Lu pour vous : rapport du WEF de 2020 sur La transition énergétique dans le monde

Insight Report

Fostering Effective Energy Transition 2020 edition

May 2020 World Economic Forum The opinions expressed in this document are those of the authors and do not necessarily reflect 9193 route de la Capite the views of the World Economic Forum, the members of the project’s advisory committee or the CH1223 Cologny/Geneva Members and Partners of the World Economic Forum. Tel.: +41 (0)22 869 1212 Fax: +41 (0)22 786 2744 Email: contact@weforum.org

© 2020 World Economic Forum. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, including photocopying and recording, or by any information storage and retrieval system. Contents

Preface 4

Executive summary 6

1. Introduction 9

2. Framework 11

3. Overall results 15

4. Subindex and dimension trends 19

4.1 System performance 19

4.1.1 Economic development and growth 21

4.1.2 Environmental sustainability 25

4.1.3 Energy access and security 25

4.2 Transition readiness 27

5. Imperatives for the energy transition 29

5.1 Regulations and political commitment 29

5.2 Capital and investment 32

5.3 Innovation and infrastructure 35

5.4 Economic structure 37

5.5 Consumer engagement 39

6. Conclusion 42

Appendices 44

1. Annual Energy Transition Index score differences, 20152020 44

2. Methodology 45

3. Regional classification 46

Contributors 47

Endnotes 48

Fostering Effective Energy Transition 2020 edition 3 Preface

The World Economic Forum Platform for Shaping the Future of Energy and Materials, with the support of its global community of diverse stakeholders, serves to promote collaborative action and exchange best practices to foster an effective energy transition. The annual benchmarking of energy systems across countries has enabled tracking the speed and direction of their energy transition and identifying opportunities for improvement. The transformation of the energy system over the past decade, although slower than required to achieve the objectives of the Paris Agreement to combat climate change, has been significant. But this hardearned momentum now risks being lost, as the ongoing COVID19 pandemic continues to cause economic and social damage.

Roberto The COVID19 pandemic is unprecedented in its scale and speed in recent times, and it has the Bocca, Head potential to redefine economic, political and social aspects relevant to the energy transition. It has of Shaping the forced society to change and relinquish valuable commodities and freedoms to collectively address Future of Energy this global outbreak. An effect of similar magnitude is required for a successful energy transition. and Materials, Beyond the uncertainty over its longterm consequences, it has unleashed cascading effects in real Member of time. Compounded disruptions from the erosion of almost a third of global energy demand, delayed the Executive or stalled investments and projects, uncertainties over the employment prospects of millions of Committee, World energysector workers, in addition to unprecedented oil price volatilities and subsequent geopolitical Economic Forum implications have created a perfect storm for energy markets. The new Earth 2.0 that will emerge after COVID19 will be a “new normal”, but many fundamental challenges will still exist. Chief among them is the imperative to collectively work towards an effective and inclusive energy transition.

This report highlights the key findings from the Energy Transition Index (ETI) 2020, part of the World Economic Forum Fostering Effective Energy Transition initiative. The ETI builds on its predecessor, the Energy Architecture Performance Index (EAPI), establishing factbased insights to support decisionmakers in their pursuit of a roadmap for a secure, sustainable, affordable and inclusive future energy system. The ETI does not only benchmark countries on their current energy system performance, but also provides a forwardlooking lens as it measures their readiness for the energy transition. The unforeseen risks uncovered by the current global environment make a strong case for strengthening the energy transition fundamentals ­ characterized as enablers for energy transition readiness. However, energy systems across countries are unique to local circumstances, the economic structure, socioeconomic priorities, and countries will adopt multiple pathways to pursue an effective energy transition.

Through these efforts, the World Economic Forum encourages the sharing of best practices and the use of its platform for effective publicprivate collaboration to facilitate the energy transition process in countries around the world.

4 Fostering Effective Energy Transition 2020 edition Fostering Effective Energy Transition 2020 edition 5 Executive summary

The year 2020 marks the beginning of the “decade of The gap between average ETI scores for countries in delivery” on energy transition. The ongoing COVID19 the top quartile and the rest is gradually narrowing, pandemic has put a stop to business as usual, setting off reflecting growing global consensus on the priorities a chain of events disrupting all sectors ­ including energy. and speed of the energy transition. The current status of the energy transition and progress in multistakeholder collaboration have been slow to achieve ­ Sweden leads the rankings table for the third consecutive and costly to build, and efforts must be made to ensure year, followed by Switzerland and Finland. France and the clock is not reset. Resilience, in economic, financial, the United Kingdom are the only G20 countries in the regulatory and infrastructure terms, is a crucial prerequisite top 10. The list of top 10 countries has been roughly the for an effective energy transition. same over the past six years, highlighting the robustness of their energy transition roadmaps. This report presents the findings from the Energy Transition Index (ETI) 2020, summarizing insights on countries’ ­ Countries in the bottom quartile are gradually narrowing energy system performance and their energy transition the gap with countries in the top quartile. While this readiness. The indicators reflect trends in the global energy illustrates that emerging economies are slowly moving transition leading up to 2020. The circumstances were the needle on their energy transition, it also highlights the radically transformed in the first few months of 2020 due ceiling of incremental gains from the current set of policies to compounded disruptions from COVID19. Analysing and technologies in advanced economies, raising the the drivers of progress in the past can offer lessons for urgency for breakthrough and radical measures. accelerated recovery in the near future. ­ Energy transition readiness improved across Countries are transforming their energy systems, but countries, mainly due to an increased level of political the improvements are not consistent across countries commitment and better access to capital and or over time. investment. Sustained progress requires a similar momentum along other enablers, such as human ­ Of the 115 countries monitored, 94 countries have capital preparedness, robust institutional frameworks improved their composite ETI score over the past six and innovative business environments. Colombia, years. These nations represent more than 70% of the the Czech Republic, Hungary, Kenya, Morocco, global population and 70% of global CO2 emissions from Thailand and the United Arab Emirates have fuel combustion. achieved substantial gains on their transition readiness, by targeting improvements along multiple enablers. ­ Maintaining steady progress on the energy transition is a challenge for all countries. Of the 115, only Argentina, Economic development and growth Bulgaria, China, the Czech Republic, the Dominican Republic, India, Ireland, Italy, the Slovak Republic, ­ Prior to the precipitous decline in the second quarter of Sri Lanka and Ukraine have made consistent and 2019, wholesale natural gas prices had increased in all measurable progress on their energy transition over the regions except North America since 2016, undermining past six years. the competitiveness of heavy industries and the replacement of coal in power generation. Infrastructure ­ The world’s largest energy consumers differ in their and supply chain constraints as well as different price energy transition trajectories. Emerging demand determination mechanisms were contributing factors. centres like India and China show strong and steady improvement, while scores for Brazil, Canada, Iran and ­ An increasing number of countries are adopting the United States are either stagnant or declining. costreflective energy pricing, as 82% of the countries that improved their ETI scores over the past six years ­ Fuel importing countries continue to outperform fuel also reduced pretax energy subsidies. However, pricing exporting countries, as the gap between their average instruments are yet to tackle the rising externalities scores increased. The key parameters of differentiation associated with energy production and consumption, are environmental sustainability, access to capital and such as global warming, health risks, traffic congestion investment in new energy infrastructure, and political and road accidents. commitment to the energy transition. ­ The affordability constraints of electricity and heating in advanced economies are compounded by the combined effects of aboveaverage tariffs and high per capita consumption levels, highlighting the importance of energy efficiency.

6 Fostering Effective Energy Transition 2020 edition Energy access and security ­ Disruptions are the new normal. In the past two decades, multiple public health crises, military ­ Building upon substantial gains in energy access over escalations, recessions and international trade disputes the past two decades, energy access programmes need have threatened global stability at frequent intervals. The to be redesigned to prioritize accessibility to a diverse disruptions brought about by the COVID19 pandemic range of energy services, energyenabled community constitute unmatched economic instability fuelled by services, affordable and efficient appliances, and the compounded disruptions from demand destruction, an quality and reliability of the electricity supply. oil production surplus and the rise of populism that are further enabled through what seems to be challenges ­ Economic inequality and energy poverty are mutually in international cooperation. Energy policies need to be reinforcing, there being a strong correlation between long term in scope, with a robust design and resilient the two. Energy consumption levels within and between recovery mechanisms. countries are highly unequal. Countries need to leverage natural advantages to bridge the gap, tapping into ­ Stimulus packages and policies to mitigate the resources with more uniform distribution, especially economic fallout resulting from COVID19 can help renewable sources of energy. leapfrog the inertia of carbon lockin by prioritizing policy responses that minimize additional costs for ­ Energy security and reliability implications from frequent businesses and consumers, and place job creation and widespread extreme weather events, and an at the heart. Allocating stimulus money towards increasing vulnerability to cyberthreats, call for resilience largescale new energy infrastructure, such as carbon in physical and digital energy infrastructure. capture, utilization and storage, clean hydrogen and grid modernization, can create multiplier effects in Environmental sustainability economic growth and employment.

