The rich countries of the world have been digging up fossil fuels and burning them prodigiously since the late 18th century. They are, as a group, largely responsible for the high levels of carbon dioxide in the atmosphere today. Those emissions are already having profound effects on the climate, and the situation is rapidly getting worse. This year, with an El Niño weather pattern riding atop the human influence on the climate, is blowing away all historical temperature records.
Figure 50: Running away
Source: Analysis of JRA – 55 data
The big breakthrough of recent years was that the countries most responsible for where we are today finally committed themselves to the energy transition. Much more remains to be done, but nearly all of them are moving in the right direction. The United States, with its high consumption of all fossil fuels and its particular thirst for oil to power large automobiles, is responsible for more historical emissions than any other country. It was by far the most important holdout, but with the passage of two major climate and infrastructure bills in two years, the United States is finally on board with the global salvage effort.
What about the developing world?
China’s economic growth of recent years has been so rapid that it is overtaking the rich countries of the West. It became the largest single emitter of greenhouse gases in 2006, and its emissions are now more than double those of the United States. Its total historical emissions will exceed those of the 27 countries of the European Union within the next few years, and its emissions per person already exceed those of the EU. If China continues on its current trajectory, it will surpass the United States as a cumulative historical emitter by 2050.1 The country has pledged that its emissions will peak by 2030 and begin to fall, but it is not committed to reaching net-zero emissions until 2060.
Figure 51: China is catching up
Source: Washington Post
China’s development aspirations are shared by many other countries, of course. India has recently surpassed China in population to become the largest country in the world.2 Its emissions are only a quarter of China’s, but they are rising. And billions of other people in the developing world aspire to higher living standards, too, which means they need the benefits of modern energy. Nearly 800 million people are still not connected to the electrical grid at all, concentrated in South Asia and in Africa south of the Sahara Desert.3
If all these countries were to replicate the high reliance on fossil fuels that powered the Industrial Revolution in the West, any hope of maintaining an equable global climate would be lost. This means the fate of the planet will be decided in the developing world. If these countries can leapfrog the fossil era and go straight to clean energy, the goals of the Paris climate agreement may yet be achievable.
China stands alone as a powerhouse in both manufacturing and deploying clean energy equipment. No other country comes close to its achievements, even though it is also burning more coal than any country in the world. Clean energy and dirty energy are thus in a race in China, running neck and neck at the moment, but if China makes the decision to speed its deployment of clean energy, it has the capacity to do so.
The developing world outside of China presents a far more worrying picture. Now is the time, we think, to consider the broad implications of this picture. The rich countries have both the capacity and the moral responsibility to help the developing countries make the energy leapfrog. If they fail to do so, all humanity will suffer for it.
Paying the price
The problem that most urgently needs solving is that clean-energy projects are still difficult to finance in the developing countries. Interest rates for projects like wind farms and solar panels can be two to three times as high as they would be for identical projects in the developed world.4 Investors perceive risks in, say, South Africa or Nigeria that they do not perceive to apply in Britain or America, and they demand compensation for running those higher risks. To a degree this is merely perception, but some of the excess risks are real: the potential for political turmoil in poor countries, the possibility that projects will be nationalised, the chance of currency gyrations that raise the carrying costs of a project, and others.
These higher interest rates badly undercut the economics of clean energy in developing countries. An urgent effort is needed to correct the situation. We are pleased that the World Bank, under fresh leadership, is considering how to use its vast resources on this problem, but it has yet to come out with a plan commensurate with the scale of the task.
The most promising effort so far involves special partnerships between the West and developing countries seeking to move forward on energy development, with Western money used to offset some of the risks and, effectively, buy down the interest rates of clean-energy projects. So far, such deals have been completed or are in the works for South Africa, India, Indonesia, Vietnam and Senegal. But we fear this approach is too piecemeal, and too slow.5 A much bolder international effort is needed to create conditions that favour clean-energy investment across the developing world. That might involve creating some kind of standard financing package that countries could sign up for if they meet certain conditions.
Another longstanding promise to the poor countries may finally be on the verge of fulfilment. In 2009, the Western countries promised that by 2020, they would mobilise USD 100 billion per year in public and private capital to help poor countries cope with the effects of the climate crisis. They broke that promise, with the sum hitting only USD 83 billion per year by 2020, but it appears likely the promise will finally be kept three years late, by the end of 2023. Unfortunately, the climate emergency is accelerating so rapidly that it is becoming clear that USD 100 billion a year is not enough.
Figure 52: Climate finance delivered from richer to poorer countries
The discussion about how to help the developing countries is likely to come to a head late this year, in Dubai, as the United Nations convenes the 28th conference of the parties of the Framework Convention on Climate Change. Controversy has swirled around the plans for this meeting for months: it is being chaired by the head of the United Arab Emirates’ national oil company. Lawmakers from Europe and the United States tried, and failed, to get him fired from the job. The chairman, Sultan Ahmed Al Jaber, has made clear that his top priorities include new financing arrangements for the energy transition in the developing world, so there is some prospect that a major new deal could emerge from the discussions.
In other respects, it is likely to be a sobering meeting. The countries of the world are due to complete a ‘global stocktake’ of the commitments they made in 2015 in the Paris Agreement, meaning a detailed review of whether they are on track to meet their own promises. They are not, so the question becomes whether they will have the courage to admit it, and the boldness to try to get back on track.
- 1. Stevens, Harry. “The United States Has Caused the Most Global Warming. When Will China Pass It?” Washington Post, 1 March 2023. Back to inline
- 2. Hertog, Sara, Patrick Gerland, and John Wilmoth. “India overtakes China as the world’s most populous country.” United Nations Department of Economic and Social Affairs, 2023. Back to inline
- 3. The International Energy Agency tracks the number of people lacking electricity and its latest estimate is 770 million. See iea.org/reports/sdg7-data-and-projections/access-to-electricity. Back to inline
- 4. For a full exposition of this problem, see the International Energy Agency’s Cost of Capital Observatory project at iea.org/reports/cost-of-capital-observatory. Back to inline
- 5. The most ambitious of these deals, for Indonesia, is already in big trouble less than a year after it was announced. See Suhartono, Harry et al. “Money and politics put world’s biggest climate deal at risk.” Bloomberg, 4 September 2023. Back to inline