The window of opportunity to prevent the worst consequences of climate change is closing fast. It is essential to make the energy transition robust by building the necessary enablers that will keep the transition going if the economic and energy security context deteriorates. This includes making legally binding commitments, designing long-term visions for domestic energy systems, building an attractive investment landscape for private capital and promoting consumer participation as well as building the local workforce required for the transition.

As outlined in the ETI framework, the readiness of a country to transition its current energy system towards one that enables the development of a sustainable low-emission economy depends on a multitude of factors that can be measured and analysed along a country’s energy system structure, regulation and political commitment, investment climate, human capital and consumer participation, infrastructure and business environment, and the robustness of institutions (Figure 1). Progress on these dimensions is critical for countries to increase their support of the energy transition and accelerate their efforts.

However, improving these dimensions is gradual as the path to institutional, socio-economic and systemic transformations depends on established processes and systems. Given the disruptive environmental, macroeconomic and geopolitical events of the last two years and their implications for the energy transition, this section outlines four measures that countries can take to support their transition journey.

1) Anchoring climate commitments in legally binding frameworks that can endure political cycles and enforce the long-term implementation of national transition objectives.

The long-term structural changes required for the energy transition will take longer than the usual 4 to 5-year political cycles of many countries so they must be made resilient to political changes in the executive, legislative and judicial branches of government. Turning climate commitments into laws (e.g. France attempted a change in constitutional law in 2021¹¹⁴) can support the transition effort in the long run. Climate-related laws then overarch the policies to promote energy efficiency, renewable energy and electricity access, the participation in international climate diplomacy, the evolution of GHG reduction targets (both 2030 nationally determined contributions and longer-term net zero targets), as well as the policy stability required for long-term energy system transformation.

Countries, cities and businesses have vowed to achieve net zero emissions in the coming decades. In 2021, a wave of pledges were made, raising the number of countries committed to net-zero targets, covering 88%¹¹⁵ of global emissions. Particularly, prior to COP26, several large economies submitted more ambitious 2030 emission reduction targets, notably China, the EU and the United States. But, although these new targets can reduce GHG emissions by 7.5% this decade, 55% is needed by 2030 to align with the Paris Agreement goal of keeping the global temperature rise below 1.5°C.¹¹⁶

To help political ambitions translate into on-the-ground action, introducing net zero commitments into a legal institutional framework and complementing them with binding policies could help strengthen the urge for action of future governments regardless of other existing priorities. To date, 13 countries have made their net-zero targets legally binding and 33 countries have put their net-zero targets in policy documents.¹¹⁷ Figure 8 shows the status of countries’ net-zero targets in 2021. The 2050 climate goals require more countries to transition their commitment into legally binding frameworks to enforce long-term on-the-ground climate action.

Figure 8: Status of countries’ net-zero targets, 2021

2) Taking and holding long-term decisions with regard to the decarbonization of the national energy system structure

A country’s existing energy system structure significantly influences transition readiness as the path depends on legacy infrastructure and resource endowments. Technological lock-in, economies of scale, the long lifetimes of current energy infrastructure and end-use behaviour patterns create barriers to entry for disruptive technologies. Creating a new energy system that can gradually complement and eventually supplant the legacy infrastructure requires enhancing the flexibility of electricity system, improving end-use efficiency and increasing the share of renewable energy in power generation, among other measures.

As an example, coal is generally the most polluting source of power generation today. It emits nearly twice the amount of CO2 when combusted compared to natural gas at most power plants where it is used,¹¹⁸ yet it still represents a major share of many countries’ energy mix.

Long-term commitments for the future of the national energy system structure can ensure countries make fundamental and irreversible changes in line with their energy transition goals. The emergency returns to coal witnessed in recent months should also make countries rethink how they can build resilience and contingency plans for their energy systems that do not rely on coal.¹¹⁹ Multinational partnerships can play a crucial role in ensuring long-term visions and structural changes are implemented. For instance, the Just Energy Transition Partnership¹²⁰ between South Africa and France, Germany, the United Kingdom, the United States and the EU will provide support to transform South Africa’s economy away from coal and towards a low-emission climate resilient economy.

3) Building an attractive investment landscape for private capital, both foreign and domestic, to finance energy transition projects, especially in emerging and developing countries

A country’s ability to attract capital depends on a multitude of factors, including supportive policy and legal frameworks, stability of the currency and exchange rates, a secure and safe environment, the quality of infrastructure and the availability of the latest technologies. Adopting and promoting these factors can create strong momentum for capital to flow into the transformation of the energy system.

While advanced economies continue to attract capital under favourable terms, including for higher-risk new low-emission technology industrial projects, developing and emerging countries are still struggling to attract both foreign and domestic private investments essential for the financing of large energy projects and infrastructure. Even though the last decade saw record investment in new renewable power capacity ($2.6 trillion globally¹²¹), most of these investments were made in countries with stable and favourable investment landscapes, such as China, the United States, Japan and Germany (Figure 9). Additionally,
the effects of the COVID-19 pandemic were felt differently across regions, with emerging and developing countries facing acute challenges given the fiscal impacts of the pandemic on their national budgets. Owing to the continued reluctance of a number of financial institutions to fund the transition in emerging and developing countries,¹²² it is worth stressing that climate goals cannot be reached without a global transition; solutions must be found to rally the financial sector. Technical and financial support to emerging and developing economies, leveraging a mix of public and private investment instruments, grants, concessional finance and market-based capital could help keep the transition on track. International collaboration, not only on finance flows but also on policies, regulatory practices, best technical practices and new business models is critical.

Figure 9: Renewable energy capacity investment, top 20 countries, from 2010 to first half of 2019 ($ billion)

While governments continue to put in place the necessary enablers to build private investors’ confidence, investing entities such as multilateral development banks, philanthropic funds, specialized branches of sovereign wealth funds and commercial banks can play a role in bridging the gap and invest in countries where higher financial risks are involved.

4) Promoting consumer participation and building the local workforce required for the transition, paying particular attention to the livelihoods of vulnerable populations

Consumer participation involves increasing customer awareness of the stakes of climate change, of carbon footprints and of individual actions that can be taken to support national climate change ambitions. The energy transition will likely create a significant number of new jobs and require a trained workforce with very different skill sets than a country has historically developed (e.g. petrotechnical professionals in oil producing countries). Developing the consumers and workers of the future can be a key enabler of a long-term sustainable energy transition.

When empowered, environmentally conscious consumers can achieve substantial emission reductions, as shown by a recent study¹²³ that researched household preferences for reducing GHG emissions in cities in France, Germany, Norway and Sweden. These consumers can drive distributed grid networks, apply energy efficiency measures and reduce their overall carbon footprint. Policies raising the awareness of consumers’ energy consumption, such as mandating energy labels on products and providing peer-to-peer comparative energy consumption reports to households, or providing monetary incentives like variable power rates and feed-in tariffs can be used to drive long-lasting behavioural changes in consumers.

While moving to clean energy can create new jobs in the clean energy industry, it can also lead to job losses in other industries and can be detrimental to the livelihood of dependent communities. In addition, the transition can negatively affect low-income households, which might struggle to keep up with the rising costs and consumption changes brought about by the transition. Governments can partner with private institutions to reskill, cross-skill or upskill the existing workforce, particularly within jobs at risk, such as those in the fossil fuel industries. They can also adapt the education system to stay abreast of the technologies in the renewables and digital space. Similarly, policies that develop or expand social protection benefits to accompany energy transition reforms can be used to mitigate the negative effects on low-income households.