Expediting Clean Energy Transition Improves Living Standards: IEA

Expediting Clean Energy Transition Improves Living Standards: IEA

Transitions to clean energy are affecting the cost of living the world over. According to a new report by the International Energy Agency (IEA), speeding up the move to clean energy technologies improves the affordability of energy and can relieve pressures on the cost of living more broadly

The IEA report, Strategies for Affordable and Fair Clean Energy Transitions, shows how putting the world on track to meet net zero emissions by 2050 requires additional investment but also reduces the operating costs of the global energy system by more than half over the next decade compared with a trajectory based on today’s policy settings. The net result is a more affordable and fairer energy system for consumers.

Over the course of their lifetimes, renewable energy systems frequently prove to be more affordable than those that rely on fossil fuels like coal, natural gas, and oil, stated the IEA report. The least expensive possibilities for the new generation are solar photovoltaics and wind. Even in cases where electric vehicles—including two- and three-wheelers—have greater initial prices—which isn’t always the case—they usually save money because of lower ongoing expenditures. Over their lifespan, energy-efficient appliances—like air conditioners—offer comparable financial advantages.

However, unlocking larger levels of initial investment is necessary to realise the benefits of clean energy transitions. This is particularly true in emerging and developing nations, where investments in clean energy are falling behind because of perceived or actual risks that obstruct funding opportunities and new project development.

The benefits of a faster energy transition and growing shares of renewables – such as solar and wind, which have lower operating costs than fossil fuel alternatives – would filter down to consumers.

Retail electricity prices are typically less volatile than oil product prices, providing more predictable costs. Yet, around half of total consumer energy expenditure today is on oil products, and another third is on electricity. In rapid transitions, electricity prices become the main benchmark for consumers and households. Oil products are largely replaced by electricity as EVs, heat pumps and electric motors take a larger share of transport, buildings, and industry demand. By 2035, electricity will overtake oil as the leading fuel source in final consumption.

Moreover, distortions in the present global energy system in the form of fossil fuel subsidies favour incumbent fuels, making investments in clean energy transitions more challenging. Governments worldwide collectively spent around $620 billion in 2023 subsidising the use of fossil fuels – far more than the $70 billion that was spent on support for consumer-facing clean energy investments, according to the IEA report.

The report finds that incentives and greater support, particularly targeted at poorer households, can improve the uptake of clean energy technologies. This would allow all consumers, especially those who are less well-off, to fully reap the benefits of these technologies.