How we can create a global energy transition inclusive of the Global South ?

• A number of international forums, from G7 and G20 to the United Nations Climate Change Conferences (COPs), are trying to address the imperative to transition our global energy systems.
• Ensuring the energy transition remains inclusive for Global South nations must be a priority.
• Here’s what global leaders should consider to achieve an inclusive energy transition as they enter COP28 negotiations.

This year’s G7 Summit in Hiroshima, Japan, focused predominantly on geopolitical challenges and a strong sense of urgency about climate change was also stressed. The Foreign Ministers’ Statement reiterated the G7’s commitment to “support sustainable, inclusive, resilient and quality infrastructure in partner countries through the G7 Partnership for Global Infrastructure and Investment.” And, the Leader’s Communiqué reiterated continued support for achieving the Sustainable Development Goals (SDGs), but little reference was made to energy access, energy affordability or market stability.

India hosted this year’s G20. Its chairmanship, as well as the G20’s inclusion of broader membership from major countries from the Global South, including the African Union, led to a very different Statement compared with that of the G7. The G20 Statement highlighted energy access, energy affordability and market stability. The Statement also recognized inclusive investment to support growth.

While the G7 Leader’s Communiqué expresses a commitment to continue to advance the SDGs and to promote the reform of public development finance, the contrast between the G7 and G20 highlights the perceived limited attention that the advanced economies are paying to the needs of the Global South, including perhaps the different priorities between those groups.

Inclusivity emerging as a challenge

According to the World Economic Forum's Fostering Effective Energy Transition 2023 report, while there has been broad progress on clean, sustainable energy, there are emerging challenges to the equity of the transition. This is due to countries shifting their focus to energy security in the face of energy price hikes.

To achieve our climate goals, we must get buy-in from all countries. This means that plans for the energy transition cannot come at the expense of energy market stability, energy security or equitable development in the Global South.

We must do our best to avoid future energy crises, which would be very damaging to the Global South, by avoiding a shortage of energy supply capacity and by ensuring sufficient cushioning against various contingencies.

The Global South must deploy much more renewable energy. But this will require a substantial increase in blended and concessional financing, which the reform of development finance can help.

Lastly, energy access is the most basic element of inclusivity. We need to change the situation in which 2.3 billion people globally continue to use wood, charcoal and biomass for cooking, which has grave health implications. In that regard, pragmatic ways to enhance energy access in the areas where connection to grids could take years must be considered. In certain instances, combining renewable energy for electricity (e.g., solar home systems) with LPG for cleaner cooking fuel can be a powerful combination.

Lessons for the upcoming COP 28

The world needs to tackle inclusivity more than ever before, as well as the exclusive focus on sustainability. The legitimate concerns of the Global South should be addressed and the large economies with sufficient resources must not be allowed to make excuses for not taking the necessary actions to tackle climate change.

There are positive aspects of the G7 and G20 that can be incorporated in the COP28 process. The strengths of G7/G20 have notably been the precious opportunity for the world’s top leaders to engage in intensive meetings that can exert top-level peer pressure, develop consensus and send out strong messages to the world. At COP28, leaders have the opportunity to engage in more intensive discussions on the energy transition inclusivity.

In addition to the enhancement of energy market stability, energy security and the improvement of energy access, some specific actions that can be taken at COP28 to achieve a global energy transition that is inclusive of the Global South include:

• Agreeing on a concrete plan to mobilize climate finance for the Global South. This plan should include public, private and philanthropic finance and be designed to support the deployment of renewable energy, energy efficiency and other clean energy technologies in the Global South. In that regard, multilateral development banks and development finance institutions should work more closely with development agencies to more aggressively shift or repurpose Official Development Assistance (ODA) to reduce the costs of financing. ODA could, for instance, be used to take on some of the currency risk associated with lending in emerging economies. ODA can also be used to take on some of the credit risks to bring down the cost of lending. Rather than separating development finance from ODA, the two need to be more integrated to expand the pool of sustainable financing available to the Global South to support the energy transition.

• Advancing global initiatives to accelerate the transfer of clean energy technologies to the Global South.

• Establishing a global just transition fund to support workers and communities affected by the energy transition. The fund could be used to provide retraining and other support to workers in the fossil fuel industry and to invest in clean energy projects in communities that are most affected by climate change.

• Getting COP negotiators to commit to a Modern Energy Minimum for those people globally who do not have sufficient reliable power to live a modern lifestyle.

Lastly, all these efforts should converge towards bigger participation of the Global South in the growth industries that the energy transition is creating. These include processing, manufacturing and assembly of inputs, such as critical minerals, batteries and equipment, like solar panels. Solutions might include providing Advanced Market Commitments to purchase goods and equipment produced in Global South countries in exchange for commitments from those countries to accelerate their own energy transitions.

Beyond COP 28: G7/G20-2024 and COP29

Beyond COP 28, it is equally important to continue emphasizing inclusivity and to incorporate concrete actions to address the legitimate concerns of the Global South in the G7/G20 meetings planned for 2024, as well as for COP29. These international processes are key for the world to address global challenges, especially when the effectiveness of international processes is in question. These international processes will have to address inclusivity in an effective manner that will continue to be one of the key elements in the long energy transition.

Article written by :

Tatsuya Terazawa - Chairman and Chief Executive Officer, The Institute of Energy Economics, Japan

Lamé Verre - Head, Strategy, Innovation and Sustainability, SSE Energy Solutions

Andrew Herscowitz - Executive Director for North America, ODI

This article is part of : Centre for Energy and Materials

- World Economic Forum