­ Although political commitment, public engagement and ­ Low fuel prices and falling consumer demand in advanced investor attitudes towards environmental sustainability economies offer opportunities to initiate structural continue to advance, average scores and gaps between economic transformation and diversification in emerging countries remained lowest on this dimension. This economies and fuel exporting countries, which could implies the continued prioritization of economic and prove challenging otherwise in normal circumstances. social considerations above environmental sustainability.

­ Global CO2 emissions from fuel combustion remained flat in 2019. However, methane emissions from natural gas production increased, as North American shale gas operations accounted for more than half of global methane emissions. A mix of affordable technology options, mandates and emission pricing instruments are required to control methane emissions, recognizing the need to maintain the competitiveness of natural gas against coal.

The rhythm and momentum of the energy transition will potentially be impeded by the COVID19 pandemic. Cascading effects have led to an unprecedented energy demand and price shocks, and the reallocation of public funds and private investment towards healthcare, social security and business continuity. While necessary measures must be taken to protect lives and livelihoods, the risks to the future of the human civilization from climate change remain, with important lessons to be learned.

­ The current environment of compounded shocks is a simulation of the scale of potential disruption from climate change, offering a grim reminder of the urgency of action. The energy transition needs a similar sense of urgency and global cooperation, rooted in scientific evidence and endorsed by all stakeholders.

Fostering Effective Energy Transition 2020 edition 7 8 Fostering Effective Energy Transition 2020 edition 1. Introduction

Economic development and growth: The global economy The front lines of energy security are evolving. The year is entering its most uncertain phase in living memory, as 2019 was marked by extreme weather events, as tropical COVID19 has challenged the current economic order like storms and wildfires in various parts of the world exposed never before. Additionally, the year 2019 saw an abnormal infrastructure vulnerabilities and caused widespread and level of street protests across the world.1 Among the many frequent power outages. Incidences of cyberattacks on the reasons for the mass mobilization at this unprecedented electricity infrastructure are rising, with recent incidences scale, contributing factors included economic inequality and in India,6 the EU7 and the United States,8 which emphasize high costs of living. The adaptation costs of climate change the urgent need to act quickly to avoid potential largescale and the energy transition can widen these rifts as they pose disruptions. Additionally, the lowcarbon energy transition systemic risks to the financial system ­ both in terms of has prompted countries to lock in their competitive physical risks to capital and infrastructure, and transition advantage by securing supplies to materials such as lithium, risks from disorderly mitigation strategies.2 Stakeholders cobalt and rare earth metals, leading to a high degree of from across the world reiterated the importance of concentration in terms of the control, refining and export of sustainable economic growth3 at the World Economic these materials.9 Forum Annual Meeting 2020 in Davos-Klosters. Environmental sustainability: The year 2019 marked a In early 2019, average oil prices were higher than the step change on environmental sustainability. The emissions year before,4 contributing to increasing investments in from the energy sector remained flat,10 even as global GDP capital projects and R&D for clean energy technologies. grew by 2.3%.11 Global spending on renewable energy The beginning of 2020, however, was volatile for the continued to increase,12 as the share of electricity from energy sector, due to price and demand shocks from renewable sources increased substantially in multiple the COVID19 pandemic. The coming years could prove countries. The share of electricity produced by coal is to be a very uncertain time for energy markets and, expected to have declined by 3% in 201913 ­ the largest given that fuel exports are 19% of international trade annual drop on record ­ primarily due to largescale thermal and a large source of income for many countries, the power plant shutdowns in the EU and United States. The situation could lead to further geopolitical shifts, as trend in electrification continued, as investment in the power recently evidenced in the OPEC+ manoeuvres. The sharp sector was higher than in oil and gas supply for the fourth decline in industrial activity, transportation services and consecutive year.14 household consumption has stoked fears of a recession, prompting governments to launch stimulus measures to The environmental sustainability agenda received a major support the economy and society. Ongoing and planned boost from the financial sector, as an increasing number projects may experience capital constraints, leading to and different kinds of asset managers looked to reduce delays. As governments act to ensure economic growth their carbon exposure, leading to divestments totalling through needed measures, the tradeoffs can affect the more than $14 trillion to date.15 An increasing number speed of the energy transition. Emerging economies of nonfinance privatesector organizations, including are particularly at risk, as their exportoriented growth international oil companies, are actively working towards model requires growing consumer demand in advanced their pledged carbon neutrality goals. Total green bonds economies. The lower oil price environment also hinders and loans issued globally increased 49% yearonyear to an the competitiveness of energy efficient alternatives, electric alltime high of $255 billion.16 The U.S. Business Roundtable vehicles and batteries. These developments confirm the redefined the purpose of a corporation to include serving mutually reinforcing links between energy transition all stakeholders, reflecting a strong move towards and economic growth ­ as much as energy transition environmental, social and governance (ESG) principles is a factor in economic growth, sustained economic in the allocation of capital.17 At the same time, countries growth is needed for the energy transition. and subnational jurisdictions across the world have either declared or are working towards netzero emissions targets. Energy access and security: The share of natural gas The demand from civil society for faster responses to in the energy mix grew, due to demand from power climate change and decarbonization has increased, as generation and the continued increase in global trade in climate protests have intensified across the world. liquefied natural gas (LNG) for the fifth consecutive year. This raises new energy security constraints, as natural gas is geographically more concentrated than oil, and the supply chain infrastructure is insufficient. The geopolitical balances of energy were dynamic, as the United States established itself as an oil exporter to 31 countries in 2019, and the world’s largest energy consumers discussed forming an oil buyers’ alliance.5

Fostering Effective Energy Transition 2020 edition 9 The strong momentum and commitment from varied stakeholder groups are necessary, especially as the consequences of climate change become increasingly apparent. The last five years have been the warmest on record, and scientists warn some climate change tipping points might already have been passed.18 Countries need to significantly raise their level of commitment towards environmental sustainability, leveraging diverse policies, technologies and financing options. The year 2020 marks the beginning of a “decade of delivery” on energy transition and climate change. However, given the massive mobilization of government and privatesector resources to mitigate the spillover effects of the COVID19 pandemic, the energy transition momentum risks slowing down in the short term, unless the economic recovery supports the countryspecific energy transition priorities. The domino effect triggered by the pandemic has affected every sector ­ including energy ­ leading to price and demand shocks, and potentially influencing the pipeline of projects, investment and R&D in the near future. This emphasizes the systemic dimensions of the energy transition, as it is not limited to linear shifts in fuel mix or production technology; rather, it both influences ­ and is influenced by ­ different parts of the economy and society. The COVID19 pandemic serves as a sobering reminder of the need for increased robustness and resilience in policymaking for the energy transition. This is the latest in a series of similar global disruptions over the past two decades, including extreme weather events and rising waves of populism, such that the volatilities define a new normal. Policies will need added robustness and resilience to maintain the course, pre-empting risks from future disruptions.

