IEA Says Clean Energy In Developing Countries A Top Priority

To Achieve Net-Zero Emissions by 2050, Clean Energy Investment In Emerging & Developing Economies Must Touch $ 1 Trillion By 2030: IEA

IEA Says Clean Energy In Developing Countries A Top Priority

The Financing Clean Energy Transitions in Emerging and Developing Economies report released by IEA calls for channelling and facilitating investment into sectors where clean technologies are market-ready, especially in the areas of renewables and energy efficiency. (Photo Credit: IEA)

  • IEA, in collaboration with World Bank and World Economic Forum, released a new report Financing Clean Energy Transitions in Emerging and Developing Economies
  • As per report, annual investments across all parts of the energy sector in emerging and developing markets have fallen by about 20%
  • When emerging market and developing economies seek to increase clean energy investment, they face a range of difficulties
  • To address this situation, the report emphasises that annual clean energy investment in emerging and developing economies have to increase by more than seven times – from less than $150 billion last year to over $1 trillion by 2030

The International Energy Agency (IEA), in collaboration with World Bank and World Economic Forum, released a new report Financing Clean Energy Transitions in Emerging and Developing Economies, which highlights the need for concerted international efforts for a sustainable and resilient economic future in the developing world.

Emerging economies and their clean energy woes

As per the report, emerging and developing economies currently account for two-thirds of the world’s population, but receives only one-fifth of global investment when it comes to clean energy. Since 2016, annual investments across all parts of the energy sector in emerging and developing markets have fallen by about 20%, and they face debt and equity costs that are up to 7 times higher than in the United States or Europe. For instance, the report states that avoiding a ton of CO2 emissions in emerging and developing economies costs about half as much on average as in advanced economies. This is partly because developing economies can often jump straight to cleaner and more efficient technologies without having to phase out or refit polluting energy projects that are already underway.

But the reality is, the report states, that when emerging market and developing economies seek to increase clean energy investment, they face a range of difficulties. The challenges involve the availability of commercial arrangements that support predictable revenues for capital-intensive investments, the creditworthiness of counterparties and the availability of enabling infrastructure, among other project-level factors. Broader issues, including depleted public finances, currency instability and weaknesses in local banking and capital markets also raise challenges in attracting investment.

Dramatic increase of clean energy investments in emerging economies needed

To address the woes, the report emphasizes that annual clean energy investment in emerging and developing economies have to increase by more than 7 times – from less than $150 billion last year to over $1 trillion by 2030. This will help put the world on track to reach net-zero emissions by 2050. Unless much stronger action is taken, energy-related carbon dioxide emissions from these economies – which are mostly in Asia, Africa and Latin America – are set to grow by 5 billion tonnes over the next two decades.

Speaking about the situation, IEA Executive Director Dr Fatih Birol 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.” Birol emphasizes to remember that not all countries are starting from the same place and many do not have access to the funds they need to rapidly transition to a healthier and more prosperous energy future. “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 added.

The report also points out to a series of actions that can enable these countries to overcome the major hurdles faced in attracting finances. Among other aspects, it specially calls for:

  • Channelling and facilitating investment into sectors where clean technologies are market-ready, especially in the areas of renewables and energy efficiency
  • Laying the groundwork for scaling up low-carbon fuels and industrial infrastructure needed to decarbonise rapidly growing and urbanising economies
  • Strengthening sustainable finance frameworks, addressing barriers on foreign investment, easing procedures for licensing and land acquisition, and rolling back policies that distort local energy markets

The report also highlights that clean energy investments and activities can bring substantial economic opportunities and jobs in industries that are expected to flourish in the coming decades as energy transitions accelerate worldwide. Last month, IEA had released its Net Zero by 2050 roadmap for the global energy sector and had recommended that solar PV capacity additions should grow to 630 GW/year by 2030 (see IEA Wants 630 GW Annual Solar PV Additions From 2030)

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