Onufriyenko/Getty Images]

Staving off the worst of the climate crisis requires dramatically shifting the type of energy we invest in: less in fossil fuel projects and more in clean energy sources. And though investments in fossil fuels are still high—with banksretirement funds, and academic institutions continuing to funnel money into oil and gas—investments in renewable energy are taking over. For every $1 invested in fossil fuels, about $1.70 is now going to clean energy, according to the International Energy Agency.

Five years ago, that ratio was 1-to-1, IEA Executive Director Fatih Birol said in a statement, noting that the standout is solar, “​​which is set to overtake the amount of investment going into oil production for the first time.”

The numbers come from a recent IEA report on world energy investments, which looked at the investment picture in 2022 and the landscape for 2023. In total, about $2.8 trillion is set to be invested in energy across the globe by the end of this year, and more than $1.7 trillion of that is anticipated to go toward “clean technologies,” including not just renewable power plants and energy grids but also electric vehicles, storage solutions, low-emissions fuels, and heat pumps.

The rest of it, more than $1 trillion, is expected to go to coal, gas, and oil. That’s still a massive amount, though a movement to divest from fossil fuels has gained steam in recent years, taking trillions away from fossil fuel projects. The IEA notes that events like Russia’s invasion of Ukraine and the passing of the Inflation Reduction Act in the U.S. have also heightened concerns over energy security and fossil fuel use while boosting support for clean energy.

Still, fossil fuel investment—and use—is higher than what climate goals allow for: Coal demand hit an all-time high in 2022, and coal investment so far this year is on track to reach almost six times the levels planned for 2030, according to the IEA’s Net Zero Emissions by 2050 Scenario.

One reason for the increase in clean energy investments may be tied to decreasing costs. Between 2009 and 2019, the price of solar dropped 89%, and the price of onshore wind dropped 70%. Meanwhile, electricity from a new coal plant became 177% more expensive than electricity from new solar panels.

Clean energy prices are expected to keep declining. However, higher interest rates, the cost of capital, and “financially strained utilities” are holding clean energy investments back in many countries, according to the IEA. “Much more needs to be done by the international community,” the agency writes, “especially to drive investment in lower-income economies where the private sector has been reluctant to venture.”

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