According to the International Energy Agency (IEA), countries have allocated $1.34 trillion to encourage sustainable energy projects since 2020. Around $130 billion in new expenditure has been announced in the previous six months, making it one of the weakest periods for new allocations since the COVID-19 epidemic began.
However, the pause may be temporary, since fresh policy packages are being discussed in Australia, Brazil, Canada, the European Union (EU), and Japan. Government expenditure is already playing a key role in the rapid rise of clean energy investment and the expansion of clean technology supply chains, and it is expected to propel both to new heights in the coming years. Notably, according to the most recent edition of the IEA’s Government Energy Spending Tracker, direct subsidies for manufacturers targeted at boosting domestic manufacturing of renewable energy technology currently reach over $90 billion.
At the same time, governments continue to boost spending on mitigating consumers’ acute energy price shocks. Governments have contributed $900 billion to short-term consumer affordability measures since the commencement of the global energy crisis in early 2022, in addition to pre-existing assistance programs and subsidies.
In the last six months, around 30% of this affordability spending has been revealed. These initiatives have played a significant part in limiting price rises for end users, but the energy crisis has nonetheless taken a toll on many people’s wallets. According to the IEA’s most recent statistics on end-user pricing across 12 countries, which together account for roughly 60% of the world population, the average family will spend a larger percentage of its income on energy in 2022, as energy costs surpass nominal wage increases.
On average, families in major countries spend between 3 and 7 percent of their wages to heat and cool their houses, power appliances, and cook—though low-income households spend more. Because to government initiatives, the percentage of income spent on energy increased by less than 1% in most major economies.
Consumers felt the impact more severely at the pump, particularly in emerging markets and developing countries, where transportation fuels, together with food, accounted for the joint highest rise in household spending in 2022. This would have been far higher if the government had not intervened. This was the situation in Indonesia, where the average household’s total energy expenditure would have quadrupled if affordability assistance had not been provided.
Early numbers for 2023 show that wholesale energy prices are easing. However, retail prices are unlikely to fall as quickly. High prices are already making clean energy technologies more cost competitive. As high prices persist, the uptake of clean energy technologies is set to accelerate further, hastening the emergence of the new energy economy.
