Chevron (CVX 0.37%) rakes in billions of dollars each year producing fossil fuels. It's investing a massive amount of money to remain a global oil and gas market leader. That's because the oil giant believes carbon-based energy will remain vital in fueling the global economy in the decades ahead.

However, Chevron has also made it no secret that it believes lower-carbon energy is the future. That's driving increased investments in building a lower-carbon growth engine. Given the potentially massive size of the lower-carbon energy market in the decades ahead, these investments could pay big dividends for shareholders.

Betting $10 billion on the future of energy

Chevron is investing $10 billion through 2028 on lower-carbon projects. On the one hand, that's a drop in the bucket compared to its fossil fuel investments. For example, Chevron expects to invest about $14 billion this year in maintaining and expanding its fossil fuels businesses. On top of that, the oil giant has agreed to spend $60 billion to buy fellow oil producer Hess to further enhance its ability to grow its oil production.

However, while fossil fuels make up the bulk of its current investment spending, the oil giant believes that lower carbon energy is the future. That's driving it to invest $2 billion this year on projects to reduce the carbon intensity of its traditional operations and grow its new business lines. It aims to build out several lower carbon businesses, including renewable fuels, hydrogen, and carbon capture, utilization, and storage (CCUS).

A leader in renewable fuels

Chevron has emerged as an early leader in the renewable fuels sector. The energy company set an ambitious goal to grow its renewable fuel production capacity to 100,000 barrels per day by 2030. It accelerated its ability to achieve that target in 2022 by acquiring Renewable Energy Group (REG) in a nearly $3.2 billion deal.

That deal should start paying dividends for the company this year. Chevron noted at the time of the acquisition that it would be accretive to its earnings in the first year and enhance its free cash flow after completing the expansion of REG's Geismar project. Part of Chevron's $2 billion of lower-carbon capital spending in 2024 will be to complete the Geismar renewable diesel expansion project this year. The oil company will continue investing capital in growing its renewable fuels platform in the coming years to capitalize on a market that could triple in size by 2030.

Making early investments in two markets with multitrillion-dollar potential

Chevron is also investing capital into building hydrogen and CCUS platforms. It's investing in organic expansions and making targeted acquisitions. For example, the company bought a majority interest in ACES Delta, a joint venture developing the Advanced Clean Energy Storage project in Utah. It will convert renewable energy into green hydrogen that will be stored in salt caverns until needed for seasonal usage. Chevron is also investing in Bayou Bend, one of the largest carbon storage projects in the country.

Hydrogen and CCUS are potentially massive market opportunities. According to Deloitte, green hydrogen could exceed the worldwide LNG market by 2030 and become a $1.4 trillion annual global market by 2050. Meanwhile, Chevron's rival Exxon sees CCUS growing to a $4 trillion global market by 2050. That would put it at 60% of the global oil and gas market Exxon envisions in three decades.

Hydrogen and CCUS could be major growth drivers for Chevron in the future. Further, they could enable the company to generate steadier earnings since the business models supporting those markets tend to center around long-term, fixed-rate contracts instead of market-based pricing. Because of that, Chevron could produce much more predictable earnings growth and cash flow in the future as it revs up its lower carbon growth engines.

Building a potentially powerful growth engine

Chevron believes lower-carbon energy is the future. That's driving the energy giant to ramp up its investments to capture opportunities across this emerging market. Its investments in renewable fuels should start generating free cash this year, while its spending in hydrogen and CCUS could pay monster dividends in the future if those markets reach their lofty expectations. This upside makes Chevron a potentially attractive energy stock to own for the long haul.