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Tag: Philippe Benoit

  • Tripling Renewables Powered by State-Owned Power Companies and Utilities

    Tripling Renewables Powered by State-Owned Power Companies and Utilities

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    Achieving the goal of tripling renewables generation capacity by 2030, and more broadly decarbonizing the global electricity system, requires active SPCU involvement. Credit: Bigstock.
    • Opinion by Leonardo Beltran, Philippe Benoit (washington dc)
    • Inter Press Service

    WASHINGTON DC, Sep 25 (IPS) – The climate community, meeting this week once again on the margins of the UN General Assembly, is continuing to explore ways to triple the world’s installed renewable generation capacity by 2030, a target agreed at last year’s COP 28 international climate negotiations. Much of this discussion has been about mobilizing finance and otherwise getting the private sector, with its massive resources and competence, to step up to the challenge … and what government policies and incentives are needed to spur more investment.

    This discourse, however, hides an important reality: much of the power sector is controlled by governments and their state-owned power companies and utilities (SPCUs). This is particularly true in emerging market and developing economies (EMDEs) where most of the future growth in global electricity demand is projected to occur. Consequently, tripling renewables by 2030 will need to involve SPCUs. More thought must be given to how to get these companies to contribute to the effort.

    SPCUs are currently responsible for nearly half of global electricity sector CO2 emissions. This figure isn’t surprising given that a similar percentage of generating capacity worldwide is owned by SPCUs, including more than 50% in Asia and a substantially higher share in China.

    Significantly, most EMDE governments favor state ownership and control over the strategic electricity sector. When this EMDE preference is coupled with the projected dominance of these countries in the future growth of global electricity demand (85% of the expected worldwide increase from 2022 to 2026), the already substantiial weight of government-owned power assets within the global electricity system can be expected to increase over time.

    Moreover, even in advanced economies, SPCUs play an important role. This includes countries like France where Electricite de France has been the dominant power company for decades. SPCUs are also present elsewhere. For example, about 15% of generation in North America is SPCU-owned. This includes Hydro-Quebec, the largest provider of renewable energy to that continent. It also includes the U.S.’s iconic Tennessee Valley Authority, as well as other lesser-known SPCUs across the country at the state and municipal level.

    Why are these elements significant? They point to the need for SPCU action in any effort to triple installed renewables capacity globally by 2030.

    How can this be accomplished? There are several key ways.

    • SPCU action should also target joint ventures with private investors. This could take various forms, such as co-investments in new renewables capacity or new government-owned plants operated by the private sector.
    • SPCUs are in many systems the purchasers of electricity produced by private independent power producers (IPPs). So even if it doesn’t own the power plant, an SPCU can help to promote new renewables generation by providing prospective private investors with a commercially reliable counterparty to buy the IPP’s electricity, as well as supporting robust and transparent competitive bidding processes and other tools to encourage private investment in clean energy.
    • SPCUs can provide critical complementary/associated infrastructure and systems to back private sector investment in the plants themselves. This might include building a dedicated transmission line to connect a large but remotely situated renewables IPP to the grid. It should also include, at a much smaller scale, SPCU support to households interested in rooftop solar systems which are frequently managed in cooperation with a local publicly-owned utility.

    Increasing generation capacity, however, is just a means to an end. Rather, the key is translating additional generation capacity into clean electrons flowing through to users. And here, SPCUs have a critical role to play in two additional dimensions.

    First, activating additional renewables capacity requires massive investments in the grid to link that new production to actual consumers. In order to transform investments in renewables generation into a greener electricity system, grid investments need to double by 2030 to over $600 billion.

    This was a lesson learned in part from the experience in China where new renewables generation outpaced network expansion, a shortcoming that required investment in specifically the grid to overcome. Because in many, if not most, countries worldwide, the grid is government-owned, SPCUs will be key to expanding the electricity network to enable the integration of larger amounts of renewables generation.

    A second dimension often overlooked is that usually even in power systems where there is significant renewables generation, there are also fossil fuel plants. The decision as to which plants are called upon at any moment to produce electricity is often made by a grid system operator.

    In many countries — from Mexico to China and more — that entity is once again government-owned and controlled. Ensuring that additional renewables capacity actually translates into a decarbonized electricity supply will require complementary and supportive action by the government-owned grid operator to dispatch that renewable power into the network to serve customers.

    For all these reasons, achieving the goal of tripling renewables generation capacity by 2030, and more broadly decarbonizing the global electricity system, requires active SPCU involvement.

    This is particularly true in emerging economies and other developing countries whose electricity sector emissions are projected to grow absent robust decarbonization actions. But it is also true in the United States and other advanced economies. More attention needs to be given to SPCUs, key players in achieving global climate goals.

    Philippe Benoit is managing director for Global Infrastructure Advisory Services 2050. He previously held management positions at the International Energy Agency and World Bank, and worked as adjunct senior research scholar at Columbia University-SIPA’s Center on Global Energy Policy and an investment banker. He is currently a visiting professor at the University of SciencesPo-Paris.

    Leonardo Beltran is a senior advisor at Iniciativa Climática de México. He was Mexico´s Deputy Secretary of Energy in charge of the Energy Transition (2012- 2018), and member of the board of directors of Pemex and CFE. He currently holds fellowships at the Institute of the Americas and the School of Public Policy of the University of Calgary.

    © Inter Press Service (2024) — All Rights ReservedOriginal source: Inter Press Service

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  • From Peak Oil to Peak Energy? … and Why It Matters

    From Peak Oil to Peak Energy? … and Why It Matters

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    Fossil fuels require recurring new exploration and development expenditures, while renewables are inherently self-replenishing. Credit: Bigstock
    • Opinion by Philippe Benoit (washington dc)
    • Inter Press Service

    This significant event, however, masks a more striking possible future: One in which total global energy use peaks and energy’s weight in world affairs diminishes.

    The modern era has been marked by increasing energy demand, largely driven by rising populations (more people using energy) and growing economies and incomes fueling increased energy consumption per capita.

    Over the last 50 years, energy use more than doubled from 250 exajoules to more than 600 as the world’s population increased from 3.7 to 7.8 billion people and global GDP expanded from $3 trillion to more than $85 trillion.

    The IEA projects energy demand may grow another 25 percent by 2050, servicing 9.7 billion people and a world economy projected to have further expanded annually by just under 3 percent. Renewables increase dramatically to meet this demand.

    Significantly, energy use drops under the IEA’s climate scenarios, driven by more robust climate policies than currently exist. While these scenarios may eventually materialize to counter the threat of climate change, they remain uncertain.

    There are, however, three forces operating largely independent of climate considerations that are likely to lead to peak global energy use before the end of this century. They are longer-term downward global population trends, structural shifts in emerging economies as their incomes rise and continued progress in energy efficiency.

    Ever since Malthus coined his theory, there have been fears that exponential population growth would outstrip food supply. Now, rather than uncontrolled population growth, the projections point to a global peak around 2085 or earlier, dropping thereafter to below 9 billion people by this century’s end. This new trend removes what had been an important source of upward pressure on global energy use.

    Second, as countries initially develop, they transition from agrarian to more energy-intensive industrial activities. But as they continue to grow, their economies move to less energy-intensive services activities, now dominant in advanced economies and expanding in China, India and other emerging economies.

    Third, energy efficiency programs being implemented worldwide, including in the U.S., China and other large economies, are dampening demand even as economies expand. These programs are motivated by both non-climate objectives (e.g., enhanced energy security and affordability) and climate ones.

    These forces have already helped produce energy peaks in the U.S., Japan, and Europe. Emerging economies and poorer countries are at earlier phases of development — a reason why the IEA has projected further growth in energy demand in China, India and elsewhere.

    But even there, population, structural and energy efficiency dynamics are ultimately likely to have their effect. For example, China’s energy demand is now projected to peak later this decade.

    Why is this “peak energy” significant? Because it will have a variety of economic, policy, geopolitical and even security impacts.

    For example, it points to a future global economic landscape in which energy plays a diminished role. This includes a lower share of energy in global GDP, especially as economies continue to grow, and even potentially a peak in energy spending in absolute terms after accounting for inflation.

    One dynamic likely to drive this change in spending is the shift from large capital investments involved in expanding energy systems or transitioning to a low emissions future, to the less costly maintenance and periodic replacement of assets inherent in a peaked system. Another is the ongoing displacement of fossil fuels that require recurring new exploration and development expenditures with renewables which are inherently self-replenishing.

    Renewables, moreover, typically draw from national resources such as local sunshine and wind patterns rather than foreign trade. As these resources move into a leading role in a peak energy future, domestic policies and considerations should gain importance for governments relative to trade and other international ones.

    Other affected areas will include diplomacy, including the lessened importance of petrostates for the U.S., China and the military, such as a possible redeployment of the U.S. Fifth Fleet from the Persian Gulf. These shifts may already begin to be triggered by peak oil and gas even before the advent of peak energy but will likely deepen under the latter.

    Various developments could counter energy peaking, such as a surge in energy-intensive activities like space tourism. Another frightening possibility is widespread war as seen last century. Combat consumes a great deal of fuel and reconstructing buildings and infrastructure destroyed by war is energy-intensive. Alternatively, the discovery of a cheap, clean and accessible energy source such as fusion could lead to creative new ways to use that energy.

    Conversely, more robust climate policies can accelerate peak energy. For example, the IEA’s Net-Zero Emissions by 2050 Scenario foresees a global energy use in 2050 which is 15 percent lower than today’s total. This drop is driven largely by strengthened energy efficiency programs that counteract the upward pressures of population and economic growth.

    However, in contrast to peak coal or oil being potentially followed by significant declines in their use over time, peak energy is unlikely to presage a subsequent large drop in consumption as growing economies will buoy demand. In fact, as GDP growth continues through the next century and beyond, energy demand could once again start to rise as, notably, energy efficiency gains reach their limits.

    In a broader sense, just as history has included the stone, bronze and iron ages, we have been living since the Industrial Revolution in an energy age. But this age, during which energy has dominated so many economic, geopolitical and other dimensions, may be coming to an end with peak energy.

    Beyond the projections of oil, gas and coal demand reaching its heights this decade, and notwithstanding the current growth in renewables, overall energy use may also hit a high point later this century. This “peak energy” is a future we should now start contemplating and analyzing.

    (First published in The Hill on November 19, 2023)

    Philippe Benoit is an adjunct senior research scholar at Columbia University’s Center on Global Energy Policy, research director for Global Infrastructure Analytics and Sustainability 2050 and was previously division head for energy efficiency at the International Energy Agency.

    © Inter Press Service (2023) — All Rights ReservedOriginal source: Inter Press Service

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  • Revisiting the Water-Energy Nexus for a Changing Climate

    Revisiting the Water-Energy Nexus for a Changing Climate

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    View of the Itaipú hydroelectric plant shared by Brazil and Paraguay on the Paraná River. CREDIT: Mario Osava/IPS
    • Opinion by Philippe Benoit, Anne Sophie Corbeau (washington dc)
    • Inter Press Service

    WASHINGTON DC, Aug 03 (IPS) – The Colorado river basin has recently been wracked by an extended drought which brought to the fore major concerns regarding hydroelectricity production. Up on the Colorado sits the iconic Hoover Dam, which transforms water into enough electricity to power 1.3 million people in Nevada, Arizona and California.

    Although an agreement was reached by the three dependent Western states to cut water use, it served as a reminder of the dependency of energy production on water … a dependency that is being subjected to greater uncertainties because of climate change.

    This phenomenon is not only impacting citizens dependent on the Colorado River but stretches across the United States and the world. Over the past two years, Europe, China, Brazil, Iraq, the Horn of Africa, have experienced the worst droughts in (sometimes hundreds of) years.

    Importantly, the water-to-energy relationship also runs the other way: water production and delivery are themselves dependent on energy.

    Moreover, the need of water services for energy is likely to increase, driven by growing populations, rising prosperity (notably in developing countries) and novel uses of energy for water in desalination plants and elsewhere. As we feel the impact of increasingly intense heat waves and droughts, the time has come to revisit the challenges of the water-energy nexus.

    The dependence of energy production on water has long been recognized by energy experts, but has surprised many others. Beyond very visible hydropower plants, like the Hoover Dam, water is used to cool down nuclear power plants (through the cooling towers emitting steam that many may have noticed, without perhaps always identifying the purpose), as well as in natural gas and coal-fired plants. Water is also used in various stages of the energy supply chain, including for production and processing.

    Climate change is expected, through its impact on water supply and availability, to increase vulnerabilities in energy production. For example, changing rain patterns will create uncertainties for hydropower production, which represents 15 percent of global power generation, even if the overall level of rainfall doesn’t change.

    Heat waves have reduced water levels and raised water temperature above the levels at which water can be discharged back into rivers, restricting the operation of many nuclear power plants.

    And in a completely different dynamic, various coal power plants dependent on barge transport for resupply have seen their operations imperiled by low water levels. These are aspects that have received some, but altogether inadequate, attention to date.

    Both hydroelectricity and nuclear generation, two low-carbon sources of electricity, are expected to increase significantly over decades to come under various government programs to reduce greenhouse gas emissions.

    Moreover, even as the need for water to cool down coal-fired plants is eventually expected to drop as countries transition from this carbon intensive fuel source, new uses for water are emerging, including for the production of hydrogen through electrolysis.

    What has attracted less attention is the impact of growing demand for energy from developments in water systems. The UN projects that the world’s population will increase by over 1.2 billion by 2040, with about two-thirds of that increase occurring in emerging economies and other developing countries.

    These nations are also projected to see significant increases in their income levels, increasing the ability of their populations to access water services, at home, at the office or for pleasure. Moreover, the demand for food is also similarly projected to increase, and with that, the need for more water irrigation services inevitably powered by energy.

    These factors are helping to drive an increase in the demand for energy. For example, the International Energy Agency projects that the amount of energy required by the water sector will more than double within 20 years. The major driver under the IEA’s modelling is the demand from desalination plants.

    These are no longer confined to the dryer climates of the Middle East and North Africa, but also in regions which once thought that their water supplies were ample, such as Europe or Asia. Other important growing demand for water is also coming from waste water treatment plants and the supply of clean drinking water and sanitation services to both the billions of poor who currently lack it and the other more prosperous billions across the developing world whose consumption is projected to increase.

    Unfortunately, efforts to meet this demand will be exacerbated by climate change. For example, droughts are likely to require the transport of water over longer distances to satisfy the needs of populations suffering from water scarcity, an effort that will require more energy.

    Similarly, over the past year, droughts have heightened the possibility of water restrictions for millions of people in Southern Europe, including drinking water, which might in turn require more desalination.

    But though tensions are inevitable, actions can be taken to, if not avoid the problems, dampen its impact. Actions lie in the water or energy sectors, and, often, at the intersection of the two. In the water sector, these include reducing water losses, allowing construction of rainwater collection tanks for agricultural use, increasing waste-water facilities, and fast-tracking the installation of desalination plants.

    In energy, transitioning to solar irrigation pumps is something that can help everywhere, in rich and poor countries alike. At the intersection, actions include hydropower plant design and management that are better adapted to the changing rainfall patterns of the future, building more efficient water-based cooling systems for other plants, and even greater use of artificial intelligence.

    The energy-for-water dimension will become increasingly fraught, driven by the combination of climate change, growing populations and increasing prosperity. Not only do we need to redouble our efforts to reduce greenhouse gas emissions, we also require stronger concerted actions on adaptation and resilience.

    Like for energy, we need to be more efficient at using water, whether this is for households needs, industrial processes, agriculture or energy; meanwhile concerted action and discussion between those sectors will be needed.

    The recent events along the Colorado River serve as an important wake-up call. Water is at the essence of our quality of life, and energy is an integral part of that story. We need to do a better job of managing our thirst for water and the energy required to satisfy that demand … and we need to do this in the face of a changing climate.

    (First published in The Hill on July 7, 2023)

    Philippe Benoit is research director forGlobal Infrastructure Analytics and Sustainability 2050 and previously held management positions at the World Bank and the International Energy Agency. He is also adjunct senior research scholar at Columbia University’s Center on Global Energy Policy.

    Anne-Sophie Corbeau is global research scholar at the Center on Global Energy Policy at Columbia University and a visiting professor at Sciences Po.

    © Inter Press Service (2023) — All Rights ReservedOriginal source: Inter Press Service

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  • Leveraging Africa’s Renewable Energy Potential: A Call for Global Partnership

    Leveraging Africa’s Renewable Energy Potential: A Call for Global Partnership

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    Over half the people in Africa still don’t have electricity access — a major contributor to persistent poverty. Credit: Energy 4 Impact Senegal
    • Opinion by Philippe Benoit, David Sandalow (washington dc)
    • Inter Press Service

    WASHINGTON DC, Jul 19 (IPS) – Africa is caught in the crosshairs of climate change. Despite contributing just 3-5% of global carbon dioxide emissions, the continent will endure climate change’s destructive impact, including more severe storms, rising temperatures and erratic rainfall in the years ahead that threaten the well-being of hundreds of millions of people.

    Renewable energy is an important part of the solution – and Africa enjoys an enormous potential in this regard. With some of the world’s highest levels of solar irradiance, vast expanses of land with favorable wind conditions and powerful rivers with immense hydroelectric potential, Africa is teeming with renewable energy resources. However the continent’s progress in tapping into this potential lags, leaving a huge energy access challenge as well as a power generation deficit that is stunting business and other drivers of inclusive economic growth.

    As the world gears up for the 28th Conference of the Parties to the UN Framework Convention on Climate Change (COP28) to be held in the United Arab Emirates (UAE), the need to address Africa’s energy needs sustainably is all too apparent. Doing so will require rethinking the approach and reshaping policies to dramatically grow Africa’s energy system.

    This will require big and bold actions, including massive investments in large-scale infrastructure. It will also require investment in information and other soft assets.  And, significantly, it will also necessitate  small and micro-scale grassroots initiatives which are particularly important to ensure that local populations remain active participants in the process.

    The shortage of energy in Africa is a pressing problem. Over half the people in Africa still don’t have electricity access — a major contributor to persistent poverty.  This gap drives households to rely on inefficient and polluting energy sources like charcoal, wood, and kerosene. This pervasive energy deficit, highlighted in the ‘Tracking SDG7: The energy progress report for 2022’ has profound implications for health, education, and sustainable development across the continent.

    An even larger portion of the population lacks access to clean cooking technologies, a crisis disproportionately affecting women and girls, and exposing them to harmful household air pollution that was responsible in 2019 for approximately 700,000 deaths across Africa. Rather than diminishing, the number of people without access is projected to potentially rise from 923 milion in 2020 to 1.1 billion in 2030.

    But Africa’s energy problem extends beyond the lack of access to electricity and clean cooking targeted by SDG#7.  In too many places across the continent, there is a lack of sufficient and reliable electricity to power businesses that are the backbone of Africa’s growth drive.  The result is a combination of inadequate supply or expensive generators acquired to compensate for the inefficiencies.  Fundamentally, Africa’s ability to stimulate local entrepreneurs or attract international developers and capital is too often being undermined by a weak electricity network.

    The shift in focus to renewables provides an opportunity to change the narrative and realities of Africa’s power system.  The large amounts of financing being discussed for climate (including in the lead-up to and at COP 28) – amounts which tend to exceed the levels of funding traditionally mobilized for poverty alleviation – provide an important opportunity for the continent.

    Mobilizing funding to harness Africa’s bountiful renewable energy would not only help to meet its current and increasingly large future energy needs, but also contribute to global efforts to avoid prospective greenhouse gas emissions.

    Moreover, Africa’s renewables are large enough to both meet domestic needs, and also help to power green development abroad, including through the export of green electricity to Europe or even, eventually, hydrogen generated from its massive hydropower resources.

    Unlocking Africa’s renewable potential will require supportive policies, robust regulations, technological innovation, and substantial investment. Strong, sound and predictable regulatory frameworks and institutions are key.

    Better information is also key. For example, the African Energy Commission has established the Strategic Framework on the African Bioenergy Data Management  that seeks to raise awareness of the potential of the bioenergy sector, reflecting the specificities of the reality on the ground in the region.

    Given Africa’s limited financial resource base, any solution requires reaching beyond Africa’s borders.  Wealthy nations can bring capital, expertise, and adapted technologies to the continent. South-South cooperation can encourage peer learning, the dissemination of technological solutions adapted to local climatic conditions and the developing country economic context, and support the deployment of the increasing financial capacities of emerging economies to support Africa’s renewables.

    Multilateral development banks, development finance institutions, export credit agencies and private capital should also all do more.

    The hosting of COP28 in the UAE provides an opportunity to mobilize funding for Africa from a broader set of actors and countries, moving beyond the traditional North/South divide.  In fact, climate finance has been identified by the COP28 host as one of the key goals of this COP. As COP28 President Sultan Al-Jaber said at last month’s climate finance summit held in Paris, “For countries that have done the least to cause climate change, climate finance remains unaccessible, unavailable and unaffordable….” Can COP 28, with UAE leadership, deliver for Africa on this potential?

    One UAE initiative – the Zayed Sustainability Prize – has already helped promote local action in addressing these challenges.  (One of the authors is a member of the Selection Committee for the Prize.) Over the years, the Zayed Sustainability Prize has supported sustainable change around the world by recognising and rewarding innovative and impactful organizations working to overcome development barriers, including limited access to reliable power, clean water, quality healthcare, and healthy food.

    For example, M-KOPA, which won in the Energy category in 2015, uses digital technology to help its customers make micropayments towards essential products and services, such as smartphones, refrigerators, solar panels, even bank loans and health insurance. Last month, it closed US $250 million in new funding to expand its fintech services to underbanked consumers in Kenya, Nigeria, and more recently, Ghana.

    Another winner was the Starehe Girls Centre which empowers disadvantaged girls by providing them access to quality education. The school won the Prize in 2017 in the Global High Schools category in recognition of its efforts to reduce its utility bills through the installation of solar panels and more efficient lighting. These financial savings have allowed it to admit more girls from disadvantaged backgrounds.

    Generating local action is a critical input to ensure that massive investment programs translate into a just transition for households. To this end, large-scale infrastructure must be accompanied by people-centric programs.

    Africa’s renewable energy potential could both help drive enormous economic growth in the region while also helping the world address the challenge of climate change. The potential is there, and it will require action …  in ways big and small.

    (Article first published in Nation (Kenya edition) on July 3, 2023)

    Philippe Benoit is research director for Global Infrastructure Analytics and Sustainability 2050. He previously held management positions at the World Bank and the International Energy Agency and has over 20 years of experience working on Africa.

    David Sandalow is Inaugural Fellow at the Center on Global Energy Policy, Columbia University, and a member of the Selection Committee of the Zayed Sustainability Prize.

    © Inter Press Service (2023) — All Rights ReservedOriginal source: Inter Press Service

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  • Invisible Women in Energy: Millions of Household Biomass Producers

    Invisible Women in Energy: Millions of Household Biomass Producers

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    While India decreased its population without access to clean cooking fuels by about 30 percent from 2010 to 2020, Africa has seen an increase of more than 50 percent over the same period, driven by a rising number of poor, tepid government policies to address this issue, and overarching poverty challenges. Credit: Zofeen Ebrahim/IPS
    • Opinion by Philippe Benoit, Alexandra Peek (washington dc)
    • Inter Press Service

    WASHINGTON DC, Jul 12 (IPS) – An estimated 2.4 billion people currently lack access to clean cooking fuels, with the majority relying on biomass (firewood, charcoal, dung) to meet household cooking needs. This is only a slight decrease from 2017, when 2.5 billion people lacked access to clean cooking fuels.

    Of those who continue to lack this access, the majority—923 million—live in sub-Saharan Africa, followed by 490 million in India. While India decreased its population without access by about 30 percent from 2010 to 2020, Africa has seen an increase of more than 50 percent over the same period, driven by a rising number of poor, tepid government policies to address this issue, and overarching poverty challenges.

    These figures are likely to remain persistently high at about 2.2 billion over the next decade, roughly split between India and other parts of developing Asia on the one hand, and sub-Saharan Africa on the other.

    Hidden behind these figures are the people who produce the biomass that powers most of this energy use: often it’s women and girls who are tasked with this labor. In this article, the authors discuss why it’s important to see these women and girls—potentially the largest segment of the energy labor force today and in the foreseeable future—as producers and workers.

    In understanding them as a formidable workforce of biomass producers, their knowledge and experience can inform ongoing efforts of electrification, clean cooking alternatives, gender rights, and overall poverty alleviation. It is also equally important to recognize this workforce in order to improve its working conditions on the path to building a more inclusive energy workforce toward net zero emissions.

    While the United Nations Sustainable Development Goal #7 (SDG 7) draws attention to the need to eliminate the use of non-clean cooking techniques that kill millions each year, the working conditions under which women toil today to produce biomass also merits greater attention.

    As the World Bank reported recently, “across most of Sub-Saharan Africa and in parts of China, women are the primary fuel wood collectors,” which is also the case in areas of South Asia. This is time-consuming and physically demanding work that can involve “collecting and carrying loads of wood that weigh as much as 25-50 kilogrammes” and can “take up to 20 or more hours per week.”

    Estimating the Size of this Workforce

    Just how many women are working in this area? A preliminary estimate—based on data regarding the number of households relying on biomass for cooking and the rate of participation of women in this labor—puts the number at over 300 million. Overall, while there is reliable data on lack of access to clean cooking, reliance on biomass, and deforestation trends, there is a gap in knowledge about the (wo)man power it takes to produce biomass.

    This gap may stem from the way issues around biomass are often discussed in the SDG 7 context. For example, data on the lack of access to clean cooking primarily informs solutions to shift cooking norms and electrification pathways and efforts to obviate the need for women to labor in producing biomass, while data on biomass reliance feeds into conservation and land use efforts.

    Such efforts, however, tend to overlook women as an energy workforce, even though across sub-Saharan Africa, India, parts of China, and Latin America, women and young girls collect and make the biomass necessary to power their homes, including for heating.

    Organizations focused on gender parity, such as SEforAll, come closer to recognizing the work of these women and girls, but they, too, frame their efforts in line with clean cooking initiatives rather than labor conditions or rights. For instance, research on the number of hours spent collecting firewood and preparing meals is used to discuss cultural and gender roles that lead to systemic disadvantages for women and girls.

    A missing link in all of these narratives and frameworks is understanding the size and importance of this workforce and how it might inform different strategies.

    Embracing a Worker-Producer Narrative

    Calculating the number of women and girls in their capacity as biomass producers reframes the perception of them as passive consumers (i.e., cooks) to active self-producers of the household energy sector. This framework can bolster efforts mentioned above in the following ways:

    First, it reframes biomass—from an issue singularly belonging to the clean cooking initiative— and places it more broadly in the context of workers’ rights. Despite numerous clean cooking campaigns, poor women and girls will continue to produce biomass for their families for the foreseeable future. As important as it is to make access to clean cooking technologies universally available, what can be done for those producing their own energy in the meantime?

    For example, these could be solutions such as creating wood stalls in more accessible areas to reduce collection times, or developing more ergonomic harnesses for carrying the wood to reduce the physical burden of the work. In addition, can more income-generating opportunities be created to help reduce the poverty of these women and girls?

    Second, it informs policies around building an inclusive energy workforce. Recognizing that there is already a female-run and -operated energy workforce across the developing world has implications for workforce policies governing the energy transition. For example, when it comes to the ability to tap into this existing labor force, does reskilling apply to this workforce as it does to coal miners?

    Moreover, by focusing on improving the labor conditions of women and girl biomass producers, this framework intersects with SDG 5: achieve gender equality and empower all women and girl. Organizations such as the Clean Cooking Alliance that aim to “increase the role of women in the clean cooking sector” and collect data on the number of hours required for biomass production could benefit from such a framework.

    Third,research that intentionally includes groups underserved and underrepresented in data can inform policies for a just energy transition. Capturing the number of women and girls producing biomass can lead to important discoveries for improving their lives while informing the energy transition. For instance, surveys and fieldwork to collect the amount of biomass producers could also be used to track energy consumption and production trends that inform electrification efforts.

    Many biomass collectors live on the margins or in rural areas, and research geared toward their energy needs can inform, for example, decentralized renewable energy projects and help anticipate their consumption patterns.

    This energy workforce comprises some of the poorest people in the world—women, girls, and people of color—and that may partly explain why their labor and working conditions have received relatively less attention.

    The latest Intergovernmental Panel on Climate Change (IPCC) report and other research puts the world on a tight timeline for lowering emissions. Existing frameworks for achieving a clean energy transition can be strengthened through approaches that recognize and acknowledge the agency of biomass energy producers made up of millions of women and girls.

    Alexandra Peek is a research associate with Columbia University’s Center on Global Energy Policy.

    Philippe Benoit is an adjunct senior research scholar with Columbia University’s Center on Global Energy Policy and is also research director forGlobal Infrastructure Analytics and Sustainability 2050.

    © Inter Press Service (2023) — All Rights ReservedOriginal source: Inter Press Service

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  • Mobilizing Private Capital for Adaptation: the Silent Climate Need

    Mobilizing Private Capital for Adaptation: the Silent Climate Need

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    Investment requirements for adaptation are huge, and they are growing every day as rising emissions are increasing adaptation needs. Credit: Isaiah Esipisu/IPS
    • Opinion by Philippe Benoit, Gareth Phillips (washington dc)
    • Inter Press Service

    To meet this challenge, large amounts of private capital are once again needed — and this will require climate finance innovation targeted at adaptation, specifically.

    The journey from this month’s Paris climate finance summit to COP 28  hosted later this year by the United Arab Emirates – and where financing is likely to be a prominent subject — provides opportunities to raise the profile of this often overlooked need to fund adaptation.  While there is relatively little discussion of this topic, it is nonetheless a key to achieving the dual climate goals of reducing emissions while also preparing for the impacts of climate change that are now unavoidable and projected to increase.

    Annual funding needs for mitigation have been estimated at around $600 billion by 2030 in emerging economies for energy alone, with private capital providing three-quarters of the required amounts. The reported needs for adaptation are relatively smaller, albeit still only partially identified. For example, annual adaptation needs for developing countries have been estimated at $160-$340 billion by 2030, including more than $50 billion for Africa. These adaptation amounts are beyond any reasonable estimate of the funding capacity of their governments, especially when added to the requirements for mitigation.

    There have been various innovative financing mechanisms developed to mobilize private capital for climate but they tend to be focused on mitigation. The best known is probably the carbon markets in which investors are compensated for funding projects that reduce or otherwise avoid emissions.  Article 6 of the 2015 Paris climate agreement establishes a resource mobilization mechanism, but once again, expressly for mitigation action. Similarly, the Energy Transition Accelerator presented by U.S. Special Presidential Envoy for Climate John Kerry at COP 27, targets private capital to fund clean power sources.

    When it comes to adaptation, the discussion is often focused on public sector funds. For example, the Green Climate Fund, a multi-government facility, looks to provide funding for adaptation at levels that match mitigation. Generally, adaptation projects have been seen as providing public goods and, accordingly, have looked to funding approaches reliant on public sector resources, frequently in the form of grants. This greatly limits financing options and amounts.

    Yet, the investment requirements for adaptation are huge, and they are growing every day as rising emissions are increasing adaptation needs. This will require more than just public sources; private capital is needed. But in order to unlock this capital, more attention and creativity must be directed to developing new mechanisms for adaptation.

    In considering private funding for adaptation, there are three distinct but interrelated major groups of actors.

    • The first are companies exposed to climate-related risks in their operations. This includes a variety of agri-businesses, electricity network enterprises, port operators, tourism industry actors and construction companies. The issue here is largely encouraging these companies to spend more on adapting their businesses to climate change.
    • A second potential source is the producers and consumers of fossil fuel products whose previous activities have fueled climate change we must adapt to. For example, just as companies have customer programs to raise finance to offset their emissions (e.g., airlines), consumers might also be motivated to support investments to address the impacts of their emissions.
    • The third and critical source is third-party private capital, including commercial banks and private equity investors. This constitutes a massive potential source of funding (the bond market totals in the trillions), and it is the focus of the discussion that follows.

    The existing mitigation carbon markets provide a potentially fertile precedent for raising third-party private capital. It is important to recognize that the genesis of carbon markets was governments creating regulatory frameworks that gave value to emissions reductions — governments set targets and created mechanisms that offered both financial incentives and flexibility to meet those targets through capital spending.

    This also helped lay the groundwork for the parallel non-governmental voluntary markets. Under these types of structures, investors are incentivized to pay for carbon avoidance which makes projects financially attractive — thereby providing project sponsors with access to capital for investments in activities, sectors and regions that were otherwise unbankable.

    A similar approach could be taken for adaptation; namely, the creation of a regulatory or voluntary framework in which payments to projects that provide genuine adaptation benefits are recognized and valued.

    Eligible adaptation actions might include climate-resilient agriculture goods and services, investments in cold storage, improved treatment and reuse of wastewater, coastal protection, conservation of biodiversity to protect nature’s ability to adapt and actions to mitigate forest fires, a topic that has received increased attention recently. Importantly, this isn’t just a musing.

    The African Development Bank, where one of us is the manager of climate and environment finance, has been developing such a facility: the Adaptation Benefits Mechanism. The ABM mechanism creates a financial product for third-party investors (private capital, donors, consumers) to fund project developers in return for Certified Adaptation Benefits, which attribute a value to lowering or avoiding the negative impacts of climate change on agriculture, people’s health, biodiversity, buildings, businesses and other assets.

    The ABM product is designed to be priced at a level that enables the developer to fund what would otherwise be an unbankable adaptation investment. Significantly, it provides these developers with access to new capital sources that can make more adaptation projects a reality.

    Other mechanisms are being explored and deployed, such as adaptation impact bonds. Many of these programs are designed to attract third-party private capital to adaptation activities, while additional ones address other barriers and constraints to private investment.

    Notwithstanding these efforts, there remains a general shortage of instruments and proposals to attract more private capital to adaptation. Overcoming this lack will require putting more intellectual and creative resources into adaptation finance, including by the world’s leading financial centers. The private sector has more to contribute to this area, but unleashing its power will require financial innovation.

    With this month’s Paris climate finance summit now completed, the current lead-up to COP 28 to be held later this year is an opportunity not to be missed to advance the effort to raise more private capital for adaptation.

    (First published in The Hill on June 14, 2023).

    Philippe Benoit is research director for Global Infrastructure Analytics and Sustainability 2050 and has over 20 years of experience in international finance and sustainability, including management positions at the World Bank. He is also adjunct senior research scholar at Columbia University’s Center on Global Energy Policy.

    Gareth Phillips is the manager of climate and environment finance at the African Development Bank Group.

    © Inter Press Service (2023) — All Rights ReservedOriginal source: Inter Press Service

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  • BPs Shift ‘Back to Petroleum’ Prods Consideration of a Climate Oil Price Cap

    BPs Shift ‘Back to Petroleum’ Prods Consideration of a Climate Oil Price Cap

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    BP’s recent journey points to the need for instruments that influence profits specifically, and notably reconsideration of the controversial price control tool: a climate-driven price cap on oil. Credit: Bigstock
    • Opinion by Philippe Benoit (washington dc)
    • Inter Press Service

    WASHINGTON DC, Mar 13 (IPS) – BP, the oil company that previously brought us “Beyond Petroleum” and more recently robust corporate climate goals, has announced a return in emphasis to its traditional business of producing oil. Drawn by the inescapable appeal of oil’s latest high profits, has BP rebranded itself as “Back to Petroleum?”

    This type of shift highlights the importance of stronger market incentives for reducing emissions so that companies interested in decarbonizing see their financial interest align with that course. BP’s recent journey points to the need for instruments that influence profits specifically, and notably reconsideration of the controversial price control tool: a climate-driven price cap on oil.

    BP has consistently been a forward-leaning company among its peers on climate.  As early as 2002, then CEO Lord Browne rebranded BP as it sought “to reinvent the energy business: to go beyond petroleum.” However, various financial pressures, including the Deepwater Horizon spill, subsequently moved the company away from its non-petroleum businesses.

    But in August 2020, BP was back with a strengthened pivot to climate as the company announced a series of ambitious low-carbon targets.”  This included a 40% production decline and a 10-fold increase in low-carbon investment over the next decade.  BP also announced  a groundbreaking target for Scope 3 emissions (namely, emissions from the consumption of its products by industry and other consumers).

    Unfortunately, BP has now scaled back its climate ambition.  Notably, rather than a 40% drop in production by 2030, BP now expects only a 25% decrease.  Significantly, this shift has been made at a time of $28 billion in record corporate profits for BP, records also seen by other oil majors, such as ExxonMobil and Shell.

    These record profits — driven in part by high gas prices resulting from Russia’s invasion of Ukraine — also point to a major vulnerability for any market-driven climate effort.  With the lure of these type of returns from the traditional petroleum business, it is difficult to see or sustain financial motivation to shift away.

    Indeed, as BP made clear in announcing its ambitious 2022 climate targets: “bp is committed to delivering attractive returns to shareholders” — and petroleum, with its upside, is uniquely placed to deliver the potential of a high return. So long as there are big profits to be made from oil, these companies will continue to be drawn to their petroleum activities, notwithstanding any stated desire to shift to renewables.

    However, this also points to what needs to be a focus of an effective climate policy for oil: reducing its profitability.  Over the years, think tanks, academics and others have put forward carbon pricing as the most efficient emissions reduction instrument, but this discourse has failed to deliver significant results in practice, especially when it comes to oil companies.

    As emissions continue to rise and the carbon budget shrinks, the time has come to explore other solutions. One tool that merits consideration — more precisely, reconsideration — is a cap on oil prices.

    This “climate oil price cap” would be designed to increase the relative profitability and so financial appeal of renewables by limiting the upside on oil activities specifically (something a customary windfall profits tax set at the corporate level wouldn’t accomplish). It would thereby support and encourage BP and other oil companies to transform themselves from a traditional petroleum company into an “integrated energy company” (BP’s own term), one that can generate significant profits from renewables and other low-carbon products relative to its petroleum activities.

    Oil price controls are, of course, not new and have a checkered history (e.g., President Nixon’s effort in the US 50 years ago). But the climate emergency presents a new threat that merits re-examining this instrument. Importantly, a price cap could also help energy-importing developing countries, as well as vulnerable households there and elsewhere, avoid the harmful impact of the high oil prices experienced in 2022 (another potential advantage over a windfall profits tax ).

    And there is now a precedent for this type of concerted purchaser action, namely the price cap on Russian oil agreed by the EU and US. It is also a tool that has drawn renewed attention in other contexts, including rethinking the framework governing gas prices to insulate US consumers from the gasoline price surges driven by Russia’s invasion of Ukraine.

    Any effort needs to consider the lessons from the failed efforts of the past.  For example, the cap should be set at a sufficient level to attract the desired supply – including to energy-importing developing countries — even as it precludes the type of record profits the oil industry saw last year. It should also build on the experience with the current Russian price cap.

    While, admittedly today there isn’t sufficient support for aggressive climate policies, the prospect for strong action will likely increase over time as heat waves, flooding and other extreme weather events wreak havoc exacerbated by climate change.  This in turn can be expected to increase the willingness of politicians and policymakers to be more ambitious down the road in taking climate action.

    In anticipation of this changing landscape, creative options beyond traditional carbon pricing mechanisms should be explored and put before these decision-makers by think tanks, academics and others.

    In this regard, the combination of BP’s recent record profits and shift in corporate policy points to the appropriateness of considering a price cap on oil as a possible tool to fight climate change by improving the relative profitability of low-carbon investments.

    Philippe Benoit has over 20 years of experience working on international energy, development and sustainability issues.  He is currently research director at Global Infrastructure Analytics and Sustainability 2050.

    © Inter Press Service (2023) — All Rights ReservedOriginal source: Inter Press Service

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  • Why U.S.-Africa Relations and Africa Matter More Now Than Ever

    Why U.S.-Africa Relations and Africa Matter More Now Than Ever

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    To achieve a strong partnership with Africa, the U.S. administration will need to demonstrate that it is interested in Africa because the continent itself matters, not merely to address other U.S. international objectives. Djibouti Port. Credit: James Jeffrey/IPS
    • Opinion by Philippe Benoit (washington dc)
    • Inter Press Service

    A strong Africa working in partnership with the U.S. is an important and all too often overlooked element of a robust U.S. geopolitical strategy. But to achieve this strong partnership, the U.S. administration will need to demonstrate that it is interested in Africa because the continent itself matters, not merely to address other U.S. international objectives.

    Unfortunately, there is skepticism within Africa, founded in historical precedent, as to U.S. intentions. For many years, as European powers withdrew from Africa following the decolonization of the continent, the U.S. and Soviet Union stepped in seeking to install “friendly” regimes.

    Africa was an area of interest more because of its importance to the U.S./Soviet Union Cold War than on its own merits. The result was often misguided policies focused on political alignment rather than promoting improvements on the continent. As the Cold War waned, arguably so did some of the U.S. interest in Africa.

    2008 saw the election of an American president of African descent, Barack Obama, generating excitement across the continent. In 2014, President Obama convened the inaugural U.S.-Africa Leaders Summit, the largest gathering at that time of U.S. and African leaders.

    Unfortunately, there followed a general sense of disappointment as the summit failed to translate into strong action. Interestingly, the U.S. president at times most often praised for his support to Africa is President George W. Bush, who launched PEPFAR, the large-scale effort to fight AIDS focused on Africa that is also considered by some historians to be his greatest achievement.   

    Last month’s summit took place on a complex international and geopolitical backdrop for the U.S., marked by the growing competition with an emerging China and, more recently, Russia’s invasion of Ukraine. For some American commentators, the summit provided an opportunity to draw Africa closer to the U.S. in countering these challenges following a period of inactivity.

    But Africa’s leaders have signaled that they don’t want to be viewed as mere tools for other geopolitical dynamics — including tensions with China and Russia — they want their concerns addressed on their merits. And the Biden administration was careful to not present last month’s summit as China/Russia-oriented. As explained by a CNN commentator: “In previewing this … summit, American officials have been careful to avoid framing Africa as a pawn in a larger geopolitical strategy.”

    This represents a wise strategy, especially as Africa has grown substantially both economically and politically over the last several decades and is poised for further growth. The GDP of Sub-Saharan Africa has grown five-fold from $400 billion 20 years ago to nearly $2 trillion today, and Africa’s total GDP now reaches nearly $3 trillion when North Africa is included. Similarly, a Brookings report estimates that the middle class of Sub-Saharan Africa will grow from 114 million in 2015 to 212 million in 2030. It is also the region where the largest growth in population is expected going forward: by 2050, an estimated quarter of the world’s people will be African.

    African leaders themselves are not oblivious to the growing strategic importance of their own countries. Rich in agriculture, mineral and energy resources, and with a growing diaspora that funneled over $83 billion in remittances back to Africa in 2020 (far more than the $65 billion the continent received in official development assistance that same year), Africa has become an attractive destination for the astute investor. 

    Newly empowered by the growth potential of their countries, many African leaders are demanding a stronger voice and greater respect internationally — and they’re getting it from China whose presence in Africa is ubiquitous. Similarly, Japan is re-asserting its engagement with Africa.

    Last month’s U.S.-Africa Leaders Summit is a welcome effort in this context and there is much room for strengthening ties. For example, Africa accounts for only 1 percent of U.S. foreign trade, most of which is in petroleum imports from two countries. But African governments, for their part, will need to demonstrate their openness to advancing inclusive growth and political rights domestically.

