The global climate agreement adopted in Paris in December is far more than just a roadmap for tackling climate change. It’s also a blueprint for rethinking how we bring energy to 1.3 billion people who live without electricity—a significant barrier to eradicating global poverty. On both of these fronts, clean energy, not fossil fuel energy, is a critical linchpin.
If we cannot solve these twin challenges—reducing our global carbon footprint and bringing the energy impoverished into the global economy sustainably—dangerous climate impacts and wide-ranging economic disruption are unavoidable.
This explains why an unprecedented number of corporate and investor leaders pushed for a strong climate accord in Paris and why many will be celebrating at the United Nations next month (April 22, 2016), on Earth Day, at the formal signing ceremony of the historic climate agreement. The agreement forged by 195 countries aims to limit global temperature rise to well below 2 degrees Celsius (3.6 degrees Fahrenheit) and reduce net greenhouse gas emissions to zero by the second half of the century.
So why is energy access in India, Africa, and other parts of the world so critical to achieving this 2-degree goal?
Barring major changes, energy-related carbon pollution in developing countries will be more than double that from developed countries by 2040, according to the U.S. Energy Information Administration. And the biggest growth will likely be in countries that are working hard to provide electricity—whether from dirty diesel and coal generators or carbon-free solar and wind power—to vast populations who have no access to power today. More than ever, increasingly cheaper renewable energy is becoming a viable solution over traditional fossil fuel energy sources.
Take the example of India. The country has nearly 400 million people without electricity and India’s Prime Minister Narendra Modi has made clear he wants to change this. He’d strongly prefer the electricity come from solar and wind power. In advance of the Paris climate talks, he announced an eye-popping goal to develop 175 gigawatts—175,000 megawatts—of solar and wind power by 2022.
“India has pledged to protect the environment. When I say in front of the world we have targeted 175 gigawatts of renewable energy by 2022, the world remains amazed,” Modi said, speaking last fall after inaugurating a solar-power facility.
Countries across Africa are thinking the same way. Hundreds of millions of Africans— including more than 75 percent of the populations in countries such as Ethiopia, Sierra Leone and Uganda—are still living without power. And increasingly, governments are looking to clean energy to plug this gap. Ethiopia, for example, is striving to become carbon neutral even as it plans to lift 25 million people out of poverty by 2025.
The good news is that clean energy is gaining traction across Africa and other emerging markets. Fueled by cheaper technology, renewable energy investments in developing countries grew 10 times faster than the equivalent investments in developed countries. Last year’s global clean energy investments were a record $329 billion, with the biggest growth being in countries like China, South Africa, Morocco, and Mexico, according to Bloomberg New Energy Finance.
Still, these numbers are significantly lower than investments needed to meet the goal of ensuring the world stays well below 2 degrees Celsius of warming that scientists say is necessary to avoid the worst effects of climate change.
The truth is we need far more investments in the low-carbon economy—well over $1 trillion every year, not just the few hundred billion dollars we’re seeing now.
So what will it take to get global investors, including pension funds, insurance companies, and endowment funds, to open up their wallets to this enormous clean energy opportunity, which can help solve climate change and energy access at the same time?
Here are a few of the keys that emerged at the recent Investor Summit on Climate Risk: Advancing the Clean Trillion, co-hosted by Ceres and the UN Foundation, at the United Nations:
Supportive national regulations: The 187 countries that made specific carbon-reducing commitments in Paris must follow up by establishing supportive rules and regulations that will catalyze projects and attract capital.
Countries such as Morocco and Mexico, which are phasing out fossil fuel subsidies while offering incentives for renewable energy, are providing road maps for other developing countries to follow. Just last month, Morocco turned on the switch to what will be the largest concentrated solar power plant in the world. The $9 billion project in the Sahara Desert is already generating 160 megawatts and, as more phases are completed, will eventually provide 1.1 million people with clean power.
More investment products: Investors are constrained in their ability to invest in clean energy because there are not enough low-carbon investment products for them to invest in. The $2 billion low-carbon index fund announced in December by the New York State Comptroller and Goldman Sachs is an encouraging step. The fund will exclude or reduce investment in high-carbon sectors such as coal. Another promising product is the fast-growing green bond market, one of the most popular ways investors are backing clean energy projects in emerging markets.
A record $42 billion of green bonds were issued in 2015, including first-ever green bonds in China and India. But we need more. Additional products that would enable off-grid rooftop solar projects to be bundled and sold to investors would be enormously helpful, for example, in places like India and Africa.
It’s easy to quibble that more must be done to make it easier to invest in the emerging markets, but evidence is growing that clean energy is gaining ground and opportunities exist that meet the risk-return requirements of major investors.
But financing exponentially more clean energy projects will require more hard work—from developing countries, which must have the necessary supportive policies, and the global investor community which must recognize the urgency of opening their wallets to help solve the twin challenge of climate change and ending global poverty.
The full and original article can be viewed on Ceres.org
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