A significant milestone will be reached in 2024 as global investment in clean energy is projected to double the amount allocated to fossil fuels. However, this progress in tackling the climate crisis reveals a stark divide: while developed nations lead the transition to renewable energy, developing countries are increasingly being left out.
According to the International Energy Agency’s (IEA) 2024 World Energy Investment report, total global energy investment this year is expected to exceed $3 trillion, with $2 trillion earmarked for clean technologies such as renewables, electric vehicles, and nuclear power. In contrast, $1 trillion is projected to be invested in coal, gas, and oil.
Most clean energy investment is concentrated in Europe, the United States, and China. Developing nations, however, receive only 15% of the $2 trillion investment, primarily due to the high cost of capital, which hampers the development of new renewable energy projects in these regions.
This disparity in funding leaves many developing nations in a vicious cycle: unable to afford the upfront costs of renewable energy projects, they remain dependent on fossil fuels. This dependence perpetuates their emissions and stalls their ability to combat climate change effectively.
IEA Executive Director Fatih Birol highlights this concern: “More must be done to ensure that investment reaches the places where it is needed most, in particular the developing economies where access to affordable, sustainable, and secure energy is severely lacking today.”
Ensuring that emerging economies can participate in the renewable energy transition is a critical aspect of the ‘just transition.’ This concept emphasizes that the shift away from fossil fuels must not come at the expense of the livelihoods of millions of people currently employed in the oil, gas, and coal industries.
The United Nations Development Programme describes the backbone of the just transition as ensuring that “every person, society, and country benefits from the opportunities presented by constructing future economies in line with the 1.5°C global warming goal.” The World Economic Forum (WEF) echoes this sentiment, stressing that an equitable and inclusive energy transition is essential for all countries and communities.
The World Economic Forum’s report, Accelerating an Equitable Transition: A Data-Driven Approach, presents metrics designed to help leaders navigate the economic and societal risks of moving away from high-polluting industries. The report underscores the challenges faced by regions such as Latin America, Southern Africa, and emerging Asia, where economic growth remains a priority, often competing with the need to decarbonize.
The WEF’s framework identifies six archetypes for countries based on their progress in the sustainable transition and reliance on climate-harming sectors. It also suggests strategies for these nations to mitigate risks and seize opportunities in the green economy.
“Evidence-backed strategies, with policy-relevant metrics at the intersection of climate action and socioeconomic inequities, can provide a sufficient baseline on risk, generate informed strategies, and ensure climate action serves both people and planet,” the report states.
The transition to clean energy is complex, with far-reaching implications for society, the economy, and the environment. Ensuring that all nations can participate equally in this shift is crucial to building trust and fostering global cooperation.
A white paper by the Forum’s Centre for Energy and Materials, Building Trust through an Equitable and Inclusive Energy Transition, emphasizes a multifaceted approach to address energy access, price volatility, and finance allocation disparities. The Forum’s broader Equitable Transition Initiative ensures that the policies, investments, and business strategies driving the energy shift support the green transition and economic equity.
As the world moves towards a more sustainable future, it is essential to recognize that the transition to clean energy must be equitable and inclusive. Without targeted investment and strategic support for developing nations, the global effort to combat climate change risks leaving millions of people behind. Ensuring that all countries can benefit from the renewable energy revolution is a moral imperative and a practical necessity for achieving global climate goals.
