The past decade has recorded significant progress in the adoption of green energy around the world. This has been made possible by a combination of technological advances, easier availability of capital and regulatory measures. However, further progress is likely to slow due to the economic shocks caused by the Covid-19 pandemic and the Russia-Ukraine crisis.
Energy shortages arising from these two shocks are leading to increased usage of fossil fuels, at least in the short term. Higher energy prices have pushed poorer consumers out of energy markets – and thus into energy poverty and deprivation. Slower global growth and higher inflation also will reduce financial resources available for green investments, especially in lower-income countries. The global challenge is to continue the green transition while ensuring that lower-income countries have access to affordable energy. Another important issue is taxonomy – a common definition for green, renewable and sustainable projects will facilitate financial flows towards these sectors. As a group that represents the world’s largest economies, the G20 is well placed to act on these issues. India’s G20 Presidency provides the opportunity to highlight the concerns of the developing world, the challenges of functioning democracies, and potential solutions.
This Task Force offers recommendations for the G20. Not all the members of the Task Force agree with all the findings and recommendations (See Appendix 2, Dissenting Note).
First, because volatility in energy supply and prices is counter-productive to green transitions, G20 should strive to achieve stable, accessible, and equitable energy markets by helping to expand the supply of affordable energy, including fossil fuels, and protecting against reduced energy supply and price fluctuations. The G20 can ensure adequate funding, including through philanthropy to make the benefits of green transition and clean technologies available to Least Developed Countries.
Second, public procurement can be used to favour technologies such as Small Modular Reactors and Green Hydrogen, which can reduce dependency on fossil fuels. Procurement norms that create a large number of players in these sectors will avoid the winner-takes-all effect often encountered in the development of new technologies. The G20 can set targets for green public procurement by 2030. Coordinated action can create cross-border carbon markets, which can steer industries towards low-carbon options. An international carbon market can generate resources for lower-income countries, where local funding is scarce.
Finally, the high costs of capital, especially debt, that most developing countries face can be eased by bringing down the cost of hedging foreign-exchange risks. Emerging markets also suffer from weak public utilities, which are the customers for green energy. Special multilateral financial institutions can provide guarantees to bring down borrowing costs. Seeding venture funds to invest in green projects in smaller and lower-income economies also can partly offset the vulnerability of these countries’ financial markets.
