Developing Nations Race to Adopt Clean Energy

By Stefan Sjöström, President, International on March 05, 2019
Stefan Sjöström
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Not so long ago, clean energy investments used to be perceived as being the exclusive realm of wealthy countries that could afford them. The commonly held belief that developed nations should let developing economies pollute their way to prosperity was a core pillar of international climate treaties. In the 1990s, countries like China and India successfully avoided international restrictions on carbon emissions that the U.S. and Europe were following. These differences, in turn, were a major obstacle for the U.S. refusal to sign the Kyoto Protocol in 1997, which before the Paris Agreement, was the main international treaty controlling greenhouse gas emissions.

In just a couple of decades, the tables have shifted. The following quote from a study published by Bloomberg New Energy Finance last year puts forward a new reality:

“Just a few years ago, some argued that less developed nations could not, or even should not, expand power generation with zero-carbon sources because these were too expensive. Today, these countries are leading the charge when it comes to deployment, investment, policy innovation, and cost reductions.”

Dario Traun, Bloomberg New Energy Finance (BNEF) Associate & Climatescope Project Manager

According to BNEF, clean energy carries four key competitive advantages over fossil fuels―including deployment, investment, policy innovation, and cost reductions―suggesting that sustainable growth is the economical thing to do when it comes to energy; it’s no longer just about making a  planet-conscious choice.

For developed and developing nations alike, the cleanest energy is now the most economical.

Racing to Fund Smarter Energy Choices

The BNEF report shows that in 2017, the investments in new capacity for wind and solar in emerging markets surpassed that of fossil fuels, with steep trends projected to make this difference even more pronounced in the coming years. With abundant data pointing to the fact that sustainable energy investments have a superior payoff compared to fossil fuels, international lenders are increasing their investments in cleantech projects in the developing world.

Because investing in innovation, deployment, and policy for sustainable energy sources is a better bet than investing in fossil fuels, global institutions have realized that these are the types of investments that can make a lasting change, not only for the planet but for emerging economies. This past December, for instance, The World Bank announced a significant increase in what they refer to as “climate action” investments. Specifically, The World Bank is “doubling its current 5-year investments to around $200 billion in support for countries to take ambitious climate action. The new plan significantly boosts support for adaptation and resilience, recognizing mounting climate change impacts on lives and livelihoods, especially in the world’s poorest countries.”

Making Transitions Work

Just a few days after this news, The World Bank announced that the United Kingdom and Canada would join them to provide “financial, technical and advisory support for developing countries that have decided to transition away from coal and accelerate the uptake of cleaner sources of energy.” Specifically, the UK is investing 20 million pounds into the World Bank’s Energy Sector Management Assistance Program (ESMAP), while Canada is investing 275 million Canadian dollars to fund The World Bank’s Energy Transition and Coal Phase-Out Program.

When it comes to energy, a ‘better mousetrap’ does not imply that disposing of the old and investing in the new is an affordable choice to make. Many developing economies do not have the funds to avoid the transition pains that technology innovations often bring. This is why both of the initiatives by the UK and Canada outlined above are significant. In partnership with The World Bank, their smart investments are designed to help emerging economies bridge the short-term disruption that transitions inevitably cause.

For example, with the world’s transition from coal, The World Bank notes that “socioeconomic impacts of coal mine closures are significant, with some coal-dependent regions continuing to lag socially and economically.” Riccardo Puliti, Senior Director and Head of the Energy and Extractives Global Practice at the World Bank adds, “A just transition for all means people’s livelihoods and communities need to be protected, and that requires a carefully managed, sustained, long-term approach. Governments must prepare well in advance of any coal mine closures, implementing strong safety nets for workers ahead of job losses.”

The Other Side of the Bridge is Richer

Happily, the falling costs of implementing and running sustainable energies, like solar and wind, and cost breakthroughs in other clean technologies, such as hydrogen, mean that once transitioned, an economy fueled by clean energy will do better. The developing world has taken notice and, most importantly, is taking bold actions to capitalize on this new reality. Bloomberg’s Climatescope project “revealed that clean energy dollars are flowing to more nations than ever. As of year-end 2017, some 54 developing countries had recorded investment in at least one utility-scale wind farm, and 76 countries had received financing for solar projects of 1.5MW or larger. That’s up from 20 and 3, respectively, from a decade ago.”

World-changing technologies, from the light bulb to mobile devices, tend to experience exponential growth once the economics line up to the point where they make more financial sense than what they replace. If this proves to be the case with clean energy, we are entering an era of exponential sustainable growth that we can all be grateful for.


Photo under license from Shutterstock.
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