The green transition: Leave no one behind

For decades, researchers and policymakers alike have been baffled by how to transition away from the world's ever-growing dependence on traditional energy - a discussion that resulted in two angles and is now known as the energy transition debate.

While we all accepted the advent of non-fossil fuel energy as the only responsible way forward, there remains a lack of consensus on when and how this can be achieved. For a considerable period, the transition itself was adopted - in the lexicon of policymakers and economists at least - as the reality of the future.

So entrenched was the belief in the world’s collective capacity to achieve this transition that Saudi Arabia, one of the world’s largest producers of traditional oil, launched and hosted the inaugural summit of the “Middle East Green Initiative” in October 2021. This summit also saw some of the largest oil-producing nations announcing their intent to transition to green economies within defined timelines.

This supposed consensus by decision-makers was compounded by announcements from the world’s leading financing institutions to immediately halt financing for future projects in areas of traditional energy, which included an embargo on current clientele to recourse to existing credit lines should they be utilised for new projects in traditional energy.

Faced with new realities enacted by politicians and lenders, preeminent traditional energy providers followed suit and launched their own “New Energy” initiatives. This triangulation of governments, financers and energy corporations further exacerbated the belief that the energy transition in and of itself is no longer a matter of debate. It is not the what that is in question but rather the when - or so we thought.

The Russian invasion of Ukraine effectively revealed the extent to which the world economy hinges on traditional fuel to maintain its power and infrastructure needs. This cataclysmic event augmented the increase of oil prices, contributed to stark rises in inflation rates, and continues to have astounding implications on fragile supply chains worldwide. Consequently, policymakers were quick to qualify previously announced positions on the subject.

It is now apparent that intentions alone are no longer sufficient to achieve the energy transition. What, therefore, should be considered to avoid relegating the energy transition to purported commitments, and rendering it a case of post hoc, ergo propter hoc?

The following points shed light on several multifaceted constructs that should become intrinsic when discussing this important topic, but is in no way an exhaustive list:

First, it is critical to understand that the debate around the energy transition is not monolithic. Conceptually, the energy transition is often conflated with alternate yet complimentary topics such as Environmental, Social and Governance (ESG) standards.

The consensus around the conceptual framework of the energy transition is key to ensuring unified results and assessments of the achievements made, now and in the future, by the various parties involved in this transition process. Moreover, while the energy transition should culminate with green energy solutions, participants often negate the fact that arriving at this point is only possible if critical antecedents are realised. The “zero to hero” approach is both overreaching and perilous to achieving this transition.

Second, it is imperative to concede that both countries and corporations have huge disparities in their capacities and willingness to embrace the energy transition. While Western Europe and certain parts of Asia are well positioned to do so, North America, Africa and the Middle East are considerably lagging in terms of appetite to commit to the investments required for the future of clean energy.

This incongruence is fuelled further by the fact that while the environmental and social benefits of the transition are considerable, new energy solutions are not yet economical. Board Members and executives worldwide face a significant conundrum: how to balance their existing fiduciary obligation to shareholders to increase their profits while simultaneously adopting a responsible approach to investment.

It’s possible to address this binary divide if governments undertake serious steps to incentivise the private sector to overcome this dilemma. Although the G-7 and the OECD's Blue Dot Network are currently working on standardizing projects that align with President Biden’s Build Back a Better World Initiative, these projects are uncircumscribed to the energy transition. These projects have a distinct geopolitical element and should develop precise processes for financial incentivization.

The private sector, particularly those companies at the forefront of the infrastructure overhauls necessary for the energy transition, cannot be expected to shoulder the burden of “investing in the future” without a clear path of government support.

Thirdly, achieving the energy transition is not restricted to technology - people must be at the helm of its realisation. Cultural shifts and the enhancement of talent in the leadership of various organisations are critical, and outlining the path to achieving this shift in the corporate mindset is grossly overlooked. Moreso, leveraging the energy transition to alleviate the ever-growing gender diversity gap in global economies is another benefit, but one which, unfortunately, remains on the peripheries of the wider debate.

Similarly, enacting social policies to curb the divide between countries, social groups, and gender are elements that should not be changed into tokenism. Instead, they should be elevated as defining pillars, and participants in the energy transition should be incentivised, both financially and socially, to make quantifiable strides towards achieving them.

Although unifying and diversifying our conceptual understanding of the energy transition is vital, praxis is instrumental to putting these and other considerations to the test. Concrete steps must be taken to demonstrate that this transition is no longer a mere debate but a reality of the not-too-distant future.