Helping countries support a balanced energy transition

The world has made significant progress in decarbonization and infrastructure development. However, recent macroeconomic and geopolitical volatilities have left most countries continually struggling to balance energy security, equity and sustainability.

In fact, many countries have shifted their focus to energy security at the expense of equity and inclusiveness – according to the Fostering Effective Energy Transition report released in June 2023.

The trade-off between an equitable and a more secure transition refers to the challenge countries face when attempting to balance the three dimensions of the energy triangle. In the context of the energy transition, this refers to a situation where ensuring fair and affordable access to clean forms of energy is compromised in favour of energy security and sustainability goals. This trade-off manifests in different forms and can have practical implications on the ground, particularly for vulnerable households and developing countries.

As the global energy crisis persists, emergency measures to ensure adequate energy supply fuel inflationary pressures that deter investments in countries already dealing with high-interest rates and greater volatility. The resulting surge in energy prices severely constrains affordability, meaning poor households spending a larger portion of their income on energy are affected the most. This also exacerbates the challenge of attracting low-cost capital on a large scale to finance the energy transition in emerging economies, leading to unequal capital allocation and adding to the equity lag, where 20% of the world shows slowing progress on energy equity. To address this, countries can undertake several actions, including:

The report provides data and raises awareness on this issue, highlighting best practices that countries can adopt to course-correct and build shared understanding among stakeholders of the priorities and pathways for an effective energy transition. Its findings have prompted a clear call for urgent action in the early years of this decade of delivery for policy-makers and businesses to ensure that strong, long-term ambition is supported by immediate progress.

The Energy Transition Index benchmarks 120 countries on their energy system performance across three dimensions:

as well as their readiness for the energy transition. Now in its 13th year of publication, the Energy Transition Index has provided a robust fact base to assess progress and opportunities for the energy transition and has driven dialogue to inform decision-making by policy-makers and businesses.

Over the past three years, the Index has been instrumental in shaping decision-making and collaboration on energy transition. Through the World Economic Forum, it has informed high-level multistakeholder dialogues in over 20 countries, leading to the identification of priority areas and public-private collaboration for the energy transition.

The Forum’s Centre for Energy and Materials actively leverages the Index to brief policy-makers and business leaders on the implications of its findings and how these relate to their respective contexts. This outreach has resulted in the initiation of country acceleration programmes in Brazil, Japan, Malaysia and Indonesia jointly with leading local public and private-sector stakeholders.

Energy is a critical enabler of modern economy and society. Driven by the urgency of immediate and accelerated action for climate change mitigation, the transition to a sustainable, secure and inclusive energy system is one of the most challenging issues of our time. The global energy infrastructure powers industries, enables the smooth functioning of society, and supports growth and prosperity. An effective energy transition that continues to deliver on these goals will have implications for and require active participation from governments, businesses and individuals alike.

Amid the increasingly apparent concerns of climate change, the energy sector has undergone rapid transformation over the past two decades. Renewable energy technologies and electric vehicles compete on cost-effectiveness and operational performance against conventional alternatives. Investment in clean energy has consistently increased. And energy and climate discourse dominates domestic and multilateral political processes. Analysis included within the Energy Transition Index provides proof of this progress.

However, advances towards long-term targets are threatened by short-term uncertainties. Given the macroeconomic and geopolitical volatilities, progress on the energy transition is now facing headwinds, highlighting the challenges in the continued momentum of the transition.

Over the past three years, energy market instability has led to extreme price shocks, exacerbating energy poverty and stalling access. An increasing number of households are struggling to meet basic heating and lighting needs at affordable costs.

Affordability is emerging as a growing concern, and the impact has been disproportionately high on developing economies, small businesses and vulnerable consumers. Around 75 million people who recently gained access to electricity are likely to lose the ability to pay for it.

The Fostering Effective Energy Transition report highlights progress and opportunities in the global and national energy transitions based on the Energy Transition Index, which benchmarks 120 countries on the performance of their energy systems and their readiness to transition to an equitable, secure and sustainable future energy system.

This fact-based, inclusive and transparent framework and rankings enable policy-makers and businesses to identify the necessary processes for energy transition and align policy and market enablers accordingly.

The report establishes an evidence base that enables decision‑makers to benchmark against global peers, learn from best practices and prioritize necessary actions to support and encourage an effective energy transition in their own countries.

Further, this work highlights the sheer complexity of the energy transition in an effort to accurately communicate the true scale of the challenge.

Accelerating the energy transition will require faster progress on all fronts, and no one stakeholder group can achieve faster and more impactful progress alone. Leaders from government and business are invited to join the Forum’s mission to improve the state of the world by partnering with the Centre for Energy and Materials.

For more information, please contact us.