10 Fostering Effective Energy Transition 2020 edition 2. Framework

The Fostering Effective Energy Transition initiative, facilitated Progress on a country’s energy transition will be determined by the World Economic Forum, aims to accelerate the by the extent to which a robust enabling environment can speed of the global energy transition by promoting the be created. This includes strong political commitment, a adoption of effective policies, corporate decisions and flexible regulatory structure, a stable business environment, publicprivate collaboration for the transition to a secure, incentives for investments and innovation, consumer sustainable, affordable and inclusive future energy system. awareness and the adoption of new technologies, among The Energy Transition Index (ETI), a part of this initiative, other factors. Energy transition is not restricted to linear establishes and disseminates a factbased framework to shifts in the fuel mix or the substitution of production foster greater understanding of the state and readiness of technologies that can be unilaterally achieved by policies energy systems across countries for this transition. or innovation or investments. Rather, the social, economic and technological systems that are connected to the energy The ETI 2020 is a continuation of the annual energy system system need to coevolve19 to shape the transition.20 benchmarking series published by the World Economic Forum. Previously published as the Energy Architecture The ETI benchmarks the state of the energy transition Performance Index (EAPI) series from 2013 to 2017, the in 115 countries. These countries constitute 90% of the framework was revised to reflect the interdependencies global population, 93% of global total energy supply and of energy system transformation with macroeconomic, 98% of global nominal GDP. The ETI is a composite score political, regulatory and social factors that determine a of 40 indicators, sourced from reliable international data country’s readiness for transition. providers to ensure comparability across countries and consistency over time. The indicators are standardized The ETI framework consists of two parts: current energy and grouped together to derive scores for higher order system performance and the enabling environment for dimensions (Figure 1), which are equally weighted to obtain the energy transition (Figure 1). System performance scores for the system performance and transition readiness provides an assessment of countries’ energy system subindices. The composite ETI score is the average of related to their delivery in three key priorities: the ability these two subindices.21 to support economic development and growth, universal access to a secure and reliable energy supply, and In addition to summarizing insights from the ETI 2020 environmental sustainability across the energy value scores, this report also examines the evolution of the global chain. The objective of energy transition in a country energy transition since 2015. Scores for the ETI composite, should be to deliver simultaneously across these three subindices and dimensions were backcasted prior to 2018 priorities, thereby maintaining a balanced “energy for a consistent group of 115 countries. Six years may not be triangle”. However, countries approach energy transition long enough to study transitions, but given the speed of new from different starting points and unique socioeconomic policy announcements, increasing volumes or investments, characteristics, and hence prioritize objectives for energy and technology deployments, this time frame provides useful transition that reflect countryspecific circumstances. insights into the effectiveness and sufficiency of the efforts Such priorities may include expanding access to modern and the roadblocks that may lie ahead. energy services, meeting a rising energy demand, modernizing energy system infrastructure, providing employment, reducing environmental footprints of energysector activities, etc. While countries will inevitably choose a diverse set of shortterm objectives, pursuing the longterm goal of achieving a balanced “energy triangle” can support the choice of appropriate policies and instruments, and help the synchronization of efforts across countries and the maintenance of a steady course on the global energy transition.

Fostering Effective Energy Transition 2020 edition 11 Figure 1: Energy Transition Index framework

System performance imperatives Transition readiness enabling dimensions

Energy access Environmental Energy system Capital and Regulations and security sustainability structure investment and political commitment

Energy triangle

Enabling dimensions

Economic development and growth

Human capital Infrastructure and Institutions and and consumer innovative business governance participation environment

Energy transition definition

An effective energy transition is a timely transition technologies for extraction and conversion, towards a more inclusive, sustainable, affordable and and enduse sectors, an effective energy transition secure energy system that provides solutions to global needs to balance the priorities of diverse stakeholder energyrelated challenges, while creating value for groups. The World Economic Forum Fostering Effective business and society, without compromising the balance Energy Transition initiative offers a platform to establish of the energy triangle. While a longterm vision and a common understanding among all stakeholder groups objectives are necessary, remaining flexible in a dynamic on the endstate of the energy transition, necessary environment is critical. Given the complexity and scale of imperatives, market and policy enablers, and the the energy system, which includes different fuel sources, resulting human impact.

