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| Fig. 1: U.S. Energy Consumption by Source (Source: Monthly Energy Review, April 2021, Tables 1.3 and 10.1. (Courtesy of the EIA) |
As the world aims to keep global temperatures from increasing by 2°C, movements to shift towards more environmentally friendly energy sources have gained momentum. As a result, renewable energy production and consumption in America have reached record highs. In order to increase the capacity and capability to produce energy in a more sustainable manner, money is heading towards renewable energy at unprecedented levels. While renewable energy is on the rise, fossil fuels remain extremely important and continue to make up the majority of the world's energy sources. In the United States, fossil fuels made up 78 percent of energy consumption in 2020. [1] The breakdown of energy consumption by source is shown in Fig. 1. Systems throughout the world have historically relied on fossil fuels to create the energy required for society to function. Increasing concern for the environment, however, has sparked an urgent need for more renewable energy. Undertaking an overhaul of energy systems and shifting behavior is proving to be extremely costly. The increased demand for clean energy and narrow timeline to achieve these goals have opened massive opportunities for investment and have significant implications for the future of energy.
Investment into fossil fuel extraction has declined over recent years in favor of renewable energy projects. In 2014, world energy companies spent $735 billion to extract oil and gas, with that number dropping to less than half in 2020. A large part of this significant drop in 2020 was due to the Covid-19 pandemic that slowed ground and air travel, reducing the overall demand for gas. TSA reported that the number of travelers on Halloween of 2020 was one-third less than the amount on the same day in 2019. [2] On top of the decline in fossil fuel extraction, investors' behavior signals a future preference for renewable energy. Investors are spending more money on renewable energy as compared to new fossil fuel-related projects. [3] Renewable energy production and consumption reached all-time highs of about 11.77 and 11.59 quads (1.24 × 1019 J and 1.22 × 1019 J) in 2020. These numbers were driven mostly by record-high solar and wind energy production. The financial support to shift towards a more sustainable economy extends beyond renewable energy. Corporations and governments issued almost $315 billion in green bonds in the first quarter of 2021, almost triple the amount from the previous year. [4] Green bonds are a type of fixed income security designated to be used for projects that benefit the climate or environment. It is worth noting, however, that concerns have been raised about greenwashing with green bonds. Borrowers have found loopholes in these deals and have been caught misrepresenting their behavior. [5] These bonds often do not align with other destructive actions the corporations issuing these bonds undertake or their historical mistreatment of the environment. Though green bonds need improved regulation, it is clear investors flocking towards these assets, renewable energy, and other ESG securities are more conscious of the environmental impacts of their investments.
As the private and public sectors attempt to pivot from a reliance on fossil fuels, record funding has poured into renewable energy projects. This movement suggests that actions are following commitments from world leaders attempting to do their part in shifting the energy systems of the world. Whether or not humans are able to accomplish this shift in time to curb worldwide temperature increases remains to be seen. Doing so would require following an ambitious plan of action that is estimated to cost far more than current efforts.
© Daniel Begovich. The author warrants that the work is the author's own and that Stanford University provided no input other than typesetting and referencing guidelines. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
[1] "April 2021 Monthly Energy Review," U.S. Energy Information Agency DOE/EIA-0035(2021/4), April 2021.
[2] "How Coronavirus Has Affected Air Travel and What It Could Mean for You," Wall Street Journal, 9 Nov 20.
[3] "Global Trends in Renewable Energy Investment 2020," Frankfurt School of Finance and Management, 2020.
[4] S. Patterson and A. Ramkumar, "Green Finance Goes Mainstream, Lining Up Trillions Behind Global Energy Transition," Wall Street Journal, 22 May 21.
[5] M. Wirz, "Bond Investors Challenge Wall Street Greenwashing," Wall Street Journal, 2 Nov 21.