The biggest problem facing the global energy transition over the next decade isn’t technology or politics. It’s money.
Reconfiguring the world’s power systems to eliminate carbon emissions is going to be a multitrillion- dollar investment project. Over the past few years, clean energy has overtaken fossil fuels in terms of global spending, but one place is still falling short: developing economies. Rich nations tempted to rest on their laurels, now that a promise to mobilise $US100 billion ($148 billion) a year for climate in such countries appears to have finally been met, should watch out. The real fight is just beginning.
Japan has been fighting a rearguard action against the decarbonisation policies of its fellow rich countries, inserting language supporting ammonia, hydrogen, and LNG into the communique from a G7 meeting in Hiroshima in May.Credit: iStock
That’s because the world’s fossil fuel exporters aren’t about to take the challenge lying down. At stake are the energy policies of 10 emerging countries in Asia and Africa that will account for more than half the world’s additional population between now and 2050, and a concomitant share of its energy. They have economies highly dependent on foreign capital, either because of their rapid pace of development, or the fragility of their currencies. If rich nations don’t provide the funding for clean energy to fuel their growth, oil producers and their allies stand with chequebooks at the ready for the dirty alternative.
Flush with profits from high oil prices, Gulf monarchies — in particular Saudi Arabia and the United Arab Emirates — have been busy building ties. Billions have been deposited with the central banks of Egypt and Pakistan to stabilise their currencies as energy import bills rose in the wake of the Ukraine war, an unusual move that leaves the recipients deeply in hock to donors. Saudi businesses signed $US4.3 billion of deals with Philippine counterparts at an investment forum in October, plus a contract this month to run a new container port in Bangladesh. Indonesia is also seeking Riyadh’s help in funding its planned new capital city, Nusantara.
The UAE, meanwhile, has been trailing only China lately as the second-largest bilateral investor in Africa, where Ethiopia, Kenya, Nigeria and Tanzania face particularly rapid growth. In India, Saudi Arabia and the UAE are looking to invest $US100 billion and $US50 billion, respectively, with half of the first figure earmarked for a long-delayed oil refinery that would be one of the world’s biggest.
That spending underpins existing soft power. Bangladesh, Egypt, India, Indonesia, Pakistan, and the Philippines are the biggest source countries for the foreign workers who provide much of the labor force in Gulf monarchies, and in turn send remittances back home. Trading ties with East Africa, where the traditional lingua franca Swahili is partially derived from Arabic, date back hundreds of years.
Oil exporters, to be sure, are starting off on the back foot. Rich democracies in the Organization for Economic Cooperation and Development remain the biggest providers of foreign direct investment, by far. Sweden, with $US62 billion of outflows in 2022, sends more capital abroad than Saudi Arabia and the UAE’s combined $US44 billion. The US, on $US373 billion, Japan’s $US161 billion, and China with $US147 billion dwarf them all.
Those last two may be as important over the coming decades as the oil exporters. China’s formidable renewables sector and engineering expertise have turned it into a major player in overseas power investment over the past decade.
The multitrillion-dollar fight that will shape the future
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22.12.2023
The biggest problem facing the global energy transition over the next decade isn’t technology or politics. It’s money.
Reconfiguring the world’s power systems to eliminate carbon emissions is going to be a multitrillion- dollar investment project. Over the past few years, clean energy has overtaken fossil fuels in terms of global spending, but one place is still falling short: developing economies. Rich nations tempted to rest on their laurels, now that a promise to mobilise $US100 billion ($148 billion) a year for climate in such countries appears to have finally been met, should watch out. The real fight is just beginning.
Japan has been fighting a rearguard action against the decarbonisation policies of its fellow rich countries, inserting language supporting ammonia, hydrogen, and LNG into the communique from a G7 meeting in Hiroshima in May.Credit: iStock
That’s because the........
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