Growth Summit 23: How we can bring everyone along on the green energy transition

In 2022, more than a quarter of all venture capital funding went into climate technology, according to PwC, with a strong focus on those technologies that can do most to cut emissions.

But there is regional disparity and much of this is funding is focused on the US and Europe.

Innovation is extremely important for climate adaptation and mitigation efforts to meet the climate goals, said Egypt's Minister of International Cooperation, Rania Al-Mashat, speaking at the World Economic Forum's Growth Summit 2023.

For a just energy transition, we need to make these technologies more available in the Global South - and we need the private sector to fund efforts to decarbonize, through initiatives like blended finance, agreed panelists at the session on Growth Hotspots: The Climate Technology Boom.

The Summit, taking place on 2-3 May, brings together policymakers, business, workers and learners to advance a new future of work, invest in human capital, embed inclusion and strengthen economic revival.

Here are some of the key quotes from the session on the challenges and opportunities leaders face to ensure we bring everyone along:

Africa produces less than 4% of global greenhouse gas emissions, but the impact of the climate crisis on the continent in terms of extreme weather events and drought is huge.

"There is so much investment that needs to be done," said Al-Mashat. "When we take a look at the global environment today with increasing interest rates, the cost of investment is going up more.

"How we can create just financing, maintain a sustainable flow of financing for developing countries or emerging markets that are not emitters but need to move forward?"

Bringing the private sector on board is key to reducing the burden.

This is beginning to happen through innovative blended financing models and initiatives like the Just Energy Transition Partnerships, launched at COP26 in Glasgow, and Egypt's Platform for the NWFE (Nexus of Water-Food-Energy), designed to "leverage international partnerships and look at concessional finance in a way that can actually draw in the private sector for mitigation and agriculture," she added.

Out of COP27 in November came the Sharm el-Sheikh Guide for Just Financing, which is a toolkit of "how we can move from pledges on the technology side, be it blended finance and also case studies were the private sector can come in in adaptation".

The IMF estimates it will cost between $3-6 trillion a year to mitigate climate change by 2050.

The challenge is enormous, said Naoko Ishii, Director, Center for Global Commons, The University of Tokyo. But it's not enough to just "count the money".

"We need a policy package, and an enabling environment with the just transition factored in," she said. "We need to see how this package will address the vision challenge, policy challenge, regulation and innovation challenge together."

"We have to address this just transition in a much more serious way, not just the number counting... It is not just the energy sector, but food, agriculture and energy, all parts of the development strategy need to incorporate this just transition factor.

"Then the finance may flow and the technology may play a part, but without this whole package, assured by the leaders, both the Global North and the Global South, it will not happen.

"We should really aim for a comprehensive policy package, supported by leaders of both sides, not just the politicians, but business leaders, and citizen leaders together. This is the only way for us to get out of this deep trouble."

"One of the key challenges is we’re talking about the energy transition and we’re doing a bit in the rich parts of the world," said Eirik Waerness, Senior Vice-President and Chief Economist, Equinor ASA.

"But it is massively difficult to combine growth in energy demand and deliver on that, reducing poverty, reducing income differentials, and at the same time reach climate targets...

"None of the 1.5-degree consistent scenarios does anything to reduce the difference in per capita income between the rich and the poor."

"If energy demand grows in the poor parts of the world, which it will do if we reduce income inequality, we do not have the technologies available to avoid emissions from increasing.

"Then the only solution is a massive reduction of emissions in the rich parts of the world, and that is difficult to find. So the technology challenges are big, and the scaling of all this is very challenging."

Waerness said energy companies need governments to step in and help, but this can be more challenging in emerging economies.

"For us to be able to drive the transition, we need governments to run ahead of us... We need permitting process and property rights and be allowed to build something in countries and regions we haven't done before.

"Most of the energy transition takes place in the well-regulated, Western, rich economies, which basically have enough energy, it is just about replacing old energy with new.

"The frustration is that it will go too slow in the emerging economies partly because of those types of risks that no government in those countries can guarantee us to avoid.

"How can the rich parts of the world, how can the financing community, how can we get in to doing investment in places where it is generally very difficult? So we can contribute to electrification in Africa with new modern technologies. It is about removing some of those risks as well that allows us to scale this. We haven't figured it out yet."

Rich Powell, Chief Executive Officer, ClearPath Inc. added: "There are many policymakers and observers in the US that are very frustrated with this concept that we're going to keep the developing world locked in energy poverty as part of the solution to climate change.

"This is why we're so focused on developing a suite of technologies that would actually provide a like-for-like substitute to the subcritical coal, which is so often the choice that so many countries are turning to because they are trying not to transition away from anything but just to build an energy system from the ground up.

"Like it or not, subcritical coal remains the cheapest, fastest way to build an energy system, but that isn't compatible with solving climate change."

The session 'Growth Hotspots: The Climate Technology Boom' was moderated by Pranjal Sharma, Contributing Editor, Businessworld, with the following participants:

Watch the full session below: