Southern Regions to Evaluate Equitable Energy Transformation
In a bid to support regions most affected by the European Union's Green Deal program, the EU has established a Just Transition Mechanism, aiming to mobilize €150bn by 2027. However, this fund pales in comparison to the trillions of local currency units or equivalent required annually to support a just transition in emerging markets and developing countries.
According to IEEFA, emerging economies need around Rs94 trillion (approximately $1.3 trillion) annually for climate mitigation and adaptation activities linked to a just transition. This funding requirement underscores the need for continuous, much larger co-investment efforts, combining international public and private capital flows along with strong government enabling actions.
Private investment is expected to primarily fund hard assets such as clean energy infrastructure, while public finance must address the socio-economic impacts like employment and community resilience. This points to the necessity for governments to play an active, facilitative role beyond traditional policy making to mobilize diverse capital sources adequately.
In countries like India, just transition financing strategies involve aligning existing financial instruments and adopting blended finance models to de-risk private investments. The Bankers for Net Zero initiative highlights that emerging markets face a critical funding gap in just transition finance, emphasizing the importance of innovation in financing structures and international collaboration to close this gap.
The just transition strategy needs to connect climate action with building better livelihoods, especially in emerging markets. By doing so, these countries could be the greatest beneficiaries of this shift, with Africa having potential to be a 'renewables superpower'. Stern suggests that north-south climate finance flows need to be doubled to ensure that benefits and opportunities are shared widely.
Central banks in emerging markets will need to incorporate an explicit focus on the just transition, potentially connecting their financial inclusion commitment with their response to the climate crisis. Accelerating investments in climate action and nature restoration are seen as drivers of economic recovery, job creation, and innovation.
The world is shifting towards a net-zero economy before the COP26 summit in November. However, reaching net zero as soon as possible will reduce the growing burden of damage from climate change impacts, which falls hardest on developing countries. The assumption that high-income countries are where carbon emissions are highest no longer always holds true. For instance, China's per capita carbon emissions reached 7.2t in 2016, while South Africa's stood at 8.5t per capita.
In conclusion, delivering a just transition is an important part of the strategy for achieving net zero across the global south. While there is no single global figure exactly matching the EU mechanism, the combined annual requirement for just transition finance in emerging and developing markets is estimated in the trillions of dollars per year range, requiring innovative co-investment strategies and multi-stakeholder collaboration beyond what the EU mechanism alone represents.
- The Just Transition Mechanism of the European Union aims to mobilize €150bn by 2027, but this falls short compared to the funding needs in emerging markets and developing countries.
- IEEFA estimates that emerging economies need around Rs94 trillion ($1.3 trillion) annually for climate mitigation and adaptation activities linked to a just transition.
- Co-investment efforts are needed, combining international public and private capital flows with strong government enabling actions.
- Private investment largely funds hard assets like clean energy infrastructure, while public finance addresses socio-economic impacts.
- Governments should play an active, facilitative role to mobilize diverse capital sources adequately.
- In countries like India, just transition financing strategies involve aligning existing financial instruments and adopting blended finance models to de-risk private investments.
- The just transition strategy should connect climate action with building better livelihoods, especially in emerging markets, to ensure benefits and opportunities are shared widely.
- Central banks in emerging markets should incorporate an explicit focus on the just transition, potentially connecting their financial inclusion commitment with their response to the climate crisis.
- Climate action and nature restoration are seen as drivers of economic recovery, job creation, and innovation in emerging markets.
- Delivering a just transition is crucial for achieving net zero across the global south, requiring innovative co-investment strategies and multi-stakeholder collaboration beyond what the EU mechanism alone represents, with estimates in the trillions of dollars per year range.