12 Fostering Effective Energy Transition 2020 edition Table 1: Energy Transition Index 2020 results

Country name 2020 ETI System Transition Country name 2020 ETI System Transition Score2 Performance Readiness Score2 Performance Readiness Sweden 79% 69% Greece 63% 47% Switzerland 74.2% 77% 70% Armenia 55.0% 60% 49% Finland 73.4% 71% 74% Bulgaria 54.9% 59% 49% Denmark 72.4% 69% 76% Montenegro 54.2% 55% 53% Norway 72.2% 81% 63% United Arab Emirates 54.2% 56% 52% Austria 72.2% 70% 71% Namibia 54.0% 54% 53% United Kingdom 70.5% 72% 68% Vietnam 53.6% 57% 50% France 69.9% 74% 64% Ghana 53.5% 59% 47% Netherlands 68.7% 68% 68% Turkey 53.2% 57% 49% Iceland 68.0% 74% 61% Bolivia 53.1% 64% 42% Uruguay 67.3% 75% 59% Poland 53.0% 57% 48% Ireland 67.0% 69% 65% Indonesia 52.9% 61% 44% Singapore 66.9% 67% 65% Dominican Republic 52.4% 59% 46% Luxembourg 65.9% 62% 68% Republic of Moldova 52.4% 61% 43% Lithuania 65.1% 71% 59% Oman 52.4% 54% 50% Latvia 65.1% 69% 60% India 52.1% 54% 49% New Zealand 64.9% 73% 57% Jamaica 51.5% 54% 49% Belgium 64.6% 65% 64% Guatemala 51.5% 58% 45% Portugal 64.5% 69% 59% Trinidad and Tobago 51.2% 58% 44% Germany 64.2% 64% 64% China 50.9% 50% 52% Estonia 63.9% 64% 63% Kenya 50.9% 47% 54% Japan 63.3% 64% 63% Russian Federation 50.6% 63% 38% Slovenia 63.2% 66% 60% Tajikistan 50.5% 49% 51% Spain 63.1% 67% 59% Jordan 49.8% 46% 53% Colombia 62.9% 72% 54% Algeria 49.8% 61% 37% Italy 62.7% 68% 56% Egypt, Arab Rep. 49.1% 52% 46% Costa Rica 62.0% 72% 52% Honduras 49.1% 51% 47% Canada 61.9% 67% 56% Saudi Arabia 49.0% 54% 43% Chile 61.7% 65% 57% Bangladesh 48.7% 54% 43% Israel 61.1% 66% 56% Kazakhstan 48.4% 59% 38% Hungary 60.8% 66% 55% Tunisia 48.3% 53% 43% United States 60.7% 66% 56% Bahrain 48.2% 46% 51% Slovak Republic 60.7% 66% 55% Cambodia 48.1% 49% 47% Malta 60.5% 65% 56% Tanzania 47.8% 47% 48% Romania 60.4% 68% 52% Kuwait 47.4% 52% 42% Australia 59.9% 66% 54% Pakistan 46.9% 46% 47% Croatia 59.7% 66% 54% Nepal 46.6% 45% 47% Malaysia 59.7% 64% 55% Nicaragua 46.3% 50% 42% Peru 59.4% 69% 49% Ethiopia 46.1% 47% 45% Panama 59.2% 66% 52% Zambia 45.9% 47% 45% Georgia 58.9% 61% 57% Botswana 45.7% 45% 44% Czech Republic 58.8% 61% 56% Serbia 44.7% 50% 39% Paraguay 58.5% 68% 49% Iran, Islamic Rep. 44.3% 55% 32% Azerbaijan 58.4% 67% 49% Ukraine 43.5% 50% 37% Ecuador 58.1% 72% 45% Bosnia and Herzegovina 43.3% 47% 39% Cyprus 58.1% 63% 53% Senegal 43.2% 39% 47% Brazil 58.0% 69% 46% Kyrgyz Republic 43.1% 42% 43% Korea, Rep. 57.9% 59% 57% South Africa 42.7% 47% 38% Brunei Darussalam 57.7% 66% 48% Zimbabwe 42.7% 41% 45% Mexico 57.0% 64% 49% Mongolia 42.6% 45% 39% Morocco 56.5% 61% 51% Mozambique 42.1% 47% 37% Albania 56.5% 63% 50% Benin 42.0% 41% 42% Thailand 56.5% 61% 51% Venezuela 41.5% 55% 27% Qatar 56.3% 60% 52% Cameroon 41.2% 40% 42% Sri Lanka 56.1% 65% 46% Nigeria 41.0% 46% 35% Argentina 55.8% 68% 44% Lebanon 40.5% 36% 41% Philippines 55.8% 62% 49% Haiti 38.5% 35% 37% El Salvador 55.3% 61% 50% 36.0% 55.3%

