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In 2022, for the first time, spending on energy transformation matched the amount put into fossil fuels worldwide, as reported by BloombergNEF's newest data release. This was a momentous occasion for the decarbonization of the global energy system.
Last year, investments in oil and gas as well as fossil fuel-fired power generation with no emissions reduction technology amounted to $1.1 trillion. Similarly, $1.1 trillion was invested in renewable energy, electrified transportation, heat, energy storage and other corresponding technologies.
In 2022, a landmark was reached as total investments in decarbonizing energy surpassed the trillion dollar mark. The growth of more than $250 billion from the previous year was the most significant jump yet.
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The majority of the investment dollars went to renewable energy and electric vehicles. Wind and solar installations achieved impressive heights, with over 350 GW of assets being put in place, while over 10 million electric cars were sold around the world.
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In 2022, investment into renewable energy reached record highs, however, electric transport was developing even faster. Most of the funds were used for passenger EVs (380 billion), but other forms of electric mobility also benefited from the capital influx. The charging stations for public use got 24 billion, electric 2- and 3-wheelers got 23 billion, electric buses 15 billion, and commercial EVs such as trucks 8 billion.
The other six sectors in the energy transition monitored by BNEF saw record levels of investment in 2020, with the exception of nuclear.
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Noting the two smallest sectors for investment, carbon capture has had an investment of $6.3 billion in 2022, with hydrogen receiving a bit more than $1 billion. Both have seen a tremendous growth in terms of relative investments, with carbon capture almost tripling and hydrogen increasing more than three times. Although the technologies have made big promises in the past five years, the investment has only started to follow. To make a significant climate impact, however, there will need to be a much greater use of these technologies.
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Last year's rise in invested dollars was, to some extent, due to inflation, but this was not the only factor. Although inflation -- ranging from 8% -- caused greater expenses for energy-related goods, components, and financing, the increase in spending from virtually all sectors was the primary factor.
Investing $1.1 trillion in one year is substantial, but it is still not enough. To reach the goal of net zero emissions by 2050, the world must significantly increase this expenditure to the tune of triple the amount, as well as provide hundreds of billions for the global power grid.
The energy transition has been an expansive investment since 2004, totaling $6.7 trillion. It took eight years, from 2004 to 2011, to accumulate the first trillion. Then, the next trillion was reached in just four years and the most recent trillion was added in a single year. 2022 saw the highest level of investment, with one in every six dollars coming in that year.
The words of the late energy investor T. Boone Pickens stated that the first trillion was the hardest, whereas the most recent trillion was the fastest. But, if we are to reach the highest levels of decarbonization, then the following trillion will be slower than the ones before it.
Nat Bullard is a highly experienced contributor to BloombergNEF and Bloomberg Green, and is currently a venture partner at the early-stage climate technology investor, Voyager.
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