Global Investment in Renewables Needed to Reach 1.5°C Scenario

The International Renewable Energy Association (IRENA) pointed out the need for investments in renewable energies to quadruple to achieve the goal of limiting global temperature from rising beyond 1.5°C above pre-industrial levels. 

The study showcases that the global investment for the energy transition in 2022 reached US$1.3 billion, representing less than 40% of the average yearly investment needed between 2021 and 2030. IRENA suggests investment needs to reach US$4.4 trillion by 2050 to meet the desired target.

Although financing toward renewable energies has upsurged in the recent past, investments have become too focused on certain technologies and certain regions. For instance, in 2020, solar photovoltaic saw 43% of the total investment in renewable technologies, with onshore and offshore wind following at 35% and 12%, respectively. Likewise, developing countries received only 15% of global investment in 2020 despite most of the population living there. This situation emphasizes the necessity for modification and public funding. 

“The regions that host around 120 emerging and developing markets continue to receive comparatively low investments, attracting a combined investment of US$59 billion in 2019 and 2020, respectively,” details the study. 

In Mexico, the country has put at risk millions in investment for renewable energy, along with the country’s commitment to an energy transition aimed at reducing carbon emissions by 35 percent in 2024, due to President López Obrador’s policies of safekeeping state companies like CFE and PEMEX, says the Global Wind Energy Council. 

In 2022, Mexico received US$35.292 million in foreign direct investment which was doubled by Canada the same year. Furthermore, in 2023, the National Association of Manufacturers and the American Clean Power Association, led by the American Petroleum Institute (API), urged the Office of the US Trade Representative government to hold Mexico accountable for creating discriminatory energy policies that breach USMCA. The government has subsidized about 35% of gasoline's retail price using funds from its oil windfall, which has encouraged the overconsumption of fossil fuels and contributed to greenhouse gas emissions (GHG), as well as diverted resources away from investments in renewable energy sources.

“In the case of our country, at this time, private investors do not see the appropriate conditions to allocate resources to the construction of new wind farms, solar farms or cogeneration plants. This is despite the enormous potential for wind and radiation that Mexico has. Unfortunately, these investments are being attracted by other countries that have an energy policy that favors renewable energies. Countries like Colombia, Brazil, Dominican Republic, Canada, Germany and France are receiving this flow of resources from abroad … Given these circumstances, our country obviously needs to increase public and private investment as soon as possible,” Roberto Balllnez, Executive Finance and Infrastructure Director, HR Ratings, told MBN in 2022.