Advanced Economies For the ETI 2020 methodology, see the methodology addendum at the end of this report. Country figures are rounded to full PPT, but exact Commonwealth of Independent States figures are used to determine rankings. Therefore, countries with the same ETI scores may have different rankings. Emerging and Developing Asia Note 1: The Energy Transition Index benchmarks countries on the performance of their energy system, as well as their readiness for transition to a Emerging and Developing Europe secure, sustainable, affordable, and reliable energy future. ETI 2020 score on a scale from 0 to 100%. Latin America and the Caribbean Note 2: ETI 2020 score on a scale from 0% to 100%. Middle East, North Africa and Pakistan Sub-Saharan Africa Fostering Effective Energy Transition 2020 edition 13

14 Fostering Effective Energy Transition 2020 edition 3. Overall results

The ETI benchmarks countries on their energy system be plateauing. The average ETI score for countries in the performance and their readiness for a fast and effective top 10 percentile has been constant since 2015. Leading transition. Countries are scored along 40 indicators countries play a critical role in the global energy transition, on a scale of 0 to 100.22 Countries scoring the global by highlighting best practices that inform the development maximum on a given indicator are assigned a score of of roadmaps for other countries. This implies that 100 on that indicator. incremental gains from the current set of policies and technologies might be limited, and the need for radical Given the systemic and interdisciplinary nature of the and breakthrough ideas is urgent. energy transition challenge, country scores on different ETI indicators depend on factors such as natural resource endowments, geography and climate, population, the level of socioeconomic development and path dependencies of legacy energy systems. Moreover, country scores on some ETI indicators are determined by factors beyond the scope of national decisionmaking, such as energy market volatilities, the emerging regulatory landscape in trading partners, global financial market sentiments and international climate change frameworks. Hence, no country scores 100 on the ETI.

The global average ETI score for 2020 is 55.1 out of 100. While this indicates the first yearonyear decline in the global average ETI score since 2015 with 55% of the countries registering declines, the mediumterm trends are positive. Figure 2 shows countries’ ETI score progression between 2015 and 2020, providing insights into the evolution of energy transition trajectories across the countries. More than 80% of the countries, representing 70% of the world population, have increased their ETI score over the past six years. Notably, progress among the world’s 10 largest energy consuming countries has been mixed. Emerging centres of demand such as China and India show strong improvement, while the trend has been moderately positive in Germany, Japan, the Russian Federation and South Korea. On the other hand, the ETI scores of Brazil, Canada, Iran and the United States were either stagnant or declining.23 Figure 3 shows G20 countries’ wide range of comparative performance on the ETI, while they consume 75% of the global total energy supply. This attests to the overall positive trajectory of the global energy transition, although progress is not smooth and pockets of underperformance exist.

The list of top 10 countries on the ETI 2020 remains similar to last year’s results, with Sweden leading the global ranking for the third consecutive year, followed by Switzerland and Finland. Among the world’s 10 largest economies, only the United Kingdom and France feature in the top 10. While the diversity among the top 10 countries in terms of pathway adopted for their energy transition is significant, they share common attributes, such as reducing the level of energy subsidies, enhancing energy security by reducing the reliance on imports, achieving gains in energy intensity of GDP, and increasing the level of political commitment by pursuing aggressive energy transition and climate change targets. However, the annual incremental gains achieved by the highest ranked countries appear to

Fostering Effective Energy Transition 2020 edition 15 Figure 2: Countries’ change in Energy Transition Index score, 2015-2020

Change in ETI score between 2015 and 2020 (%)

-4% 0% 10%

Figure 3: G20 countries’ Energy Transition Index 2020 ranking and share of global total energy supply, 2017

78 32 80 22

Russian 20 47 Federation Germany Brazil

China 28 86 50 Rest of World United 7 Saudi Kingdom

48 Arabia

74 26 South 106 8 Africa 70 Italy Argentina India 36 56 67

G20 Countries’ ETI Rank Areas represent countries’ share of global total energy supply (%) Figures in the top right corner indicate country ranking on Energy Transition Index 2020 1 115

Sources: World Economic Forum and IEA, World Energy Balances 2019

16 Fostering Effective Energy Transition 2020 edition Figure 4: Global average Energy Transition Index and sub-index scores, 2015-2020

