The Developing World Post-COP26: Can Developing Countries Leapfrog to Renewable Energy?
The pressure is on. Global climate action has had to confront multiple key issues over the past few months, with the unveiling of shocking emissions projection data in the UNFCCC report, culminating in crucial debates at the COP26. Since the conference in Glasgow, the focus has largely turned towards developing countries where energy consumption will grow the most. Despite contributing the least to historical cumulative emissions, developing countries have the most to lose from climate change.
it is estimated that 132 million people would be pushed into poverty by 2050 if climate change goes unchecked , accompanied by extreme weather and drought causing livelihoods to deteriorate. While the future is concerning, so is the present health of developing economies. Over the pandemic, the external debt of developing countries reached USD $10.6 trillion in 2020, equivalent to a third of their GDP . Therefore, the question is not only how the developing world can reduce their emissions, but how this can be fair and just while enabling the same opportunities for economic growth that today’s industrialized countries experienced. The COP26 draws attention to three main motives in particular:
1. End Coal Fired Projects
23 countries have established new commitments to phase out coal power, with the backing of international private banks and public finance to retract financial support for coal power by the end of 2021 . For the developed world, coal power is mostly uneconomic. In the US, 80% of coal plants would be cheaper to operate if switched to renewable energy generation . However, the case for developing countries differs. In Asia, younger plants are cheaper to operate and are crucial for industrialization and economic development. For example, India is 70% reliant on coal energy in addition to providing extensive fossil fuel subsidies. The fear of economic upheaval caused by an abandoning of coal prompted India to change a clause’s wording from “phase out” to the “phase down” of coal, causing great controversy at the COP26 . Ultimately, this reflects the incongruity between the reality for developing countries and the pace expected of them.
2. Stop expanding oil production
Oil dependent economies in the developing world such as Angola, Congo, Timor Leste all rely on oil for more than 60% of their fiscal revenues . The International Environment Agency claims that no new oil and gas fields can be developed if the world aims to reach net-zero by 2050. This puts a significant amount of pressure on the lowerincome, oil reliant economies. Simultaneously, developing countries face the challenge of high growth in energy demand as the population grows, with projections for the African continent reaching 2 billion by 2050 . Currently, more than 800 million people lack access to electricity. Therefore, if existing energy systems based on coal, oil and gas are dismantled, there has to be an alternative method of prioritizing universal access .
3. Speed up renewable energy deployment
As energy consumption is expected to increase by 50% by 2050, renewable energy alternatives have to be able to meet demand. The shift of financing away from fossil fuels could potentially redirect USD $17.8 billion to the clean energy transition . Funding could support the development of electricity storage for different renewables, as well as the necessary technologies. Advantageously, reduced costs of renewable generation have changed the narrative. Renewable energy is now seen as a way to boost economic development as well. In this new context, delaying the switch to zero-carbon power does not give emerging economies a chance to catch up with richer countries the way one would imagine . Instead, it is hindering their development by tying them down to higher-cost power when cheaper alternatives are available. This combination of pressure and opportunity for developing countries leads to a further question: can the developing world leapfrog to renewable energy?
While global climate action may be attempting to overcome several hurdles at once, the focus must remain on how to create a fair and just path for climate action. The need to rapidly curb emissions has to be reconciled with meeting the demand for energy and basic universal access in low-income countries. Currently, 2.5 billion people still use traditional sources of energy such as burning wood and dung . Leapfrogging is the idea that the developing world can become prosperous by skipping the fossil-fuel-reliant stage of industrialisation and directly adopting renewable energy. This is not an idea just confined to theory. For example, the telecommunications sector never really experienced the use of landlines in low-income countries . Instead, these countries went straight to adopting mobile phones. With mobile phone penetration at 83% amongst adults in developing economies , there are reasons to believe that countries can leapfrog to renewable energies that are low cost, reliable, environmental and well suited to serving rural populations.
The cost of renewables has declined drastically over the last decade (see Fig. 1). The levelized cost of electricity for solar PV and wind have decreased by 81% and 62% respectively between 2010-17 . Alongside the lowering of costs, investments in renewable power generation increased to USD $300 billion by 2017 . Of this investment sum, developing countries accounted for 63%, mainly in China, India and Brazil . On a smaller scale, renewable energy has been useful for equipping households, health clinics and schools with basic solutions. These include solar panels for a few hours of water pumping, lighting or other low electrical demand processes. Over the last decade, the offerings have expanded to include village level mini-grid systems often spearheaded by private companies. On a national level, the prioritisation of renewable energy generation has proven to be sustainable for developing countries. For example, since 2009, Morocco pursued an ambitious renewable energy program based on solar PV that allowed it to increase renewable energy to a 42% share of its national energy network, staying ahead of the global average of 30% .
“However, as developing countries reorient their commitment towards renewable energy, the financial and technical support from the developed world is crucial for a fair and just energy transition”
Challenges and next steps
The opportunities are prominent, yet there are challenges in how these can be effectively leveraged. A closer look at the energy sector in India highlights some of these. India is expected to be one of the top emitters, and only recently established its net-zero for 2070. India’s energy demand will grow faster than any other country over the next 20 years . So far, its solar energy capacity has increased 17x in 7 years, now at 45GW capacity . The country aims to have renewable energy make up 50% of its total electricity by the end of the decade. However, their focus has been only on decarbonising the grid and not within transport, agriculture and construction- all high emitting industries . To catalyse India’s renewable energy sector, the right policies such as subsidies are needed to improve the attractiveness of low-carbon options . Moreover, we require a big scale-up of finance from donors. Economic and financial strains caused by the COVID-19 pandemic could significantly hamper future investments in renewable energy projects. So far, the developed world has failed to provide the promised USD $100B in annual climate finance. In order to achieve its targets, India estimates it will require USD $1 trillion dollars in financial assistance over the period of transition . The private sector is expected to play a large enabling role of providing 70% of climate financing for the future, according to the International Energy Agency. Other developing countries are making further demands for investments and the transfer of technologies required to unlock synergies between power, transportation, heating and cooling systems . Infrastructure will need to be developed as well. For example, solar and wind investments rapidly increased in Vietnam but plants could not operate fully due to grid efficiency constraints . Encouraging FDI is one viabsle option for India, however the regulatory changes needed to create an open and attractive market must follow . Leapfrogging is not just an optimistic but a proven strategy for developing countries to progress. It could be a viable option in the post-COP26 world. However, as developing countries reorient their commitment towards renewable energy, the financial and technical support from the developed world is crucial for a fair and just energy transition.
This article is also featured on the London Journal of Energy. Future Thought Leaders is a democratic space presenting the thoughts and opinions of rising Energy & Sustainability writers, their opinions do not necessarily represent those of illuminem.
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About the author
Gowri Mohan is a MSc Development Management student at the London School of Economics. During her undergraduate degree she was a part of Global Research and Consulting and led a project team working on crafting policy recommendations to improve equity in the sustainable economy. In addition, she is the editor-in-chief of the London Journal of Energy.