Discussion Paper

No. 2019-37 | June 03, 2019
Advancing a global transition to clean energy – the role of international cooperation
(Submitted as Global Solutions Paper)

Abstract

International cooperation in support of a global energy transition is on the rise. Initiatives and venues for multilateral cooperation are complemented by growing bilateral engagement to foster international lesson-drawing and exchange. Official development assistance (ODA) in the energy sector is increasingly being directed to renewable energy sources. Despite these promising developments, it is widely acknowledged that investment towards achieving the Sustainable Development Goal (SDG) 7 on clean and affordable energy is insufficient. A recent report by SE4ALL estimates annual investments in support of SDG7 at USD 30 billion. This is well below the USD 52 billion that would be needed (SE4ALL and Climate Policy Initiative, Energizing finance: Understanding the landscape 2018, 2018). Moreover, investment in clean energy remains heavily concentrated in a small number of frontrunner countries. In terms of technologies, investments in clean energy still overwhelmingly target grid-connected electricity generation. Despite their proven ability to provide rapid and affordable access to clean energy in many country contexts, off-grid technologies account for only 1.3 percent of investments (SE4ALL and Climate Policy Initiative, 2018). Worryingly, a significant share of international public sector financing, most notably by export-credit agencies, is still allocated to coal and other fossil-based technologies. Against this background, this paper makes three recommendations for strengthening international cooperation in support of a global energy transition: 1) Promote investment in clean energy and end support for coal-based energy infrastructure. 2) Tackle the socio-economic dimension of the global energy transition. 3) Provide early market support to promote challenge-based energy innovation.

JEL Classification:

F5, O3, O38, P18, Q01, Q4, Q48

Assessment

  • Downloads: 284

Links

Cite As

Rainer Quitzow, Sonja Thielges, Andreas Goldthau, Sebastian Helgenberger, and Grace Mbungu (2019). Advancing a global transition to clean energy – the role of international cooperation. Economics Discussion Papers, No 2019-37, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2019-37


Comments and Questions


Jörg Peters - Evidence on socio-economic dimension of energy transition
June 15, 2019 - 12:52

This is an interesting paper and it makes well-substantiated and appropriate claims. The focus seems to be on electricity, though, while the energy transition in the Global South also encompasses the challenge of disseminating more efficient or clean cooking technologies. This could be emphasized further.

My main comment is ...[more]

... on the empirical substance that is provided in Section 4. There is a growing literature on the socio-economic impacts of electrification that should be included. The bottomline, roughly, is that grid extension is hardly cost-effective while off-grid technologies, especially home-scale solar are sufficient to meet demands in rural areas – and thus is somewhat in line with paper’s call for less coal and more renewables. Expensive infrastructure extensions could focus on selected areas where high demand can be expected. Here are some key references:

Bos et al. (2018). Benefits and challenges of expanding grid electricity in Africa: A review of rigorous evidence on household impacts in developing countries. Energy for Sustainable Development, 44, 64-77.

Grimm et al. (2019). Demand for off-grid solar electricity–Experimental evidence from Rwanda.
http://ssrn.com/abstract=3399004
Lenz et al. 2017. Does large scale infrastructure investment alleviate poverty? Impacts of Rwanda’s electricity access roll-out program, World Development 89: 88-110.
Lee, Kenneth, Edward Miguel, and Catherine Wolfram. 2019. Experimental evidence on the economics of rural electrification. Journal of Political Economy, forthcoming.
Peters/Sievert. 2016. Impacts of rural electrification revisited – The African context. Journal of Development Effectiveness 8(3): 327–345.

For Asia and Latin America, the evidence is more mixed, see for example
Lipscomb, M., Mobarak, A. M., & Barham, T. (2013). Development effects of electrification: Evidence from the topographic placement of hydropower plants in Brazil. American Economic Journal: Applied Economics, 5(2), 200-231.
van de Walle et al.. 2017. Long-term gains from electrification in rural India. World Bank Economic Review 31(2): 385-411.


Andrea Prontera - Participatory processes
July 22, 2019 - 11:30

This is a very interesting and well-written paper that touches on several key elements of the current debate on global energy transition. It is convincing in its analysis of both the gaps in the existing system of international cooperation and the operative proposals to address them. Particularly valuable is the ...[more]

... focus on public export-credit agencies and banks, along with ODA, as well as on the potential of market-creating innovations and the socio-economic dimension of global energy transition.
My main comment relates to the article’s reference to the idea that ‘innovation challenges should be developed in participatory processes’ (p. 11). I think that this aspect is very important, especially because of the poor democratic credentials of several developing countries where clean technologies and investments need to be improved. I would be happy to see further discussion of this point in the article; for instance, discussion of whether/how the current system of international energy cooperation is supportive (or not) of participatory processes in developing countries (and possibly how these processes can be improved) would be interesting. This issue is also important in tackling the socio-economic challenges of global energy transition.


