Russia's war has mobilized $500 billion in clean energy spending

Breanne Deppisch

December 25, 06:30 AM December 25, 06:30 AM

Russia’s war in Ukraine has accelerated the pace of clean energy spending, according to a report from the world’s leading energy agency, sparking $500 billion in new government investments alone, as leaders seek to transition away from fossil fuels and keep costs down for consumers.

The two primary drivers of government clean energy spending this year were concerns over energy security and soaring costs of commodities, according to the International Energy Agency’s Government Energy Spending Tracker.

In Europe, the energy crisis sent natural gas prices soaring to a record high of more than 300 euros per megawatt hour in August, touching off fears of an affordability crisis, while gas prices in the U.S. reached an all-time high of more than $5 per gallon in June.

But the crisis has also led governments to embrace clean energy policies in an effort to decrease global demand for every type of fossil fuel in the near future. As a result of the shift to clean energy, coal use will peak within the next few years before declining, while natural gas demand will plateau by 2030, the report said. Total renewable capacity growth is set to nearly double in the next five years, the report found, overtaking coal as the largest source of electricity generation.

RUSSIAN OIL EXPORTS CRATERED BY MORE THAN HALF SINCE G-7 PRICE CAP BEGAN

The U.S. was at the fore of clean energy spending this year, according to the tracker, largely due to its August passage of the Inflation Reduction Act, which allocates more than $360 billion in clean energy and climate spending. It was followed closely by the European Union — and particularly, the governments of Finland, France, and Germany.

Other countries, including Japan and South Korea, have also ramped up their renewable energy investments this year. Japan announced the launch of its Green Transformation program, which invests in clean energy technologies such as nuclear, low-emissions hydrogen, and ammonia, while South Korea has accelerated its efforts to increase the amount of nuclear power and renewable sources in its energy mix.

Energy security was a major concern this year, especially in the European Union, which depended heavily on Russian fossil fuels prior to the war. But in the 10 months since Russia’s invasion, the bloc has raced to accelerate clean energy projects, such as solar, wind, and nuclear power, bringing down its total demand for natural gas and oil by 20% this decade, and coal demand by 50%.

Meanwhile, Inflation Reduction Act investments put the U.S. on track to see its annual solar and wind capacity increase by 2.5 times by 2030, compared to today’s levels, and electric vehicle sales increase by seven times the current amount.

In total, the new national investments in clean energy bring to $1.22 trillion the amount that governments have allocated to clean energy since the start of the COVID-19 pandemic.

That funding has also substantially incentivized spending by the private sector, the IEA found: Government spending is expected to mobilize flows of private investment by another 50% by 2030, reaching more than $2 trillion annually.

“The responses from governments to the crisis are going in the right direction,” IEA Executive Director Fatih Birol said in a statement.

“The unprecedented financial support we are seeing for clean energy transitions is improving energy security and dampening the impact of high fuel prices on customers," he said.