Developments over the past two years have demonstrated that the energy transition is more complicated than previously though, Ayra says. „While the transition proceeds—and continues to gain political and business momentum—expectations of a linear global shift have been shaken as climate goals compete with priorities around energy security, energy access and affordability.“
The emergence of a new North-South divide between the wealthy countries of the Global North and the developing countries of the Global South would have led to an increasingly sharp debate over the cost and timing of the energy transition, its relative burdens and its compatibility with other priorities such as economic growth, poverty reduction and improved health.
Trilemma of energy security, affordability and sustainability looks different
“The trilemma of energy security, affordability and sustainability looks very different in Africa, Latin America and the developing countries of Asia than in Europe and the United States, where per capita incomes are as much as 40 times higher. This divergence makes addressing the gaps in policy, technology and financing a significant challenge across geographies“, Arya underlines.
Supply chain concerns, particularly those regarding the adequacy of mineral supply and processing capacity to meet the needs of low and zero-carbon technologies such as renewable power and electric vehicles as well as the impact of persistent inflation and higher interest rates on the cost of capital, would pose additional challenges.
“For developing economies, which already face high borrowing costs for energy projects, rocketing interest rates make it even more difficult to develop commercially viable projects and attract investors“, Arya says.
Did you miss that? Accelerating the journey to net zero
Progress is being made. Policy actions in the United States and the EU—such as the U.S. Inflation Reduction Act and the REPowerEU plan in Europe—have cemented net-zero ambitions. China’s investment in the energy transition continues to outpace others, also.
However, the realities of the global energy system and the diverse status of global economies represents challenges to meeting emissions reduction goals.
„Challenge how to bend the emissions curve while ensuring economic grow“
“The challenge is how to bend the emissions curve while ensuring economic growth. The climate policies of the Global North will be insufficient to achieve the global goal of net-zero unless there are reductions in emissions from fast-growing developing economies“, Arya comments.
According to S&P Global Commodity Insights, current nationally determined contributions would reduce global emissions by only 10% in 2030 relative to 2019 levels. This compares with the 43% reduction that the Intergovernmental Panel on Climate Change set as the benchmark to align with a 1.5 degrees C pathway.
Also interesting: Renewable energy investments in Africa lag behind
Despite a rise in climate ambitions and supporting policies, in the last 30 years, the share of hydrocarbons in the global primary energy mix has hardly changed, to 80% from 81%. Global greenhouse gas emissions are estimated to have increased 0.9% in 2022, hitting a new record of 52 gigatonnes.
Scaling low-carbon technologies crucial
Energy demand has continued to grow in most emerging and developing economies as hundreds of millions more people with increased access to reliable and affordable energy have achieved improved living standards.
“Closing the gap between current emissions trajectories and the pathway required to achieve net-zero by 2050 will largely depend on scaling low-carbon technologies. Technology advances, government support, regulation and growing private sector support will continue to pave the path ahead“, Arya concludes. (hcn)