Nils Ohlendorf - Commentary
July 29, 2019 - 15:12

The Discussion Paper „Advancing a global transition to clean energy – the role of international cooperation“ addresses the important nexus of global investments into renewable energies and fossil fuel infrastructure in the context of the Sustainable Development Goal (SDG) 7 on clean and affordable energy.
The authors first provide ...[more]

... an overview of the current global developments in the energy sector as well as the status quo of international cooperation activities. Subsequently, they outline different gaps and challenges in the international energy cooperation, such as lacking investments for renewable energies, a focus on a small group of countries and existing, i.e. grid based solutions and the persistence of credits for fossil fuel infrastructure granted by export-credit agencies. The last three chapters propose potential solutions, namely, higher investments in clean energy while simultaneously stopping fossil fuel funding, addressing the associated socio-economic benefits of an energy transition and finally to provide early market support for energy innovations.
The problem analysis touches upon important problems in the structure of the global energy finance while the proposed solutions hint towards probably useful reform proposals. However, the scientific contribution this discussion paper could be increased as the paper partially lacks academic rigor. I recommend to carefully rework different sections in order to make problem analysis more comprehensive and aligned with the reform proposals.


Major points of critique:
- There is a lacking coherence between the chapters but also within them. For example, chapter 4 promotes fostering socio-economic analyses on the benefits of a global energy transition, on both, a country as well as on a global level. Though the outcomes of such analyses would clearly be interesting, this proposition nevertheless does only very indirectly address the key challenges that were outlined earlier in chapter two (too little RE investments, focus on existing solutions and few countries, remaining fossil support of export credit agencies). The authors neither explain which problem shall be addressed, nor why especially those analyses should effectively contribute to solve them. Though one can hypothesize about how those scoio-economic analyses might for example foster RE investments by highlighting their benefits, it should be discussed why this measure is best suited to address this shortcoming and not others. This critique holds for all proposed solutions (chapter 3-5). None of them clearly derive from the described problems in chapter 2. First, linking the solutions to the specific problems and second, empirical evidence that show their success in the past would underpin their selection.
Lacking coherence within the chapters can, for example be illustrated based on 2.3: The overall topic of chapter 2 are “gaps and challenges”. 2.3 however first outlines the need for locally adjusted solutions (solution), then potential opportunities of market-creating innovations (another solution) and finally, but unconnected to the previous paragraphs, warns of fossil fuel infrastructure lock-ins. The section 2.3 could be integrated to the solution chapters (first two paragraphs) and to the introduction (last paragraph).
- The second chapter shall outline “gaps and challenges” but lacks in elaborating their relevance and magnitude. This unclear problem analysis makes deriving solutions quite difficult. For example, the “problem” of a focus on existing solutions (2.2) is not really described. The first paragraph is the following: “In terms of technologies, investments still primarily target grid-connected electricity generation. Despite their proven ability to provide rapid and affordable access to clean energy in many country contexts, off-grid technologies account for only 1.3 percent of investments.” Why exactly is the lacking focus on off-grid technology a problem? How exactly would off grid solutions be beneficial? The topic of missing off-grid electricity was not discussed in the first chapter and will only reappear in the fifth chapter, where the authors demand market support programmes.


Minor points of critique:
- In the introduction, more quantitative information on certain developments would have been helpful or interesting. For example in 1.1, the overall and added capacity (and not only overall investments) for REs and fossil fuels. Or in 1.2, the overall magnitude of multilateral and bilateral financial volume including its development over time.
- Again in chapter 1.2, the ODA funding for fossil fuels did not “remain stable” as it grew from 1.2 billion to 2.8 billion (increase of 250%). Similarly, the recent decrease has only occurred in the last two years (2016 and 2017); the suggested picture of a shift towards renewables is therefore a little overemphasized.
- In the second chapter, “Gaps and challenges for international energy cooperation”, there are some slightly confusing numbers: How to the 30 billion in support of the SDG7 (page 3) align with the 33 billion for developing countries (page 4)?
- For section 2.4, the magnitude of credits granted by export-credit agencies (in fossil infrastructure) beyond Germany would be interesting.