4 Stocks to Watch in the Path to Decarbonize the Future

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Amid heightening climate concerns, the world is on a decarbonization mission. This has resulted in a significant shift toward renewable energy sources, which are becoming increasingly crucial in battling carbon emissions. Renewable energy offers a more sustainable alternative to traditional fossil fuels.

The world is already seeing a significant increase in the use of renewable energy sources such as solar, wind, geothermal, hydro, and biomass. As society continues to change and adapt, alternative energy use will be more common, with many energy companies already shifting their focus to renewable energy in place of oil, coal and natural gas.

This increasing adoption of renewable energy sources makes investing in renewable energy a promising option. Investors can consider adding stocks like Clearway Energy CWEN, NextEra Energy NEE, Brookfield Renewable Partners L.P. BEP and Vestas Wind Systems VWDRY.

Rosy Prospects of the Renewable Energy Market

Factors like supportive government policies to encourage more renewable investments, plummeting cost of generating renewable electricity as well as rapid adoption of electric vehicles (EV) across the board are driving the renewable energy market. Renewable energy sources are not only cleaner than traditional fossil fuels but are also becoming more affordable and accessible.

Governments are also actively focused on speeding up global decarbonization by passing aggressive climate legislation to increase investment in the clean energy sector. For instance, to fight the ongoing climate crisis and strengthen the U.S. energy infrastructure, the Inflation Reduction Act of 2022 (“IRA”) entailed an investment of $369 billion over the next 10 years. The Climate Bill, part of IRA, is estimated to reduce the country’s carbon emissions by roughly 40% by 2030.

Clearly, the power sector is undergoing decarbonization, as a result of the significant expansion in wind and solar energy.  Per the latest report by clean energy think tank Ember, wind and solar hit a record 12% of global electricity last year. Per the report, the world's electricity emissions intensity reached its lowest level ever in 2022.

The International Energy Agency (IEA) predicts that by 2025, renewable energy will account for around 35% of the world’s electricity generation, rising from the current levels of around 29%. Per Allied Market Research, the global renewable energy market was valued at $881.7 billion in 2020 and is projected to reach $1,977.6 billion by 2030, at a CAGR of 8.4% from 2021 to 2030.