IEA says $1tn investment needed to sustainably rebuild global economy after Covid-19

The recovery plan, proposed by the IEA, could add 1.1 percentage points to global economic growth on an annual basis

A view of the cooling towers of the Drax coal-fired power station near Selby, northern England on September 25, 2015. Energy company Drax has abandoned a 1 billion GBP installation of carbon capture technology to cut emissions, citing  the UK government's reduction of subsidies for renewable energy. AFP PHOTO / OLI SCARFF (Photo by OLI SCARFF / AFP)

An investment of $1 trillion (Dh3.67tn), equivalent to 0.7 per cent of global economic output is needed over the next three years to sustainably rebuild economies post the  Covid-19 pandemic, according to the International Energy Agency.

The Paris-based agency, which launched the plan along with the International Monetary Fund, said its roadmap details actions that can be taken over the next few years to "revitalise economies and boost employment while making energy systems cleaner and more resilient".

Calling the pandemic “the biggest economic shock in peacetime since the 1930s”, the IEA's plan for recovery from 2021 to 2023 will cover six significant energy sub-sectors such as electricity, transport, industry, buildings, fuels and emerging low-carbon technologies.

"The energy sector, particularly electricity, has played a critical role in the global response to the Covid-19 crisis,” the IEA said.

"Uninterrupted energy supplies have enabled hospitals to provide care, food and other essentials to be delivered, and millions of people to work and study from home while maintaining social contact online,” it added.

The plan, which could add 1.1 percentage points to global economic growth on an annual basis and could create roughly 9 million jobs a year, focuses on deploying low carbon electricity sources such as wind and solar post Covid-19 to meet energy needs and reduce emissions.

Expansion and modernisation of electricity grids, increasing the uptake of cleaner transport such as electric vehicles and high speed rails, improving the energy efficiency of buildings and appliances along with enhancing the efficiency of equipment used in industries also form part of the recovery plan.

The IEA’s plan could boost the annual growth of developing economies by around 1.3 percentage points and lead to an increase in global GDP by 3.5 per cent in 2023.

"It would also bring lasting benefits to the global economy because investment in new infrastructure, such as electricity grids and more energy-efficient buildings and industries, would improve the overall productivity of both workers and capital,” the IEA said.

If implemented, the sustainable recovery plan could enable 420 million people to gain access to clean-cooking solutions in low-income economies and would bring 270 million people to the grid.

It would also help lower greenhouse gas emissions by 4.5 billion tonnes in 2023.

"Air pollution emissions would also decrease by 5 per cent as a result of the plan, reducing health risks around the world,”  the IEA said.

The agency also said the energy sector would be more resilient to future crises by deploying the recovery plan.

"Policy makers are having to make hugely consequential decisions in a very short space of time as they draw up stimulus packages," Fatih Birol, the IEA's executive director, said.

"The plan is not intended to tell governments what they must do. It seeks to show them what they can do.”