The global energy landscape is undergoing transformation towards clean energy. This transition is driven by the urgent need for sustainable energy solutions. The International Energy Agency‘s report, “Energy Technology Perspectives 2024,” released in October 2024, sheds light on these developments. It analyses energy policies, industrial manufacturing, and trade dynamics across major economies.
Current Trends in Clean Technology
The adoption of clean technologies is accelerating. Key areas include solar photovoltaic (PV), wind energy, electric vehicles (EVs), and batteries. Since 2015, the market for these technologies has grown nearly fourfold, reaching $700 billion in 2023. The growth is largely attributed to the rise of EVs, solar PV, and wind energy. Projections suggest that by 2035, the clean technology market could exceed $2 trillion, rivaling the crude oil market.
Investment and Manufacturing Growth
Investment in clean energy technology manufacturing has surged. It rose from $160 billion in 2022 to $235 billion in 2023. This investment constitutes about 3% of global GDP growth. Solar PV and battery manufacturing dominate this investment, accounting for 80%. China continues to lead in clean technology manufacturing, holding 40-98% of global capacity across various technologies.
National Policies and Energy Transition
Cost competitiveness is crucial for clean technology investments. Producing solar modules, wind turbines, and batteries is more expensive in the US and EU compared to China. However, policy support and market access are also vital. The European Union’s Net Zero Industry Act aims to boost its clean technology sector. In the US, investments have been mobilised through acts like the Inflation Reduction Act.
China’s Dominance and Future Projections
China has emerged as a dominant player in clean technology exports, projected to exceed $340 billion by 2035. This could reduce its net fossil fuel imports by 70%. Despite being the largest fossil fuel importer, China’s clean technology strategy positions it favourably in the global market.
India’s Position in Clean Technology
India’s current trajectory suggests it will remain a net importer of clean technologies by 2035. However, there is potential for India to pivot towards being a net exporter, particularly in solar PV modules and batteries. The IEA estimates that India’s net exports could reach $30 billion by 2035, contingent upon accelerating its energy transition.
Implications for Trade and Industrial Policy
The report marks the need for balanced industrial policies and trade measures. Tariffs on renewable energy systems are higher than those on fossil fuels. Effective industrial policies should focus on competitiveness and innovation. They must be specific and time-bound to achieve energy security and climate objectives.
Questions for UPSC:
- Discuss the impact of clean energy technologies on global economic trends.
- Critically examine the role of government policies in shaping the clean energy market.
- Explain the significance of international trade in the context of clean energy technology.
- With suitable examples, discuss the challenges faced by emerging economies in transitioning to clean energy.
Answer Hints:
1. Discuss the impact of clean energy technologies on global economic trends.
- Clean energy technologies have seen a market growth from $175 billion in 2015 to $700 billion in 2023.
- Projected to exceed $2 trillion by 2035, the clean technology market could rival the crude oil market.
- Investment in clean energy manufacturing rose from $160 billion in 2022 to $235 billion in 2023, contributing to global GDP growth.
- International clean technology trade is expected to reach $575 billion by 2035, indicating a robust global market.
- Countries like China, the EU, and the US dominate production capacity, influencing global economic dynamics and competitiveness.
2. Critically examine the role of government policies in shaping the clean energy market.
- Government policies, like the EU’s Net Zero Industry Act and the US’s Inflation Reduction Act, have mobilized investments in clean technologies.
- Cost competitiveness is influenced by policies; production costs are higher in the US and EU compared to China.
- Effective policies must include support for market access, industrial skills, and infrastructure development.
- Policy stability is crucial; changes in administration can impact existing clean energy initiatives, as seen in the US.
- Well-designed industrial policies can address competitiveness gaps and encourage innovation in clean energy sectors.
3. Explain the significance of international trade in the context of clean energy technology.
- International trade in clean technologies is projected to reach $575 billion by 2035, denoting its growing importance.
- China is expected to dominate clean technology exports, projected to surpass $340 billion by 2035, impacting global supply chains.
- Higher tariffs on renewable energy systems compared to fossil fuels can hinder trade and cost competitiveness.
- Trade measures affect the pace of energy transition, emphasizing the need for balanced policies.
- Effective international trade agreements can facilitate technology transfer and collaboration, promoting global clean energy adoption.
4. With suitable examples, discuss the challenges faced by emerging economies in transitioning to clean energy.
- Emerging economies like India face high production costs; solar modules and batteries are more expensive than in China.
- Limited access to capital and technology hampers investments in clean energy sectors in countries like India.
- Infrastructure gaps and lack of industrial skills pose challenges for manufacturing clean technologies.
- Dependence on fossil fuels creates resistance to transition; for instance, India’s reliance on coal impacts its clean energy goals.
- Policy instability and regulatory challenges can deter foreign investments, affecting the clean energy market’s growth.
