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Amidst preparations for upcoming climate negotiations at CoP24, two important reports were launched this week that can highly influence the debate. The first, the World Energy Outlook 2018, examines the future patterns of global energy systems, its dependence on geopolitics and its impact on e.g. air pollution and energy access. The second, Energizing Finance, investigates the gap between energy needs, in terms of access and climate, and investments.

Both publications show some positive trends. The World Energy Outlook 2018 of the renowned International Energy Agency (IEA) reports that for the first time the number of people without access to electricity fell below 1 billion in 2017. Furthermore, renewable energy has become the technology of choice. It is projected that the share of renewables in the global energy mix will rise to over 40% by 2040, from 25% today. The Energizing Finance report, commissioned by Sustainable Energy for All (SEforAll), on the other hand shows an increase of investments in half of the countries investigated, boosting the total budget invested in energy access.

Africa left behind

However, both reports also confirm what we already expected and were afraid of. Progress on providing energy access remains uneven. Around three quarters of the people who gained access last year are concentrated in Asia, leaving 600 million people in sub-Saharan Africa behind. Investments are unequal too and seem to be allocated to areas with potential higher economic gains. To illustrate take Congo, Malawi and Mozambique. All three countries have high energy access deficit rates (76% or higher) and all three have strongly decreasing, from already tiny, budgets. Whereas in Asia, for example India, Bangladesh and the Philippines, deficits are relatively low (28% or lower) and budgets grow substantially with India being the absolute leader with a budget increase of 121%.  When taking a closer look at Africa, the strongest increase in budget is in Eastern Africa. The region we all know as the most economically promising.

Sadly enough this is a recurrent pattern: money flows to regions that are already doing better, where there are gains for investors, where risks are lower and return on investments higher. Other regions and countries that are more in need of public and private investments are left behind.*

Private vs. Public

Furthermore, the Energizing Finance report shows that while international public finance declined (to USD 8.8 billion in 2015-16) international private finance more than doubled (to reach USD 2.9 billion in 2015-16). While we welcome the private sector to invest in energy access, it is worrying that public finance is becoming less available. We see that the biggest energy access challenges are in low income countries where private sector is not eager to go.

Where does the money go?

Investments also do not meet the finance needed. Neither for electricity (USD 30.2 billion against USD 52 billion needed) nor for clean cooking. Off-grid, the top-1 solution to reach universal energy access, is strongly underfunded. Although finance for off-grid increased, it still only accounts for 1.3% of the total tracked flow. For clean cooking, for the second year in a row, finance dropped. Only USD 30 million compared to the estimated annual investment needed of at least USD 4.4 billion.

Another troublesome finding is that investments in fossil fuels increased. At the time the International Panel on Climate Change issues a strong warning about stalling progress on the Paris Agreement, countries almost triple their annual commitments for coal plants. This pose a clear challenge to climate goals and has huge implications for air pollution and CO2 emissions, to name a few.

Towards a solution

Looking into the future, the IEA argues that the world’s energy destiny lies with government decisions as 70% of global energy investments will be government- driven. This means that if governments are serious about both climate and energy access goals, leadership should be taken. In short,  they should:

  • use the potential of decentralized renewable energy solutions since these are the most cost-effective, fast and flexible solutions to speed up energy access;
  • withdraw from investments in fossil fuels such as coal;
  • make sure public money fills the gaps where private money does not flow, and thus invest in basic energy infrastructure, especially in the high energy access deficit countries (often low income countries);
  • adopt supportive policy and regulations to increase investments in renewable energy solutions.**

At the same time, international financial institutions such as development banks and climate funds as well as donors, like the EU, should favor countries with biggest energy access gaps. Focus should not solely be on what commercial gains are to be found, but how people and climate can be served. Especially clean cooking should be higher on the agenda since it is instrumental in reaching both energy access and climate related goals, as well as health.

Above all, people should be at the heart of all interventions and energy systems must be inclusive. To quote Rachel Kyte, SEforALL’s CEO and Special Representative of the Secretary-General: “We won’t meet the promise of the SDGs or the Paris Agreement, if we forget this is about people.”

We strongly suggest that policy makers read both publications and take findings seriously. Alarms have been ringing for some time now, let this be the final wake up call to take action.

 

* See our two research papers ‘Unlocking Climate Finance’ and ‘EU’s financial instruments for energy access

** See for more input the policy brief that was developed for the SDG7 review, to which Hivos contributed.