Can the world reconcile its hunger for energy with the need to fight climate change? The answer depends on whether it can find greener, cheaper, more efficient ways to produce and deliver that energy. But that in turn depends on the level of research and development spending, and overall investment, in this area — and the figures do not look promising.

Take the Mission Innovation initiative announced by then US president Barack Obama at the 2015 Paris climate summit — the gathering at which world leaders agreed to limit global warming to well below 2°C above pre-industrial levels.

MI’s 20 participant governments pledged to double their clean energy R&D investment in the five years to 2020. But that didn’t happen. Instead, there was a cumulative shortfall over the five-year period of more than $50bn, based on estimates from the Information Technology and Innovation Foundation, a US public policy think-tank.

According to the ITIF, of the 34 countries it covers, only Norway spent more than 0.1 per cent of its GDP on low-carbon energy R&D in 2021. But, if all 34 countries had invested at the 0.1 per cent level, it would have equated to an additional $71bn.

Column chart of Global government spending on energy   R&D ($bn in constant 2021 values) showing Public spending on energy R&D is on a steadily rising trend

The latest World Investment Report from the Paris-based International Energy Agency estimates that, in 2021, total public spending on energy R&D was $38bn, of which almost 90 per cent was allocated to clean-energy technologies.

Much of the emphasis on clean energy is a response to the climate emergency. However, elevated fossil fuel prices and concerns over energy security — both factors that have come to the fore since Russia’s invasion of Ukraine — also play a part.

Public spending on non-fossil fuel energy R&D doubled in IEA member countries between 1974 and 1980, after oil price shocks, and doubled again between 1998 and 2011 — another period when oil prices were elevated.

Column chart of Annual real growth (%) in clean energy R&D for 32 IEA countries. Shaded areas show periods of high oil prices showing Governments increase clean energy R&D when oil prices rise

Economic recovery packages have also helped to boost investment — as happened after the global financial crisis of 2008-09, again during the Covid-19 pandemic, and, most recently, after the return of high inflation in 2022. Funding from the US Inflation Reduction Act (IRA), passed last year, is expected to accelerate investment into clean technologies.

Although pressure on government budgets may work against this, levels of R&D spending today account for a smaller share of GDP than in previous crisis periods — suggesting that increases should be affordable.

As well as arguably being too low, current levels of R&D investment may be unbalanced. Data from the IEA shows that research into renewables, such as wind and solar, actually trended down slightly in the decade to 2021. Energy efficiency R&D has risen, mostly in the transportation sector rather than in buildings or industrial processes — both a significant source of emissions. The nascent technologies of carbon capture and storage (CCS) and hydrogen and fuel cells have very low shares of R&D (though some experts say that attention is in any case better focused on more proven areas).

A rising trend in government investment is likely to stimulate private investment. Incentives such as tax breaks could also help lure private investors away from fossil fuel projects and towards cleaner alternatives.

While the share of non-carbon sources in the energy mix is increasing, global fossil fuel consumption has almost certainly not yet peaked. In fact, it looks likely to keep rising in some developing economies for decades to come. The pressure to develop greener alternatives will only grow.

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