The Journey Towards a Low-Carbon Future
All of mankind is looking for solutions to address climate change, growing food shortages, and the looming energy crisis. When solutions are introduced to the community, it is equally important to make sure that energy security, price stability, and greenhouse gas emission reductions also tackle inequality and injustice. Shouldn’t the transition be fair to all?
The world’s average global temperature is now 1.2°C higher than the pre-industrial era. Under the Paris Agreement, the countries that care about the future generations are committed to limit the increase in the global average temperature to well below 2°C above pre-industrial levels and pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels. If this target can be achieved, this would significantly reduce the risks of climate change.
Considering all these facts, moving towards to a low-carbon future by a rapid energy transition has been identified as the best solution for mankind and the planet. Renewable energy and energy efficiency are the front runners of a low-carbon economy not only to put the world on a climate-safe pathway but also to ensure sustainable, reliable, and affordable energy for the community.
It is important to identify the key strategies to achieve these ambitious targets. Some specific strategies are investing in solar and wind energy, promoting energy efficiency, adopting electric vehicles, encouraging the use of sustainable transportation modes, promoting sustainable agriculture and land use, and investing in carbon capture utilization and storage (CCUS) and energy storage technologies.
The fossil fuel industry continues to receive considerable support through subsidies. It is estimated that USD 2.9 trillion was spent globally as fossil fuel subsidies from 2013 to 2020. Excepting for the years 2015 and 2020, the Middle East and North Africa were the regions providing highest subsidies. Having said that, East Asia and the Pacific region have continued to attract the most investments in renewable energy from 2013 to 2020 while the total global investment in renewable energy went up to USD 500 billion in 2022.
Here are three actions that developing countries can take to accelerate the just energy transition to the journey towards a low-carbon future:
Promote Private Sector Investment: Most of the private sector renewable energy investments have centered around advanced economies and matured technologies such as wind and solar because of lower risk of investment and profit maximization. Naturally, the cost of investment is much higher when the project is to be developed in higher-risk environments. Eventually, lower income countries may have to pay higher prices for their electricity or energy. Public finance would be a solution in this context, but public funds are very limited. Therefore, governments should take strong actions to lower the risk associated with renewable energy investment projects, which will pave the way for more private sector investments from international financial markets at a competitive price.
Enhance International Collaboration: International collaborations between advanced economies and developing economies are crucial for catalyzing renewable energy and energy efficiency sector development in the region. Many countries do not have the resources or expertise to develop and implement their own energy solutions. Collaboration can help leverage these strengths and achieve more efficient and effective outcomes while promoting knowledge and technology transfer. A significant amount of public finance resources at concessional rates of interest, credit guarantees and insurance of commercial and debt obligations, and development assistance including donations and grants can be secured from international development funds such as the Green Climate Fund, High-Level Technology Fund, Energy Transition Mechanism Partnership Fund, and Just Energy Transition Partnership.
Carry Out Effective Public Investment: Public investment projects should be carried out in developing countries, which will create an investment-friendly environment for the private sector. Public finance can not only mitigate risk but also do capacity building, support innovative pilot project testing, and introduce innovative business models in the clean energy sector. Also, public finance can be utilized to incentivize fossil fuel sector investments towards renewable energy sector development and attract energy consumers who can play a major role by demanding green energy as well as energy efficient systems in the future.
Sustainable energy sector development is a global challenge, and it requires coordinated global effort to address the challenges of climate change. While expanding clean energy for the 350 million people in Asia-Pacific region who have either limited or no access to electricity, the global community has to catalyze the transition from coal and other fossil fuels toward clean, affordable, and reliable energy sources. We need to do better, act bolder, knowing we will meet critical climate goals and a low-carbon future through collaboration and meaningful capital commitments.
By Keshan Samarasinghe
Energy and Environment Consultant, Asian Development Bank
and Future Energy Leader at World Energy Council