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IEA Report 2025: Clean Energy Growth Still Too Slow for Net Zero Goals

Global clean energy investment reaches record highs but significant barriers and inequalities persist, challenging the transition to net-zero emissions.

By Medha deb

Created on Sep 27, 2025

Global clean energy investment reaches record highs but significant barriers and inequalities persist, challenging the transition to net-zero emissions.

IEA’s 2025 World Energy Investment Report: Progress and Gaps

The International Energy Agency (IEA) has released its latest World Energy Investment 2025 report, highlighting significant growth in clean energy investments yet cautioning that the pace remains insufficient to achieve global net-zero carbon goals.

Clean technologies are attracting record levels of funding, but systemic hurdles and regional inequalities threaten progress at a critical juncture for the global energy transition.

Clean Energy Investment: Record Growth, Slowing Momentum

IEA analysis shows that global energy investment is projected to reach an unprecedented $3.3 trillion in 2025, with clean energy receiving two-thirds—approximately $2.2 trillion—of this total.

Solar power is leading, with nearly $450 billion in projected annual investment, more than any other single energy technology.
Battery storage and electrification—especially in transport (like electric vehicles or EVs)—are major drivers.
Fossil fuels will receive around $1.1 trillion, reflecting a shift but not elimination of carbon-intensive investments.

The past five years have seen a consistent growth in clean energy spending, propelled by lower technology costs, targeted policy interventions, and recovery packages following the COVID-19 pandemic.

Regional Disparities: Investment is Concentrated, Not Global

While clean energy spending now dominates investment portfolios in places like China, the United States, and Europe, it remains worryingly concentrated in these markets.

Region	Clean Energy Investment vs. Fossil Fuels (2025 forecast)
Advanced Economies	12:1
China	6:1
Other Emerging Markets & Developing Economies	2:1

Developing regions such as Africa, Southeast Asia, and Latin America lack the scale of investment required, hindered by weak grid infrastructure, limited finance, and ongoing fossil fuel subsidies.

Grid Infrastructure: The Weakest Link

One of the most urgent bottlenecks identified by the IEA is insufficient grid investment. While generation assets (like solar and wind farms) are booming, the annual global spending on electricity grids is less than half what is being spent on new generation. In 2025, grid investment is expected to stand at $400 billion.

This lag is caused by:

Lengthy and complex permitting processes for new or upgraded grid connections
Shortages of key physical components such as transformers and cables
Financial weakness of utilities, especially in emerging markets

Without rapidly scaling modern grid infrastructure, the world risks rendering a significant share of new clean generation capacity underutilized—stalling progress towards a low-carbon grid.

Fossil Fuel Plant Approvals: A Concerning Trend

Despite the shift toward low-carbon infrastructure, approvals for new coal and gas power plants in 2024 reached their highest level since 2015.

IEA warns that these approvals may result in further lock-in of emissions and could drive up costs for future consumers and businesses if the plants become stranded assets.
Subsidies for fossil fuels remain entrenched in many emerging markets, undermining the economics of renewables.

This contradictory trend underscores the ongoing tension between immediate energy security/reliability concerns and long-term climate imperatives.

Spotlight: Electrification of Mobility and Industry

Electric vehicle (EV) investment continues to surge globally, especially in China, where EVs are now cost-competitive with gasoline vehicles.

Electrification of transport represents a pivotal opportunity to reduce oil dependency—if renewable power replaces fossil fuel-burning generators.
Yet, oil subsidies in emerging markets remain roughly four times higher than direct investments in electric vehicles or charging infrastructure.

Industrial demand is also rising. The growth of data centers and artificial intelligence, combined with reshoring of manufacturing supply chains, is boosting clean electricity demand faster than supply in some markets.

