Clean energy investment is set to double that of fossil fuels – here’s how developing nations can also benefit

A major milestone is set to be reached this year in the fight to tackle the climate crisis – global investment in clean energy will reach almost double the amount going to fossil fuels. But while the shift to renewable power speeds ahead, there is a risk that millions of people could be left behind.

The International Energy Agency’s (IEA) 2024 World Energy Investment report says total global energy investment this year will likely exceed $3 trillion for the first time, with $2 trillion spent on clean technologies such as renewables, electric vehicles and nuclear power, and $1 trillion going to coal, gas and oil.

However, the report shows that the overwhelming majority of that clean energy investment is happening in Europe, the United States and China, with just 15% of the $2 trillion being spent in emerging economies, chiefly because the high cost of capital is holding back the development of new projects.

This lack of funding in developing nations means they are stuck in a loop: they cannot afford to build wind and solar farms, so they have to continue to rely on fossil fuel energy, which means they cannot reduce their emissions and therefore cannot combat climate change.

In the World Energy Investment report, IEA Executive Director Fatih Birol writes: “More must be done to ensure that investment reaches the places where it is needed most, in particular the developing economies where access to affordable, sustainable and secure energy is severely lacking today.”

Ensuring emerging countries can develop renewable energy projects is one element of the ‘just transition’ to a world where global warming is no more than 1.5C above pre-industrial levels. Another aspect of that just transition is making sure that the phasing out of fossil fuels does not equal the phasing out of employment for millions of people currently working in industries related to oil, gas and coal.

The United Nations Development Programme says “the backbone” of the just transition is “ensuring that every person, society and country benefits from the opportunities presented by constructing future economies in line with the 1.5C global warming goal”.

While a World Economic Forum report, Fostering Effective Energy Transition, says an equitable and inclusive energy transition is vital because “all countries and people – at the individual, community, national and international levels” are affected.

The Forum report includes an Energy Transition Index (ETI), which benchmarks 120 countries on their current energy system performance, focusing on balancing equity, security and sustainability, and on their readiness to transition to clean energy.

While there has been notable progress in energy efficiency and a significant rise in the adoption of clean energy, the momentum of the transition “has been held back by setbacks in energy equity, driven by rising energy prices in recent years” and that “energy security also continues to be tested by geopolitical risks,” the report found.

A new report by the Forum addresses the socioeconomic challenges posed by the shift to a net-zero society, and proposes a framework to help drive a just transition.

The report, Accelerating an Equitable Transition: A data-driven approach, presents metrics which show the economic and societal risks posed to a nation by the move away from high-polluting industries, to “give leaders a forward view on key opportunities and challenges”.

It says that in regions like Latin America, Southern Africa and emerging Asia, “economic growth remains a critical but competing priority with pressures to decarbonize”. And the lack of financing, coupled with less access to the requisite technology, means that “leapfrogging to ‘green growth’ can be elusive”.

The Forum sets out six archetypes for countries based on their progress in the sustainable transition and their current reliance on climate-harming sectors; it then suggests how those nations can mitigate risks and capitalize on opportunities.

“Evidence-backed strategies, with policy-relevant metrics at the intersection of climate action and socioeconomic inequities can provide a sufficient baseline on risk, generate informed strategies, and ensure climate action serves both people and planet,” the report says.

A white paper by the Forum’s Centre for Energy and Materials, Building Trust through an Equitable and Inclusive Energy Transition, says the energy transition is inherently complex, with far-reaching implications for society, the economy and the environment, and so ensuring all nations can participate equally in the shift is crucial.

“An unjust, inequitable and non-inclusive transition manifests in various ways, including disparities in energy access, price volatility, affordability constraints, unequal job impacts and finance allocations,” the report says. “Addressing these challenges and fostering the necessary trust requires a multifaceted approach grounded in specific measures, concerted efforts and partnership structures where roles are clearly defined.”

The Forum’s broader Equitable Transition Initiative aims to ensure the policies, investments and business strategies for the energy shift support both the green transition and economic equity.