Renewables and energy efficiency, in combination with electrification of end uses, are key to a successful energy transition and to driving down energy-related CO2 emissions. The latest edition of UNEP’s annual Emissions Gap Report examines how to attain this transition.

This article first appeared in ESI Africa Issue 1-2020.
Read the full digimag here or subscribe to receive a print copy here.

Given the important role that energy and especially the electricity sector will have to play in any low-carbon transformation, UNEP’s report examined five transition options, taking into account their relevance for a wide range of countries, clear co-benefit opportunities and potential to deliver significant emissions reductions.

1. Expanding renewable energy for electrification.

2. Phasing out coal for rapid decarbonisation of the energy system.

3. Decarbonising transport with a focus on electric mobility.

4. Decarbonising energy-intensive industry.

5. Avoiding future emissions while improving energy access.

Implementing such major transitions will require increased interdependency between energy and other infrastructure sectors, where changes in one sector can impact another.

Similarly, there will be a strong need to connect demand and supply-side policies and include wider synergies and co-benefits, such as job losses and creation, rehabilitation of ecosystem services, avoidance of resettlements and reduced health and environmental costs as a result of reduced emissions.

The same applies to decarbonising transport, where there will be a need for complementarity and coordination of policies, driven by technological, environmental and land-use pressures. Policies will need to be harmonised wherever possible to take advantage of interdependencies and prevent undesirable outcomes such as CO2 leakage from one sector to another.

Any transition at this scale is likely to be extremely challenging and will meet a number of economic, political and technical barriers and challenges. However, many drivers of climate action have changed, with several options for ambitious climate action becoming less costly, more numerous and better understood.

First, technological and economic developments present opportunities to decarbonise the economy, especially the energy sector, at a cost that is lower than ever. Second, the synergies between climate action and economic growth and development objectives, including options for addressing distributional impacts, are better understood. Finally, policy momentum across various levels of government, as well as a surge in climate action commitments by non-state actors, are creating opportunities for countries to engage in real transitions.

A key example of technological and economic trends is the cost of renewable energy, which is declining more rapidly than was predicted just a few years ago. Renewables are currently the cheapest source of new power generation in most of the world, with the global weighted average purchase or auction price for new utility-scale solar power photovoltaic systems and utilityscale onshore wind turbines projected to compete with the marginal operating cost of existing coal plants by 2020.

The call to redirect investment to low-carbon energy systems raises a number of issues. Firstly, the high upfront capital outlay and low operating costs of renewables is a new terrain in finance where further innovation is required. Secondly, while the historically low interest rates over the past 10 years have provided an environment very conducive to investment in renewable energy technologies (RETs), energy investment was mostly concentrated in high and upper-middle income countries (IEA 2019d). Thirdly, the high investment requirement in developing countries is being hampered by the high perception of risk, little opportunity for patient capital, and unstable political and regulatory regimes.

To this end, multilateral, regional and national development banks could play a major role in leveraging larger finance by helping to de-risk investments. However, this would need to be co-developed where country policymakers play a deeper role by creating stable policy and regulatory conditions to encourage investment. This would also mean appealing to the immediate concerns of decision and policymakers; for example, integrating transport policy with air quality and climate policy and with vehicle emissions regulation. Policies should be harmonised wherever possible to take advantage of interdependencies and prevent undesirable outcomes such as CO2 leakage from one sector to another. ESI

Acknowledgement

This article is based on the UN Environment Programme’s Emissions Gap Report 2019