Energy Transition

How do you achieve an equitable energy transition that includes developing economies?

Just energy transition

Developing world energy demand is projected to grow by two-thirds by 2050 Image: Photo by roya ann miller on Unsplash

Majid Jafar
Chief Executive Officer, Crescent Petroleum
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Decarbonizing Energy

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  • Developed nations must support a clean energy transition in emerging economies. Tackling climate change for the planet depends upon it.
  • For the developing world, climate action represents just one of the UN’s 17 Sustainable Development Goals alongside poverty, hunger, health, education, clean water and energy access.
  • Efforts to achieve real change will fall short until the interests of developed nations versus those of developing countries seeking to industrialize their own economies are better aligned for a just energy transition.

When world leaders gather for the COP26 climate summit in Glasgow next month, expectations will be high for a definitive roadmap to reduce global carbon emissions.

This comes after a summer of raging forest fires, flooding, and fresh warnings by the UN Intergovernmental Panel on Climate Change that greenhouse gas emissions must immediately be cut drastically. Success, however, will crucially depend upon bridging the diverging paths of developed countries and the industrializing emerging economies of the developing world.

Fostering a just energy transition

In the West, where the post-industrial shift to less energy intensive sectors has already markedly reduced carbon emissions, climate change is a high priority issue with growing calls for action. This has influenced car manufacturers to commit to a future of electric cars, encouraged subsidized installation of solar panels across city skylines and pushed investors to reduce fossil fuel investments.

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For the developing world, by contrast, climate action represents just one of the UN’s 17 Sustainable Development Goals alongside poverty, hunger, health, education, clean water and energy access.

With rapidly growing populations and urbanization, developing countries need affordable and reliable sources of energy to sustain their development, but now account for two-thirds of global emissions and almost all the growth in emissions going forward.

From their vantage point, Western pleas to eschew energy-intensive growth ring hollow, especially since the US and Europe account for most of the accumulated carbon dioxide in the atmosphere today, while 800 million people in Asia and Africa still live without electricity, and almost 3 billion lack clean cooking fuel.

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The challenges

The challenge to a just energy transition is how to solve the global commons problem of climate change in a world of self-interested nation-states while acknowledging the inequity of emissions and incomes. And the highest priority action now is how to enable Asia to wean off burning coal for power.

China alone built a new coal plant nearly every week last year, despite the pandemic, commissioning 38.4 GW of new coal plants in 2020, more than three times the amount commissioned in the rest of the world combined.

Despite its increased investments in renewables and pledge to achieve carbon neutrality by 2060, China still finances 70% of coal plants worldwide across 152 countries, so the recent G7 pledge to stop funding coal plants may have limited impact. India, Indonesia and Vietnam are also all still expanding their coal power capacity and together with China account for 80% of planned new plants.

This is not to lay blame – these Asian economic powerhouses need affordable and reliable energy and will continue to rely on coal in the absence of a viable alternative.

Natural gas can be a cleaner alternative to coal, as well as a complement to and enabler of intermittent renewable energy like solar and wind power which cannot yet be stored. It is also the path to a future hydrogen economy, which leverages much of the same infrastructure.

Over the past 5 years, replacing coal with natural gas has cut global CO2 emissions one hundred times more than all the electric cars in the world. Gas paired with renewables has allowed the US to achieve the lowest emissions in a generation and cut UK emissions to 19th century levels. Its potential in Asia and Africa is just as promising with the right policy targets and financial incentives, along with other cleaner energy sources like hydro power and nuclear energy where appropriate.

Oil will be used less for light transport but will still be needed in air transport, shipping and trucking until better solutions are developed. The pandemic also underscored oil’s importance in the manufacture of petrochemicals to make everything from PPE, sanitizers, digital devices, medicines, and vaccines, not to mention fuelling the airplanes that transported them.

These realities highlight the regressive nature of calls to cut investment in oil and gas, which would ultimately raise energy prices for the developing world and lead to even more burning of coal.

Instead, smarter policy for the developing world should focus on tempering demand growth through boosting energy efficiency in planning, which according to the International Energy Agency could cut emissions by almost the same amount as using renewables, and would cost dramatically less.

For a just energy transition, equally important are concrete international mechanisms with clear financial incentives to enable developing economies to implement the changes, funded by developed countries who stand to gain the most from the improvements. Setting a fair value for the cost of carbon emissions would also encourage more efficient use of energy and spur investment in “carbon negative” projects through the use of offsets.

A just energy transition is possible when the interests of developed and developing nations are better aligned.
A just energy transition is possible when the interests of developed and developing nations are better aligned. Image: World Economic Forum

Oil and gas companies must also reduce their emissions by cutting flaring, preventing methane emissions, and reducing their overall carbon intensity. Our own company, Crescent Petroleum, as the oldest private upstream company in the Middle East, has for some time been shifting focus to natural gas, which now makes up 85% of our production and enables cleaner, affordable electricity for millions while displacing dirtier liquid fuels to also reduce emissions.

We have reduced our carbon intensity to just one third of the industry average while offsetting our remaining emissions to become one of the first energy companies to achieve carbon neutrality across our operations.

Developing world energy demand is projected to grow by two-thirds by 2050, reaching nearly twice that of OECD demand. But efforts to achieve an equitable energy transition will fall short until the interests of developed and developing countries seeking to industrialize their own economies are better aligned.

The solutions for a just energy transition are clear but will require pragmatism, political will, and an inclusive global approach with concrete mechanisms and real financial incentives.

Majid Jafar is steward of the Platform on Energy and Materials at the World Economic Forum.

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