Global GDP would increase by US$1.3 trillion if the renewable energy share doubles by 2030
By Dr Anthony Horton
On 16 January 2016, the International Renewable Energy Agency (IRENA) published a report titled ‘Renewable Energy Benefits: Measuring the Economics’ discussing their analysis of the link between renewable energy and world economies. The report is based on a study investigating and measuring the macroeconomic impacts of renewable energy deployment on a global scale. From this information, IRENA has calculated that US$1.3 trillion would be added to global GDP if the renewable energy share doubles by 2030. Under this provision there would be significant welfare benefits, with millions of indirect and direct jobs, and positive trade impacts worldwide.
As living standards improve and resource consumption increases, the total global energy demand is expected increase by 21% by 2030. Governments around the world are increasingly concerned about climate change and are actively looking at how they can supply clean energy and minimise greenhouse gas (GHG emissions). The energy sector drives the global economy and any changes can send strong ripples through it. Increasing the cost effectiveness, reliability, security and sustainability of this sector means contributing to long-term economic resilience.
IRENA’s report states that technological breakthroughs in the renewable energy space and cost competitiveness have made the business case of renewables more compelling, as Governments can now transform their energy systems. Scaling up renewable energy surpasses cost competitiveness and increased deployment will see economies able to meet the needs of an ever-growing population, facilitate development and improve wellbeing. Greenhouse gas (GHG) emissions will decrease and natural resource productivity will increase. IRENA also states that economic growth and environmental conservation are fully compatible, with trade-offs between the two no longer required.
According to IRENA’s report, the US$1.3 trillion GDP increase is mostly due to increased investment in renewable energy deployment, which in turn triggers investment elsewhere in the economy. In terms of welfare, renewables can bring benefits beyond pure economics. Doubling the share of renewables by 2030 can significantly increase the pool of money that can be spent on welfare around the world by approximately 3%. Jobs in the renewable energy sector are expected to grow across all technologies, with growth in bioenergy, hydropower and solar expected to be highest. In the value chain, the largest growth in jobs is expected to be from fuel supply (bioenergy feedstocks), installations and equipment manufacturing.
In terms of trade, the deployment of renewable energy infrastructure affects the trade of related equipment, services and fossil fuels. Trade will increase as deployment is scaled up in both the power and end-use sectors. Fossil fuel importers and exporters will be impacted as the trade in renewable energy equipment and services increases. For importers, a higher percentage of energy supplied from renewables has potentially favourable trade implications from the ripple effects on their economies. In contrast, exporters may be vulnerable to changes in trade unless they can diversify and position themselves in the new markets that will arise.
The ‘Renewable Energy Benefits: Measuring the Economics’ report also discusses a way forward for renewable energy deployment which is underpinned by a conducive and enabling Government policy environment. Government commitments can include credible renewable energy targets which give investors some degree of confidence and establish a trajectory for the continual development of the global energy sector. As of early 2015, more than 140 Governments have introduced regulatory and fiscal incentives and public financing. Incentives that have been implemented include feed in tariffs, net metering, auctions and investment or production tax credits. Significant decreases in the cost of technology has led to a shift in the factors that influence policy making. Governments are now adapting their existing policies to ensure that the incentives they offer are appropriate. Policy makers will need to use a system level approach that balances the ambitions of established renewable energy companies, new market entrants, and other stakeholders.
Institutional development is also essential in order to support the sustainable deployment of renewable energy. The pace of transition will be influenced by individuals and institutions making informed, effective decisions on resource use. In some countries institutional capacity is weak which affects awareness, policy design and implementation processes. To strengthen these institutions it is very important to identify, assess and address barriers to their operation and development. Needs assessments should guide national capacity building programs and focus on establishing appropriate steering processes, institutionalising inter sectoral coordination mechanisms, and creating or strengthening specialised renewable energy institutions.
IRENA’s study and report make postponing the scale up of renewable energy technology around the world even more questionable. The analysis of the positive impacts of this on GDP, welfare, employment and trade, as well as a rationale for how to scale up the deployment, should provide justification for first-mover Governments that are now reaping the benefits of doing so. It should also encourage change in Governments who have yet to grasp the opportunities that renewable energy presents. Grasping these opportunities will ensure that all countries play their part in increasing the likelihood that US$1.3 trillion can be added to global GDP if the renewable energy share is doubled by 2030.
6 comments
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Jennifer Meyer-Smith
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diannaart
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stuff me
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John Kelly
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Andreas
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Pilot
Return to home pageFantastic news being identified and reported by IRENA. The political protagonists that first stridently take up the good news and advocate what IRENA is identifying, will be seen as beacons of light by Australians everywhere, who are worried about environmental destruction, their children’s futures, their economic security and their social inclusion.
I am trying to think of how this good news can be immediately applied to protecting Australia’s old growth forests such as in Tasmania and Victoria? One way is that an immediate stop to such disastrous logging need not be at the employment disadvantage of the loggers because they could be re-employed into robust renewable energy industries.
@Jennifer Meyer-Smith
I have been arguing about this for ten years or more.
To many of us, it is bleeding obvious that renewable technology can fill in and take over from fossil technology – finally a little more publicity of this fact.
We could have a win/win but that will take cooperation, collaboration and, quelle horreur, changing the way capitalism works.
diannaart its such a pity that the fossil heads in the tory parties everywhere seem to think that “cheap” coal is the answer. One word… idiots!
We saw the coming of the motor car and dumped the horse and cart. We saw the coming of air travel and stopped taking the train. We ushered in computers and stop keeping books. We found email and stopped posting letters. We saw renewable energy emerge and…..er….we said, don’t bother, it will never last!
Re John Kelly; Your last line I disagree with. We saw renewable energy emerge and… er…we had said to us, don’t you worry about that.
It is unbelievable that with the volume of manufacturing capacity (post car industry departure) and skilled workforce (otherwise unemployable) available and ready to go, the present government cannot grasp the emerging reality and ditch their cosy relationship with the fossil fuel industry. Does no-one see the signs on the wall? Could the adherents to the old ways be called traitors?
@ John Kelly
I told my Dad in the 60’s I wanted to get involved in computers when I left school. He told me I was mad and that computers would be nothing more than a toy and a passing fad. The best computer is stored between your ears. That was about the only time I shouldn’t have listened, lol.