Sustainable energy future is not all clear blue skies

I’m writing from the COP28 climate summit in Dubai this week, where 70,000 people have come together to figure out how to accelerate decarbonisation and minimise the catastrophic effects of climate change. I’ve spoken at several closed-door roundtables with both governments and the private sector. Let me share some observations.

First, the “global stocktake” has shown that the world is far behind where it needs to be to limit global warming to less than 2°C. The aggregate sum of all existing emission reduction pledges is inadequate.

In fact, the stocktake found that at the current rate of effort the temperature rise will be 2.5°C-2.9°C.

If you thought the 37°C temperatures last week in Johannesburg were high, that will pale in comparison to where we’re going at this rate of temperature rise. The effect on livelihoods will be debilitating.

Second, one of the most prominent conversations at COP28 is how to ensure the transition is fair for both developed and developing countries, and ensure the latter are not left behind. Developed countries have robust private and financial sectors, along with public fiscal resources, that can drive the transition.

But blended finance for the energy transition is complicated in emerging economies. Private capital is not easy to come by in these countries, owing to both macro and project risks.

Sovereign credit ratings, currency risk, and a weak legal and regulatory environment for power markets deter investment.

Though global investment in renewable energy exceeded $3trillion from 2010-19, Africa received only 2.4% of it from 2010-20. Amid skyrocketing debt in emerging economies, countries also lack the public finance to finance the transition. Multilateral development banks have not stepped in to fill the trillions of dollars in shortfall. Finding a solution is imperative — but the world hasn’t figured it out yet.

Third, while the energy transition from fossil fuels to renewable energy seems straightforward, it is not. It ’ s true that the cost of clean energy technologies such as wind turbines and solar panels has fallen, but the cost of transmission and storage is significant. Even in the US, 85% deployment of renewable energy will bring a $2.2-trillion price tag in transmission infrastructure — thus generating resistance by US policymakers.

When you factor in the poor state of transmission infrastructure in most African countries, the levelised cost of electricity for the energy transition is out of reach.

Fourth, there is some (importantly, not universal) agreement that Africa’s emissions reductions are less urgent than those of China and other industrialised nations. Africa contributes only 3% of global emissions. If emissions go up a bit to bring energy to the 590-million people who now lack access to electricity, it won’t be the thing that derails net zero efforts.

Some of this stems from the strong consensus that energy poverty undermines economic and social development, including educational and health outcomes, life expectancy, economic activity and employment generation, as well as access to’water and sanitation. It s hard to escape poverty without ending energy poverty. The clean energy transition can’t come at the expense of energy justice.

Fifth, what the loss and damage fund will look like is yet to be fully determined. Developing countries are not, in any shape or form, ready to handle or finance the climate shocks that are coming with escalating frequency and severity. Pledges are there, but there’s still more talk than action.

I appreciate that some of this feels very doom-and-gloom. But what leaves me hopeful is that the discussions have highlighted a dual trajectory for developing and developed countries. Decarbonisation has not been viewed as a homogeneous journey. It’s a big step from a few years ago when the world looked at it as a onetrack task, leaving developing countries in a highly disadvantageous position.