    Just as Asia has dominated the growth story of the last 50 years, will Africa be the emerging engine of growth for the next 50? This is something that analysts are contemplating. The recent analysis of the continent by the International Energy Agency posits a possible high growth “Africa Case” scenario in which the continent is able to exploit effectively its potential. 

    Arguably, the U.S. and other advanced economies were caught off-guard by the rapid economic growth that took place in Asia. They were slow to anticipate it, recognize it and integrate its implications into their strategies. This is not to predict when it comes to Africa that it will inevitably replicate what Asia has done; however, the reality is: “maybe, who knows?” That’s a potential outcome that the U.S. should prepare for, and even nurture. 

    What might Africa look like 20 years from now? A real possibility is a 2.4 billion-person continent with significantly diminished poverty and a large and growing middle class that can provide a vibrant economic partner for the U.S. To achieve this, a strong partnership between the U.S. and Africa is key and in the interest of both their peoples.

    Philippe Benoit has over 25 years of experience working on international development, including previous positions at the World Bank where he focused on Africa.  He is currently research director for Global Infrastructure Analytics and Sustainability 2050. 

    Bayo Oyewole, CEO of BayZx Global Strategic Solutions, currently provides independent advisory services to the African Development Bank. He previously held senior positions at the World Bank and the International Finance Corporation, including in the office of the Executive Director representing several African countries on the World Bank Board.

    © Inter Press Service (2023) — All Rights ReservedOriginal source: Inter Press Service

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  • Early Coal Retirement: How about a Global Auction

    Early Coal Retirement: How about a Global Auction

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    There are over 8,500 coal power plants in the world, with over 2,100 GWs of capacity.  These plants generate about 10 gigatons of CO2 emissions  per year, nearly 30% of the global total. Credit: Bigstock
    • Opinion by Philippe Benoit, Chandra Shekhar Sinha (washington dc)
    • Inter Press Service

    WASHINGTON DC, Nov 02 (IPS) – Report after report highlights that we can only achieve the greenhouse gas (GHG) emission reductions required by the climate goals of the Paris Agreement if much of the existing coal power generation capacity is retired early.  To this end, one concept that deserves greater consideration is conducting an auction for early retirement of coal power plants worldwide: a global coal retirement auction. This article sets out the broad outlines of how this global auction might operate.

    The International Energy Agency (IEA) has estimated that there are over 8,500 coal power plants in the world, with over 2,100 GWs of capacity.  Although these plants are concentrated in a limited number of countries (notably China, followed by India and the U.S.), there are coal plants running in over 100 countries with over 2,000 owners.

    These plants generate about 10 gigatons of CO2 emissions  per year, nearly 30% of the global total.  This  level of emissions from coal is incompatible with either the “well below 2oC” or the more ambitious ”1.5oC” temperature targets set out in the Paris Agreement.

    Accordingly, climate/development organizations, like the Asian Development Bank (ADB), the World Bank, the IEA and RMI, are exploring programs to effect the early retirement of these coal plants.

    But closing these plants presents two important challenges.  First, retiring these plants removes electricity production that many countries rely upon for their economic development … production that would need to be replaced with preferably low-carbon sources.  Second, owners are generally unwilling to shutter revenue-generating plants and want financial compensation for the returns they would forego from the premature retirement of their asset.  This article addresses this second constraint.

    There are various regulatory mechanisms that can be used to push early retirement, such as mandating closure of plants or imposing a carbon tax or other cost that makes operating the plant uneconomic.

    A completely different tack is to entice closures by paying the owners to do so.  This is the premise of, for example, the ADB’s innovative Energy Transition Mechanism.

    But what’s a fair price? Perhaps, however, that’s not the right question. Rather, at what price are the owners willing to shutter their plants? Given that there are more than 8,500 coal power plants operating with different technical and revenue characteristics, and over 2,000 plant owners in diverse financial situations following distinctive corporate strategies (including numerous state-owned enterprises), the answer will vary.

    A technique that has been used in this type of context of multiple actors is an “auction”. While in the traditional context, a seller looks to get the highest price from multiple possible buyers through an auction, in this case, we have a buyer that is interested in paying the lowest price to different plant owners (i.e., the sellers) for the retirement of their coal plants.

    This is referred to as a “reverse auction”.  This tool has been used to acquire new power production, including renewables, at low prices, and specifically in the climate context to attract cost-effective investments that reduce methane emissions.

    The reverse auction mechanism could be used to solicit proposals from coal power plant owners as to the price at which they would be willing to close their plant.  Conceptually, this could be done on the basis of MWs of installed power generation capacity. Under the auction, an interested coal plant owner would offer to sell — more specifically, to shutter — their MWs of plant capacity by a fixed time at a proposed price.

    Importantly, the climate benefit sought by the auction is not from the decommissioning of MWs of capacity itself, but rather from the GHG emissions that would be avoided by retiring that capacity. Accordingly, for any coal retirement tender, it will be necessary to estimate the level of emissions that would be avoided.

    This determination will be based on several factors, including the particular plant’s efficiency, remaining operational life and other technical characteristics, the type of coal used, and the amount of electricity production projected to be foregone through early retirement given the power system’s expected demand for electricity from that plant.

    Tenders should include sufficient information to evaluate these items and, by extension, the level of avoided emissions and related climate benefit to be produced from the proposed retirement. This, in turn, will drive how much the auction buyer should be willing to pay for the tender.

    Moreover, because it would be largely counter-productive from a climate perspective to pay to retire existing coal plants to see that money used directly (or indirectly) to build new fossil fuel generation, the tender by the plant owner would need to be accompanied by an undertaking not to reinvest in new fossil fuel generation.

    As has been repeatedly explained, CO2 emissions have a global impact that is essentially unaffected by the geographic location of the emitting plant. Given this global nature of emissions, the auction would likewise be conducted at a worldwide level as a global auction.  From India to Indonesia, from South Africa to South Korea, from Poland to Australia, any plant anywhere would be eligible to participate in the global auction.

    Given this scope, an international organization like the United Nations or a multilateral development bank would be well positioned to provide the platform for this auction.  One could imagine a system where the auction bidding process sets out eligibility criteria for projects, the methodology for estimating GHG emission reductions, and other key bid-submission parameters.

    Significantly, while the bidding process would be managed on an integrated basis, the funding and selection of winners need not be. Rather, a system that allows for the matching of interested coal retirement buyers with individual plant owners could be used.

    For example, buyers and their funding could be mobilized on a plant-by-plant basis based on information submitted by the plant owner through the auction process.  Indeed, many potential funders have areas of focus that could lead them to be attracted to retiring coal assets only in certain countries (e.g., funders interested in a targeted set of developing countries).  The proposed auction structure could accommodate these preferences. Moreover, the global auction could also operate in association with country-specific approaches.

    One potential source of funding for coal retirements tendered under the auction is the potentially large amounts of capital to be mobilized through expanded carbon credit mechanisms under development. Tapping into these mechanisms might require establishing defined project eligibility criteria, frameworks for calculating GHG emissions reductions, and associated monitoring and verification systems to enable payments for emission reductions at the time of decommissioning based on a price for emission reduction (“carbon”) credits.

    It is also important to recall the first constraint noted earlier, namely that countries, and particularly developing countries, will need more electricity to power further economic and social development.  Accordingly, any global auction to retire coal plants needs to be coupled with a program to fund new renewables electricity generation.

