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Renewable energy projects like solar and wind have captured their highest ever share of global investments in the industry, as government policies designed to reduce emissions give a spur to the sector.

Yet the International Energy Agency warned that investments in renewables would need to triple to meet targets agreed at last year’s Paris climate talks, even as costs in the sector fall rapidly.

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“We are seeing real action in dollar terms but it is not yet enough,” said IEA director Fatih Birol, as the agency launched its first annual report on global energy investments.

“It makes me happy that the numbers show governments can change the direction of investment. But we need to triple efforts to meet the Paris targets.”

The report showed that renewable energy projects accounted for 40 per cent of investment in all new power projects globally, with China overtaking the US and Europe as it tries to reduce its reliance on heavily polluting coal.

Renewable investments by China made up 60 per cent of the country’s spending on power projects, Mr Birol said. More than 80 per cent of global nuclear investments were also made in China, which become the world’s largest energy consumer last decade.

Globally, energy efficiency projects made up 12 per cent of all spending on energy investments, as private companies cut capital expenditure on oil and gas due to lower prices.

The IEA warned that capex cuts in the oil and gas sector meant state oil companies were capturing a bigger share of the market, with many pushing ahead despite lower prices.

In 2015 state oil companies made up 44 per cent of all capex spending in the sector, the highest ever level. “This could change the dynamics of the oil industry,” Mr Birol said.

A major shift in investment towards low-carbon sources of power generation is underway. Fossil fuels continue to dominate energy supply but the composition of investment flows points towards a reordering of the system

– IEA report

He warned that new oil field discoveries, which have generally been made by private companies in recent decades, fell to the lowest level in six decades last year.

“That could prove to be costly in the future once the current surplus is worked off and stocks erode,” Mr Birol said.

Renewable investments reached almost $290bn in 2015, the report said, the highest on record. “A major shift in investment towards low-carbon sources of power generation is underway,” the report said. “Fossil fuels continue to dominate energy supply but the composition of investment flows points towards a reordering of the system.”

As China has increased investments in low-carbon alternatives it has cut back in coal, with spending dropping to the lowest level in a decade. Investments in coal mines dropped 14 per cent in 2015 with the decline accelerating in the first half of this year, according to official Chinese statistics

With China accounting for the vast majority of global coal investments that dragged the worldwide total down by 9 per cent in 2015 to less than $70 bn.

The IEA said in a separate report on Tuesday that the global oil glut, which has halved prices since mid-2014, may run on into 2017 as Opec countries have raised production almost as fast as higher-cost supplies have shrunk.

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