Hydrogen, Carbon Capture, and Low-Emission Fuels: Mixed Progress

Beyond renewables, the IEA highlights promising but uneven trends in low-emissions fuels and carbon management:

Low-emission fuel investment is expected to exceed $30 billion in 2025.
Investment in hydrogen is set to reach $8 billion—almost double from the previous year, though several projects face delays or cancellations.
Planned carbon capture, utilization, and storage (CCUS) projects could deliver a tenfold increase in capacity by 2027, subject to successful deployment.

Though critical to decarbonizing heavy industry and tackling legacy emissions, these solutions still require more supportive policy and public investment to compete at scale.

Systemic Barriers: What Slows Clean Energy Growth?

Why aren’t soaring investments leading to faster progress toward net zero?

Grid bottlenecks: Chronically underfunded and outdated infrastructure cannot handle the surging supply of new clean power.
Policy uncertainty: Political shifts and incomplete implementation of climate commitments make investors hesitant in many regions.
Financing inequality: The lion’s share of capital flows to already wealthy economies and large corporations, leaving smaller nations and communities behind.
Entrenched fossil incentives: Fossil fuel subsidies and political pressure slow the retirement of high-carbon assets.

The IEA report calls for not only greater overall investment, but smarter and more equitable allocation to ensure the energy transition is both fast and fair.

Energy Security, Industrial Policy, and Geopolitics: New Drivers Emerge

As nations grapple with recent geopolitical and economic uncertainties—from global inflation to war-related supply disruptions—energy security has become an equally important motivator as climate change for many governments and investors.

Advanced economies are prioritizing domestic energy supply chains, clean tech manufacturing, and resilience to shield against future global shocks.
Industrial policy plays a prominent role, with large incentives and credits fueling clean manufacturing and infrastructure expansion (notably in the US and EU).

Yet in many places, these policies risk further reinforcing investment concentration, unless developing regions have improved market access and financial support.

Global Solutions: Essential Actions for Acceleration

The IEA concludes that substantial acceleration is still required across three core dimensions.

Increase grid investment: At least double global funding for electricity infrastructure to unlock additional renewables, storage, and electrification.
Mobilize finance in emerging markets: Use multilateral development banks and innovative de-risking mechanisms to channel more private investment where it is most needed.
Reform policy frameworks: Streamline permitting, strengthen climate policy signals, and remove outdated fossil fuel subsidies to clear the path for clean energy deployment.

Global cooperation—via just transition funding, knowledge-sharing, and coordinated industrial strategy—will be critical to meet climate targets and ensure all regions can benefit from the clean energy century.

Frequently Asked Questions (FAQs)

Q: Why does the IEA say global clean energy investment is ‘too slow’?

A: Despite a record $2.2 trillion projected for 2025, current investment levels remain insufficient to rapidly phase out fossil fuels and meet Paris Agreement net zero targets. Grid constraints and financing gaps slow progress in critical regions.

Q: Which regions lead in clean energy investment, and which lag?

A: The US, China, and the European Union account for the bulk of new investment. Africa, Southeast Asia, and Latin America struggle with less than adequate funding, limited grids, and high reliance on fossil fuels.

Q: What are the top barriers to faster clean energy rollout?

A: Grid bottlenecks, inadequate public and private finance in emerging economies, entrenched fossil fuel subsidies, and inconsistent policy are the biggest obstacles identified by the IEA’s 2025 report.

Q: Does the recent surge in coal and gas plant approvals threaten climate goals?

A: Yes. Increasing approvals of fossil-based capacity, especially in Asia, run counter to the global push for renewables and risk long-term emissions lock-in unless accompanied by coal-to-clean pledges and rapid rollout of renewables.

Q: What can be done to close the investment and infrastructure gap?

A: The IEA urges doubling down on grid and clean technology investment, targeting emerging regions with innovative finance, and implementing stronger climate and industrial policies that can accelerate and equitize the energy transition.

References

Author

medha deb

Medha Deb is an editor with a master's degree in Applied Linguistics from the University of Hyderabad. She believes that her qualification has helped her develop a deep understanding of language and its application in various contexts.

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