    Climate change is a global challenge affected by GHG emissions from anywhere.  We need to reduce emissions from coal power generation and that requires some program to encourage and entice owners to shutter their plants.  A global auction, conducted by the United Nations or a similar international organization, would help to identify opportunities where willing plant owners and interested funders can make a deal.

    Philippe Benoit has over 20 years working on international energy, finance and development issues, including management positions at the World Bank and the International Energy Agency. He is currently research director at Global Infrastructure Analytics and Sustainability 2050.

    Chandra Shekhar Sinha is an Adviser in the Climate Change Group at the World Bank and works on climate and carbon finance. He previously worked at JPMorgan, TERI-India, UNDP, and the Kennedy School of Government at Harvard University.

    © Inter Press Service (2022) — All Rights ReservedOriginal source: Inter Press Service

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  • How China Can Retire Coal Early in Pakistan and Elsewhere Through the BRI

    How China Can Retire Coal Early in Pakistan and Elsewhere Through the BRI

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    Achieving the temperature goals of the Paris Agreement requires not only slowing new construction, but also retiring existing coal power plants early, worldwide. Credit: Wikimedia Commons
    • Opinion by Philippe Benoit (paris)
    • Inter Press Service

    PARIS, Oct 26 (IPS) – With COP 27 approaching, pressure is mounting on wealthy countries to increase their support to poorer ones in the face of climate change. The recent floods in Pakistan have amplified this issue.  China, as the world’s second largest economy, will similarly face increasing pressure to help other developing countries on climate. 

    At last year’s COP, the Asian Development Bank (ADB) unveiled an innovative program to fund the early retirement of coal power plants by mobilizing capital to buy-out the investors in these plants. This approach has an interesting, and potentially even easier, application to the coal plants financed by China in Pakistan and elsewhere overseas under its Belt and Road Initiative (“BRI”).  The key to unlocking this, somewhat surprisingly, lies in the dominance of China’s state-owned companies in BRI transactions.

    In 2015, Beijing and Islamabad launched a program under the BRI to build a series of new power plants in Pakistan.  Over the next five years, five coal plants were commissioned and there are currently an additional four plants under construction. These plants are largely being developed by Chinese energy firms with loans from Chinese banks and financiers … companies that are all mostly owned by the Chinese Government.

    Beijing has repeatedly been criticized for the BRI’s funding of new coal power plants considered to exacerbate the climate vulnerabilities of the countries where these projects are being built, like Pakistan.  Even as President Xi pledged last year to stop building new coal-fired power plants abroad, there has been an increasing understanding that achieving the temperature goals of the Paris Agreement — and reducing the type of climate devastation experienced by Pakistan – requires not only slowing new construction, but also retiring existing coal power plants early, worldwide.

    In response to this challenge, the ADB announced the Energy Transition Mechanism which includes an initiative to buy out existing coal investors to shutter their plants early and thereby avoid the attendant future emissions. Typically, this would involve mobilizing international financing from multilateral development banks, climate funds, etc. to compensate the private sector investors in these plants.

    Interestingly, the dominance in the BRI’s overseas projects of China’s state-owned companies creates the opportunity for the Chinese Government to apply the ADB mechanism in a streamlined manner — under what could be called the “BRI Clean Energy Transition Mechanism”. How might this work?  Some initial ideas follow.

    As noted above, Chinese state-owned financial institutions are the major lenders to the BRI coal power projects in Pakistan. Similarly, Chinese government-owned energy firms are the dominant coal plant owners.  It is the financial interests of these various Chinese state-owned lenders and other enterprises (SOEs) that would be affected adversely by any early retirement.

    Consequently, under the proposed mechanism, China would be compensating its own SOEs for the revenues they would lose in the future from the early plant retirements in Pakistan. In essence, China would pay itself.  This is a unique feature of this BRI coal retirement program that flows from China’s reliance on its own SOEs … and it presents several operational and financial advantages.

    1. The financial arrangements for early retirement should be easier to negotiate and execute since the parties are all affiliated — i.e., the Chinese government, its state-owned banks and other SOEs. This should also reduce transaction costs.
    2. In the ADB’s early retirement context, private sector investors would typically insist on some compensation being paid today for the loss of projected future revenues. In contrast, because the BRI context would involve compensation from the Chinese Government to its own SOEs, the Government could reasonably delay payments till the point at which the SOEs would actually be foregoing revenues. So, for example, if we assume early retirement in 2030 — an interval that would give Pakistan the time to replace the retired coal electricity generation with renewables in an orderly manner (see discussion below) – then the payments by the Chinese Government to its SOE lenders and energy firms could similarly be deferred till that time.
    3. The Government would also, as a practical matter, enjoy significant discretion regarding the level of compensation to be paid to its SOE lenders and energy firms in 2030 and beyond. Notably, the Government could impose a discount on these future payments — especially if it has implemented by that time financial disincentives targeting coal generation (e.g., a carbon price) to support its own carbon peaking and neutrality goals.
    4. The proposed BRI mechanism would resemble in various ways a debt-for-nature swap, notably from the perspective of China as a creditor/donor country.  In this BRI “debt-for-coal” swap, China would forego the payments due its SOEs in the future from the operation of these Pakistan coal plants in exchange for the reduced emissions generated by their early retirement. Significantly, this mechanism would produce emissions avoidance benefits without China providing any new overseas funding.

    What are some possible motivations for Beijing to launch this type of initiative?

    First, it provides a mechanism for China to respond to the increasing pressure it is facing as the world’s second largest economy to help poorer developing countries meet their climate and sustainability challenges. China’s status as the world’s largest emitter of greenhouse gases amplifies this pressure.

    Second, the ability to launch an international climate program that does not require China to disburse funds for the next several years — and, when it does so, to pay its own SOEs — may appeal to the Government, particularly given the current domestic economic stress.  This is consistent with other debt-for-nature swap programs advanced by other donor countries where the financial cost to the donor is from foregone revenues, not new funding.

    Moreover, the loss in revenues for China and its SOEs from the early BRI coal plant retirements would only take place in 2030 when China’s economy should be markedly larger and more capable of absorbing the expense.

    Finally, there is an argument that to the extent the ADB and BRI approaches retire the same type of coal capacity with the same climate benefits, China’s inducements to its SOEs to retire BRI coal assets early should be counted as international climate financial support (e.g., a type of “synthetic carbon credit”) just as actual monetary transfers to private sector investors would be recognized with respect to an ADB coal retirement transaction.

    Importantly, Pakistan and other BRI developing countries will need even more electricity to power their economic development. Consequently, the BRI Clean Energy Transition Mechanism needs to include additional funding for new renewables power generation capacity (as is the case under the ADB’s approach).

    Helping BRI-recipient countries to transition from coal to renewables would also support international efforts to reduce emissions — efforts whose importance for Pakistan and various other developing countries has been made abundantly evident by the devastating weather they have been experiencing.

    The extreme climate events of 2022 have increased awareness regarding the vulnerability of poorer countries to climate change and the consequent importance of reducing future emissions.  This article sets out a proposal for how China could retire BRI coal plants early in Pakistan and elsewhere that capitalizes on its use of state-owned companies, while supporting more renewables in these countries to reduce the climate change threat and promote sustainable economic growth.

    Philippe Benoit has over 20 years working on international energy, climate and development issues, including management positions at the World Bank and the International Energy Agency. He is currently research director at Global Infrastructure Analytics and Sustainability 2050.

    © Inter Press Service (2022) — All Rights ReservedOriginal source: Inter Press Service

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