More than $48 trillion (£28.6tn) must be invested across the globe by 2035 to meet the growing need for energy, according to a new report.
The International Energy Agency (IEA) suggests more than half of that amount will be needed to compensate for declining production from existing oil and gas fields while the remainder on finding new ways to meet the rising demand.
Two-thirds of the total will be spent in emerging economies while investment needed in renewable energy will total $6 trillion (£3.6tn), with another $1 trillion (£0.6tn) in nuclear power, the report states.
A majority of investment spent today – more than $1 trillion – is related to fossil fuels, including extracting them, transporting them to consumers, refining crude oil into products or building coal and gas-fired power stations.
However the report suggests investment in energy supply needs to rise steadily from the current $1.6 trillion (£0.9tn) to $2 trillion (£1.2tn) a year while annual spending on energy efficiency must increase to more than $550 billion (£328bn) by 2035.
Householders would need to make around half of the total investment, businesses nearly 40% and governments around 11% over the period to 2035.
The IEA warns that the transition to a low carbon energy system is a “major challenge”, requiring strong policy and price signals to ensure investments offer an “attractive risk-adjusted return”.
It urges for new forms of investment to be exploited and suggests that institutional investors, such as pension funds and insurers, could be vital as a source of long-term funds.
Maria van der Hoeven, IEA Executive Director said: “The reliability and sustainability of our future energy system depends on investment. But this won’t materialise unless there are credible policy frameworks in place as well as stable access to long-term sources of finance.
“There is a real risk of shortfalls, with knock-on effects on regional or global energy security, as well as the risk that investments are misdirected because environmental impacts are not properly reflected in prices.”
Europe will need to invest $2.2 trillion (£1.3tn) in the power sector by 2035 to replace ageing infrastructure and meet decarbonisation goals, the report warns.