Clean energy sector boosted global economy by $320bn in 2023

Global investment in clean energy technology manufacturing surged by 75% compared to the previous year.

This is based on project-by-project data collected and analysed by the International Energy Agency (IEA). The IEA conducted this analysis at the country level, focusing on four major economies: the US, the EU, China and India.

The study examined advancements in three key areas within the clean energy sector including the manufacturing of clean energy technologies, deployment of clean power capacity and sales of clean equipment, including electric vehicles (EVs) and heat pumps.

In the EU, clean energy emerged as a significant driver of GDP growth, contributing nearly one-third to the overall growth of 0.5%.

The report notes that strong climate policies such as the Fit for 55 package and the proposed Net Zero Industry Act propelled investments in clean energy manufacturing, particularly in battery production, which more than doubled between 2022 and 2023.

Similarly, in the US, clean energy was a substantial contributor to GDP growth, accounting for approximately 6% of the overall expansion.

According to the report, legislative measures such as the Inflation Reduction Act (IRA) and the Bipartisan Infrastructure Law catalysed a surge in investment in clean energy manufacturing, in addition to increased sales of EVs, which further augmented this growth trajectory.

Clean energy growth across Asia

China, with its bold clean energy goals, saw clean energy driving nearly one-fifth of its GDP growth in 2023.

The country exhibited growth across all three categories analysed, with considerable investments in clean power capacity and clean equipment sales, particularly in EVs.

Despite the progress, China faces challenges related to surplus production capacity in certain technologies, such as batteries. The report highlights that the utilisation rates for these technologies were only around 30% in 2023, indicating that a substantial portion of manufacturing capacity remains underutilised.

The IEA suspects that this surplus production capacity could constrain the potential for further growth in the clean energy manufacturing sector going forward.

India, boasting the fastest-growing large economy in 2023, witnessed clean energy contributing nearly 5% to GDP growth. This growth was predominantly fuelled by investments in new solar power capacity and policy initiatives like the Production Linked Incentive, aimed at attracting investment in clean energy manufacturing.

Clean energy investment and global emissions

Beyond the economic contributions in individual countries, the report underscores the global significance of clean energy as a catalyst for investment growth.

In China, for instance, clean energy accounted for 50% of the total investment growth in 2023, while in the US, it contributed 20%. Globally, investment in clean energy technology manufacturing surged by 75% compared to the previous year, reaching around $200bn in 2023.

The IEA projects that renewables and nuclear energy will “dominate” the growth of global electricity production in the next three years, together accounting for more than 90% of additional global demand.

Nevertheless, research indicates that despite significant growth in renewable energy production worldwide, global emissions continue to rise due to the persistent failure to address fossil fuel consumption.