Investing in clean energy is a good idea. The global transition to renewable energy for both residential and commercial use is already underway. The public is increasingly demanding green options in all aspects of daily life, and that includes green energy.
With major industrialized nations committed to net-zero emissions by 2050 and the global effort to “build back better” and more sustainably as the recovery from the pandemic begins, there has never been a better time to invest in clean energy.
The demand for decarbonization
Clean energy is, at its most basic, power that comes from renewable, zero-emission sources. It comes from energy sources that do not pollute the atmosphere when used. There are various ways to generate clean energy, and they include solar, wind, water and tides, geothermal, and bioenergy.
Decarbonization is the process of removing the output of the leading greenhouse gas—carbon dioxide (CO2)—from a nation’s economy. Growing public demand is driving efforts toward decarbonization, as are governmental commitments. Given that modern industrial processes, manufacturing, and major forms of transportation all rely on carbon-based fuels, this is no small feat.
Efforts toward decarbonization focus on technologies that aim to reduce emissions from industries (such as CO2 scrubbers in industrial smokestacks) as well as capturing carbon from the atmosphere and lock it up over the long term. Such efforts range from high-tech solutions like carbon-trapping nanosponges to natural methods like widespread tree planting and reforestation. Increasing the efficiency of industrial processes and switching to alternative fuels and substitute materials in manufacturing can also aid decarbonization efforts.
Governments driving the transition to clean energy
And it’s not just consumers who are pushing for decarbonization. Governments are moving ahead with ambitious climate goals that are encouraging decarbonization.
In the United States, multiple states and utilities have 100% clean energy goals. The United Kingdom—whose carbon emissions have decreased by 38% since 1990, faster than any other major developed nation—has passed laws requiring the country to reach net-zero carbon emissions by 2050. Similarly, the European Union aims by 2030 to reduce its net carbon emissions by 55% percent below 1990 levels, on its way to being carbon neutral by 2050.
Tremendous opportunities exists in the clean energy space as corporate demand for clean energy currently outstrips supply by 27 terawatt-hours—a gap predicted to increase tenfold in the next ten years. For those that may not know, a terawatt–hour is a unit of energy equal to outputting one trillion watts for one hour. Most of us are familiar with the kilowatt, which is a unit of energy equal to 3600 kilojoules. The kilowatt-hour is commonly used as a billing unit for energy delivered to consumers by electric utilities.
Demand for clean energy is growing in North America
Europe is not the only place that the demand for clean energy has been growing. The same thing is happening here, in North America.
Most Americans (77%) now say it’s more important for the United States to develop clean energy sources like solar and wind power than produce coal, oil, or other fossil fuels.
In part, simple economics drives the demand for clean energy. Building new renewable energy is cheaper than running existing coal plants, with prices dropping every year. By 2025, almost every existing coal plant in the United States will cost more to operate than building replacement wind and solar within 35 miles of each plant.
There remains a long way to go, however. Renewables make up less than 20% of the total US power mix. While solar and wind power generation installations have proliferated over the last decade, wind remains only 8.4% of all capacity in the United States, and solar just 2.3%.
What investing in clean energy looks like
Green stocks and green ETFs allow investors to gain exposure to the growing renewable energy and energy efficiency industries. With options as diverse as wind, solar, water and tides, geothermal, and bioenergy, there are ways to invest locally and globally that make sense for every investor.
And the industry is keen for investment to help grow and meet the rising demand for services. Already, clean energy is a major global employer. In Europe and the United States alone, more than 11 million people work in renewables, and 3.3 million people work in energy efficiency. Increased investment in these sectors is projected to result in an additional 63 million new jobs by 2050. That number could be as high as 100 million jobs when you factor in transition-related jobs from traditional fossil fuels to clean energy.
Investment will accelerate growth in clean energy
Clean energy capacity has increased at over 8% annually during the last ten years, but that’s still falling short of the level needed to meet the growing demand for clean energy.
At a minimum, countries will need to double their annual investment in renewables from around $310 billion today to more than $660 billion to meet their obligations under the Paris Agreement on climate change. The actual amount required could be far higher.
The drive to build and perfect the new energy systems that will power the world through the rest of this century and into the next will require innovation, disruption of existing ways of doing business and, above all, investment. As government, industry, and investors all embrace the switch to a zero-carbon energy future, the potential rewards will include more than a clean, sustainable world, but also growth, jobs, and financial returns.
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