Growing disparity between developed, emerging country emissions reduction spending – IEA

Tom Brown

09-Jun-2021

LONDON (ICIS)–The gap in investment in clean energy and emissions reductions between advanced and developing economies is widening, the International Energy Agency (IEA) said on Wednesday.

Steps taken in emerging markets are increasingly key to reaching global climate goals.

Spending on all parts of the energy market in developing countries has fallen 20% since 2016, a decline that has accelerated since the onset of the coronavirus pandemic, to under $150bn in 2020.

This is an investment level that needs to increase to $1,000bn by 2030 if climate change mitigation targets are to be met, the IEA said.

“In many emerging and developing economies, emissions are heading upwards while clean energy investments are faltering, creating a dangerous fault line in global efforts to reach climate and sustainable energy goals,” said IEA executive director Fatih Birol.

At the current rate, carbon dioxide (CO2) emissions from developing countries largely in Asia, Africa, and Latin America, are set to increase by 5bn tonnes/year over the next two decades, according to the IEA, as access to power increases.

At present, around 785m people worldwide have no access to electricity, and 2.6bn people without access to clean cooking options worldwide.

With access to debt and equity capital much more expensive for many developing countries than for advanced economies, more development finance institute funding needs to be focused on clean power, according to Birol.

“There is no shortage of money worldwide, but it is not finding its way to the countries, sectors and projects where it is most needed,” he said.

“Governments need to give international public finance institutions a strong strategic mandate to finance clean energy transitions in the developing world.”

With vaccination progress in emerging economies lagging G20 advanced economies, due to financial constraints and moves by western governments to lock down the bulk of vaccine supply from late 2020 onward, the bulk of developing country citizens are unlikely to be inoculated this year, according to the IMF.

Meaning that the financial impact of pandemic surges, coronavirus mutations and the continued prevalence of the disease in the developing world is driving a growing divergence in economic growth and the pace of recovery between the developed and developing worlds.

Clean energy spending can be substantially more effective in developing countries, with the spending to reduce emissions by a tonne of CO2 roughly half what it would be in a developed economy, due to the capacity to leapfrog directly to clean power, according to the IEA.

The agency has noted that around half of the technologies necessary to achieve the Paris Agreement target of restricting global warming to 1.5-2 degrees Celsius by 2050 are in the pre-commercial phase at present.

The  best approach to helping avoid significant CO2 emissions growth in the developing world is to focus on “market-ready” solutions, such as renewables and energy efficiency technology, as well as laying the groundwork for the rollout of clean fuels and to decarbonise industrial sectors, the IEA said.

India’s minister of power, new and renewable energy, Raj Kumar Singh, recently called for advanced economies to set carbon negative rather than carbon neutral targets, to allow economies where millions of citizens currently have no access to power at all room to develop.

Advanced economy climate tsars such as John Kerry in the US and Frans Timmermans in the European Commission have called instead for developing countries to set their sights on jumping fossil power and for some citizens’ first experience of grid connectivity to be from clean sources.

“We need to show this can be a just transition, to remove coal, but do it in a way to allow those regions to grasp the opportunities of the new economy,” Timmermans said, speaking at an IEA event in April.

Focus article by Tom Brown

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