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Better bundles of energy

By HARSH VIJAY SINGH/PEDRO GOMEZ | China Daily | Updated: 2021-04-27 07:22
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MA XUEJING/CHINA DAILY

Focus of transition from fossil fuels must also be on resilience in addition to speed and direction

The global energy transition has crossed many milestones over the past decade, surpassing most expectations. Thanks to technological innovation, entrepreneurship and risk-taking by policymakers and businesses, the installed capacity grew seven-fold for solar photovoltaic, and three-fold for onshore wind since 2010. Once considered a pipe dream, the share of renewable energy in the electricity mix is higher than fossil fuels in some countries. The last decade has also seen the number of people without access to modern forms of energy significantly decline.

But there is still a long way to go. As of 2019, 81 percent of the world's primary energy supply was still based on fossil fuels. And while the share of coal in the electricity mix has been steadily declining, the volume of electricity produced from coal has increased in absolute terms-primarily in regions with rising energy demand.

Analysis from a decade of benchmarking data from the World Economic Forum's Energy Transition Index 2021 indicates that only 10 percent of the 115 countries analyzed maintained a steady upward trajectory toward energy transition. While most countries progressed in some way, consistent progress was a challenge. As we move into the decade of delivery and action, when pledges and commitments are expected to materialize into actions, maintaining consistency of progress is of paramount importance for a timely and effective energy transition. Along with speed and direction, the focus must also be on the resilience of the energy transition, to make the progress irreversible and enable the process to bounce back in the event of disruptions.

China is one of the 13 of the 115 economies to have maintained a consistently upward trajectory on the Energy Transition Index over the past 10 years, and the improvement in its score has been the highest of all the large economies.

Moreover, the presence of skilled human capital, modern infrastructure and continued investment in research and development is supporting accelerated energy transition in China.

China's attempts to improve the enabling environment for its energy transition are steps in the right direction-as evident by the recent net-zero goals announcements. But reliance on coal for power generation continues to pose challenges, despite the record amounts of renewable energy capacity installation over the past decade.

As global energy transition advances, the landscape of risks to the transition is rapidly evolving. Accelerated incremental progress will depend not only on continued advancements in technology, but also on addressing the socioeconomic and geopolitical ramifications of the energy transition.

First, energy remains strongly coupled with economic growth. Addressing this trade-off is at the heart of the energy transition. Recovery efforts to mitigate the economic damage from COVID-19 were expected to be a significant green catalyst. Yet despite the historic emissions reductions caused by lockdowns, emissions in many countries have quickly rebounded to pre-pandemic levels. Moreover, although trillions of dollars are being pledged and effectively channeled to sectors relevant to the energy transition, the majority of the funds have been allocated to carbon intensive sectors in most countries, potentially locking in emissions for years. Investment in green, future-ready infrastructure would be a strong vehicle to drive further economic growth and generate employment.

Second, as the global economy limps back to normalcy, forecasts suggest that emerging and developing economies are on track for slower recovery, with many not expected to return to pre-pandemic GDP levels until 2023, according to the International Monetary Fund. The fiscal challenges will limit their ability to support investments into their energy transitions. In the short term, ramping up vaccine production and distribution, and ensuring equitable distribution is important to ensure emerging and developing economies are quickly able to bounce back.

Third, the pandemic highlighted the devastating effects of income inequality, both in terms of increased risk of contagion, and economic costs from loss of income and employment. The impact of the energy transition will be similarly disproportionate to vulnerable sections of the society-for example, from labor market dislocations across the conventional energy source value chain and from affordability challenges resulting from subsidy reforms or carbon taxes. Addressing distributional considerations by prioritizing "just transition" pathways is critical to ensure the inclusiveness of the energy transition.

Fourth, the COVID-19 pandemic has exposed the limitations of international cooperation to mitigate and address the global health emergency quickly. Climate change, the primary driver of the energy transition, is already creating food and water shortages across many parts of the world and is expected to spark an unprecedented wave of migration in the near future. This is likely to test the strength and efficacy of international collaboration even more, necessitating development of robust cooperation mechanisms across all stakeholder groups.

Uneven public compliance to mitigation measures and vaccine hesitancy has also highlighted the challenges in mobilizing public support to address a rapidly escalating emergency. Research suggests that people underestimate the effects of dangers that have exponential growth, long-term horizons or might be unfolding in faraway places. At the same time, inconsistent communication and administrative miscalculations can lead to loss of trust in the authorities and give rise to misinformation.

Given the ubiquitous presence of energy across the fabric of modern economies and societies, the energy transition has systemic implications and requires active participation from individuals. With timelines extending to decades into the future and extreme weather events happening in faraway places, individuals might not perceive the necessity for the energy transition or the need for speed. This highlights the urgency of enhancing awareness of how crucial the energy transition is to ensure active participation from all sections of society.

Harsh Vijay Singh is the project leader of the Platform for Shaping the Future of Energy, Materials, and Infrastructure at the World Economic Forum. Pedro Gomez is the head of Oil and Gas Industry at the World Economic Forum. The authors contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

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