While two-thirds of countries globally have enacted dedicated policies for renewable energy, only half of least developed countries (LDCs) and a third of small island developing states (SIDS) have implemented such policies, said the United Nations Conference on Trade and Development (UNCTAD) in its latest Investment Policy Monitor.
The UNCTAD released the monitor as the world gears up for the 28th UN climate change conference, COP28. It emphasised the urgent need for balanced frameworks, especially in developing nations. It delves into the tools driving investment in the transition to low-carbon energy, revealing significant gaps and challenges faced by developing countries.
GLOBAL POLICY LANDSCAPE
Investment Challenges in Developing Nations: Developing countries encounter hurdles in formulating and adopting specific policies for renewable energy. The investment gap for the energy transition in these nations is a staggering $2.2 trillion annually, with an additional $4 trillion needed annually to meet Sustainable Development Goals.
Private Investment Integration: Developed and emerging economies lead in integrating private investment promotion mechanisms, covering over 70% of their renewable energy policies. In contrast, LDCs and SIDS lag significantly, with only 24% and 17%, respectively.
Generic Tools vs. Specific Needs: Advanced economies lean towards complex mechanisms like feed-in tariffs and auctions, while developing nations rely on generic instruments such as profit-based tax incentives. The report emphasizes the importance of tailoring instruments based on country, location, and technology-specific criteria.
CHALLENGES OF FOSSIL FUEL SUBSIDIES AND CLIMATE IMPACT
Fossil Fuel Subsidies: Despite calls for phasing out fossil fuel subsidies, their value reached a record $1 trillion in 2022, surpassing support for renewable energy. The report highlights the detrimental impact of subsidies on climate change mitigation and the need to reallocate resources to promote clean energy.
Investment Impact: Fossil fuel subsidies impede incentives for firms to invest in clean energy, straining government resources. The report advocates for redirecting these resources to support targeted policies and regulations for clean energy promotion.
Role of Thermal Power Plants: Acknowledging the continued role of thermal power plants in ensuring energy security, the report calls for wider adoption of technologies like carbon capture, utilization and storage, cofiring, and low-carbon fuels to mitigate environmental impact.
TOWARDS A JUST GLOBAL ENERGY TRANSITION: UNCTAD’S ACTION COMPACT
The World Investment Report 2023 proposes a global action compact to navigate the challenges of a just global energy transition. With three key objectives—achieving climate targets, ensuring affordable energy access for all, and maintaining energy security—the compact outlines six priority-action packages covering national and international investment policymaking, global partnerships, financing mechanisms, and sustainable finance markets. UNCTAD emphasizes the crucial balance between investment and energy policymaking for a sustainable and equitable future.