IEA Offers World Governments a Sustainable Recovery Plan to Boost Economic Growth, Create Millions of Jobs and Put Emissions into Structural Decline

June 19, 2020

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(International Energy Agency) Based on analysis conducted in cooperation with the IMF, new IEA report outlines energy-focused policies and investments to move the world towards a cleaner and more resilient future -- The International Energy Agency is today presenting a Sustainable Recovery Plan focusing on a series of actions that can be taken over the next three years to revitalise economies and boost employment while making energy systems cleaner and more resilient.

Set out in a Special Report on Sustainable Recovery from the IEA’s flagship World Energy Outlook series, the plan offers an energy sector roadmap for governments to spur economic growth, create millions of jobs and put global emissions into structural decline. By integrating energy policies into government responses to the economic shock caused by the Covid-19 crisis, the plan would also accelerate the deployment of modern, reliable and clean energy technologies and infrastructure.

In an analysis carried out in cooperation with the International Monetary Fund, the report shows that the set of policy actions and targeted investments over the 2021-2023 period that are outlined in the Sustainable Recovery Plan can achieve a range of significant outcomes, notably:

boost global economic growth by an average of 1.1 percentage points a year
save or create roughly 9 million jobs a year
reduce annual global energy-related greenhouse gas emissions by a total of 4.5 billion tonnes by the end of the plan

In addition, the plan would deliver other improvements to human health and well-being, including driving a 5% reduction in air pollution emissions, bringing access to clean-cooking solutions to around 420 million people in low-income countries, and enabling nearly 270 million people to gain access to electricity.

Achieving these results would require global investment of about USD 1 trillion annually over the next three years. This sum represents about 0.7% of today’s global GDP and includes both public spending and private finance that would be mobilised by government policies.

“Governments have a once-in-a-lifetime opportunity to reboot their economies and bring a wave of new employment opportunities while accelerating the shift to a more resilient and cleaner energy future,” said Dr Fatih Birol, the IEA Executive Director. “Policy makers are having to make hugely consequential decisions in a very short space of time as they draw up stimulus packages. Our Sustainable Recovery Plan provides them with rigorous analysis and clear advice on how to tackle today’s major economic, energy and climate challenges at the same time. The plan is not intended to tell governments what they must do. It seeks to show them what they can do.”

Based on detailed assessments of more than 30 specific energy policy measures, the Sustainable Recovery Plan considers cost-effective approaches, the circumstances of individual countries, existing pipelines of energy projects, and current market conditions. It spans six key sectors – electricity, transport, industry, buildings, fuels and emerging low-carbon technologies.

The IEA’s new energy employment database shows that in 2019, the energy industry – including electricity, oil, gas, coal and biofuels – directly employed around 40 million people globally. The special report estimates that 3 million of those jobs have been lost or are at risk due to the impacts of the Covid-19 crisis, with another 3 million jobs lost or at risk in related areas such as vehicles, buildings and industry.

The largest portion of the millions of new jobs created through the Sustainable Recovery Plan would be in retrofitting buildings to improve energy efficiency and in the electricity sector, particularly in grids and renewables. The other areas that would see higher employment include energy efficiency in industries such as manufacturing, food and textiles; low-carbon transport infrastructure; and more efficient and new energy vehicles.

Recent IEA analysis has shown that global energy investment is set for an unprecedented plunge of 20% in 2020, raising serious concerns for energy security and clean energy transitions. As a result of the Sustainable Recovery Plan, the global energy sector would become more resilient, making countries better prepared for future crises. Investment in enhancing electricity grids, upgrading hydropower facilities, extending the lifetimes of nuclear power plants, and increasing energy efficiency would improve electricity security by lowering the risk of outages, boosting flexibility, reducing losses and helping integrate larger shares of variable renewables such as wind and solar PV. Electricity grids, the backbone of secure and reliable power systems, would see a 40% increase in capital spending after years of declining investment. This would put them on a stronger footing to withstand natural disasters, severe weather and other potential threats.

The Sustainable Recovery Plan is designed to avoid the kind of sharp rebound in carbon emissions that accompanied the economic recovery from the 2008-2009 global financial crisis and instead put them into structural decline. The IEA report highlights key aspects of today’s situation that make it a unique opportunity for government action. Compared with the 2008-2009 crisis, the costs of leading clean energy technologies such as wind and solar PV are far lower, and some emerging technologies like batteries and hydrogen are ready to scale up. Global carbon emissions flat-lined in 2019 and are set for a record decline this year. While this drop, which results from economic trauma, is nothing to celebrate, it provides a base from which to put emissions into structural decline.

