Governments across the world are doling out billions of dollars worth of investments and subsidies to help accelerate the energy transition, reduce energy costs for consumers, and spur innovation in fuels and power-sector technologies.
US: SPURRING CHANGE
Fuelled in large part by the Inflation Reduction Act (IRA) of 2022, the United States has the world’s largest government-funded war chest, estimated at $560 billion by the International Energy Agency (IEA), to be deployed on energy transition and energy efficiency measures. More than $210 billion (37.6% of total) is earmarked for the development of low-carbon electricity and related efforts to aid the power sector’s switch away from fossil fuels.
Companies engaged in the production of renewable energy equipment, in the deployment of clean energy supplies, and in the switching out of fossil fuel power for renewable systems are also eligible for tax breaks and other incentives. An additional $140 billion (25%) is tied to reducing the carbon footprint of the country’s transportation systems, including $66 billion for high-speed rail systems and around $40 billion in grants for public transport system upgrades.
EUROPE: SHIELDING CONSUMERS
While the United States is deploying over 60% of its government funding on low-carbon electricity and transport system overhauls, energy affordability has been by far the single largest focus of government spending in Europe. Germany, Europe’s largest economy, has the largest government spending total in the region ($339 billion), and has earmarked over $240 billion (72.6% of total) for an array of energy affordability measures.
Price caps on electricity and heating costs, capital injections into ailing utilities, and relief packages for cash-strapped households and businesses shell shocked by the surge in power costs account for nearly three quarters of the government spending on clean energy seen so far, IEA data shows.
ASIA: SEEKING BALANCE
Major Asian nations including China, Japan and India are also spending heavily on energy affordability measures, which have so far accounted for roughly 50% of the region’s government spending in the clean energy and energy efficiency areas. However, Asian governments are also deploying major funding on low carbon electricity (roughly 16% of total spending), low carbon transport (around 12%) and on electricity network upgrades and expansions (7%), in an effort to develop positive momentum among carbon reduction and green energy supply efforts.
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Source: XM