“This report lays out the data and analysis showing that a cleaner, fairer and more secure energy future is within our reach. The Sustainable Recovery Plan would make 2019 the definitive peak in global emissions, putting them on a path towards achieving long-term climate goals,” Dr Birol said. “The IEA is mobilising its analytical resources and global convening power to bring together a grand coalition that encompasses government ministers, top energy industry CEOs, major investors and other key players who are ready to pursue a sustainable recovery that will help steer the world onto a more resilient trajectory. This is why the Sustainable Recovery Plan will be a key element informing discussions at the IEA Clean Energy Transitions Summit on 9 July.”

The IEA Clean Energy Transitions Summit on 9 July will gather ministers from countries representing 80% of global energy use, as well as industry CEOs, big investors and other key leaders from the public and private sectors around the world. The high-level virtual dialogue will review both near-term actions for sustainable recovery and measures to accelerate clean energy technology innovation for reaching long-term decarbonisation plans. READ MORE

In this report:

Since the scale of the economic crisis began to emerge, the IEA has been leading the calls for governments to make the recovery as sustainable and resilient as possible. This means immediately addressing the core issues of global recession and soaring unemployment – and doing so in a way that also takes into account the key challenge of building cleaner and more secure energy systems.

As they design economic recovery plans, policy makers are having to make enormously consequential decisions in a very short space of time. These decisions will shape economic and energy infrastructure for decades to come and will almost certainly determine whether the world has a chance of meeting its long-term energy and climate goals.

The Sustainable Recovery Plan set out in this report shows governments have a unique opportunity today to boost economic growth, create millions of new jobs and put global greenhouse gas emissions into structural decline. This work was done in collaboration with the International Monetary Fund.

Fuels

This section examines the implications of the Covid-19 crisis on methane emissions from oil and gas operations, fossil fuel subsidies and biofuels, and the extent to which sectors could contribute to an overall sustainable recovery programme.

Reduce methane emissions from oil and gas operations: We estimate that it is technically possible to reduce around three-quarters of the current 82 Mt of methane emissions that are released from oil and gas operations each year. Some of the skilled oil and gas workers at risk of being laid off because of Covid-19 could be re-trained to work on abatement programmes: we estimate that around 4 jobs would be created for every million dollars spent to reduce oil and gas-related methane emissions. The economics of monitoring, reduction, and methane prevention measures and programmes are likely to be impacted by the drop in natural gas prices. Continued and enhanced government support to address gaps in information, infrastructure and investment will be important to ensure the oil and gas industry tackles its methane emissions. It would be cost effective to deploy nearly all technically available abatement options at a GHG price of $15/tonne CO₂-eq.

Reform fossil fuel subsidies: The global value of fossil fuel consumption subsidies in 2019 was around $320 billion. Without any changes to existing subsidy regimes, this is likely to fall to $180 billion in 2020 because of the drop in oil and gas prices. However, oil and gas income in producer economies in 2020 is likely to drop by nearly $800 billion – a reduction of 55% on 2019 levels. Phasing out inefficient fossil fuel subsidies would create new budget space, remove economic distortions and make room for more spending to boost long-term economic growth; the dramatic fall in oil and gas prices also offers opportunities to cut inefficient subsidies without increasing end-user prices. Reform programmes need to carefully consider national circumstances, not least the need to keep energy affordable for the poorest in society.

Support and expand the use of biofuels: The liquid biofuel industry employed around 2.1 million people in 2018, and is a critical employer of both low and high skilled workers across many countries. However, a significant share of production capacity has been idled or is operating at reduced capacity as a result of the slowdown in overall liquid fuel demand. New policies and targeted support – which should be closely linked to meeting appropriate sustainability criteria – could help stabilise the industry and create a large number of new jobs in a short period of time. We estimate that each million dollars of investment would create around 15-30 jobs, a significant proportion of which would be in rural areas. Investment in sustainable biofuel production and consumption infrastructure could also have other long-term benefits such as offsetting the need for oil imports and supporting demand for nationally important agricultural commodities. Sustainable biofuels also have a potentially important part to play in reducing emissions from sectors that are challenging for low-carbon electricity to reach such as heavy-duty vehicles, aviation and shipping. READ MORE