61% 59% 57% 55% 53% 51% 49% 47% 45%

2015 2016 2017 2018 2019 2020

ETI Score System Performance Score Transition Readiness Score

On average, the ETI score improvement has been the critical role of energy in the economic structure are higher for energy importing countries than for fuel contributing factors. However, fuel importing countries exporting countries, leading to a substantial increase outperform them on the key parameters of environmental in the gap between their average scores. A comparative sustainability, political commitment to the energy analysis of these two groups (Figure 5) indicates that transition, and access to capital for investment in new fuel exporting countries perform better on the energy energy infrastructure. This is likely due to the additional sector’s contribution to economic development and pressure on energy importers to improve on energy growth, and comparably on energy access and security. security by prioritizing domestically available renewable Access to domestic reserves at affordable prices and sources of energy.

Figure 5: Average scores on Energy Transition Index dimensions for net energy importers and exporters, 2015-2020

ETI Score Economic Development and Growth Environmental Sustainability Energy Access and Security Regulations and Political Commitment Institutions and Governance Capital and Investment Infrastructure and Innovation Human Capital Energy System Structure

2019

2020

Net Energy Importer 35 ­ 45% 50 ­ 55% 65 ­ 75% Net Energy Exporter 45 ­ 50% 55 ­ 65% Fostering Effective Energy Transition 2020 edition 17 Source: World Economic Forum with energy import data from IEA, World Energy Balances 2019 18 Fostering Effective Energy Transition 2020 edition 4. Sub-index and dimension trends

4.1 System performance Over the past six years, 75% of the countries have increased their scores on the system performance Energy is a critical enabler of modern economy and dimension. The global average scores for system society. Regardless of the economic structure and performance increased successively each year from 2015 to socioeconomic priorities of countries, the domestic energy 2019, before declining yearonyear between 2019 and 2020 sector has strong forward and backward linkages in a (Figure 4). The yearonyear decline is primarily driven by rising nation’s economy. The energy sector uses outputs from natural gas prices for importing countries leading up to 2019, a variety of industries, spurring demand for products and and the emerging evidence on externalities as associated services such as capital equipment, metals and mining, with energysector activities. Figure 6 shows scores for the manufacturing, procurement, construction, and engineering system performance dimensions, with country scores sorted and design. At the same time, energy is an intermediate from minimum to maximum for the years 2015 and 2020. input for most industrial sectors and services,24 in addition to addressing final demand for lighting, heating, cooking The global average score for environmental and transportation. Hence, it is critical for countries to sustainability in 2020 remains the lowest among ensure an abundant and secure provision of modern forms the three dimensions. However, 75% of the countries of energy at affordable prices to maintain an optimal level have improved on this dimension between 2015 and of economic activity and provide better quality of life to 2020, by approaching the challenge from multiple their citizens. The system performance component of angles, including technology mandates and equipment the ETI measures the extent to which the energy system labelling, carbon pricing, retiring coal plants ahead of in a country contributes towards the three key priorities: schedule, and redesigning electricity markets to integrate economic development and growth, energy access and renewable energy sources. Progress on the environmental security, and environmental sustainability. sustainability of the energy system has been particularly challenging among fossil fuel exporting countries.

Figure 6: System performance dimension scores, 2015 and 2020

Economic Development and Growth Environmental Sustainability Energy Access and Security

Dimension Score (out of 100) 90

0

0 10 20 30 40 50 60 70 80 90 100 0 10 20 30 40 50 60 70 80 90 100 0 10 20 30 40 50 60 70 80 90 100

2020 Scores 2015 Scores 2020 Global Average

The energy access and security dimension continues importing countries have been primary contributors to to exhibit the highest global average score, with 80% of strong global progress on energy access and security. the countries having achieved progress between 2015 However, as the dimension’s profile in Figure 6 shows, the and 2020. Largescale programmes targeting access to gap between the top and bottom performers on this electricity in South and SouthEast Asia and the further dimension is the highest of the three dimensions. diversification of import counterparts among energy

Fostering Effective Energy Transition 2020 edition 19 Figure 7: Scores on system performance sub-index indicators, Energy Transition Index 2020 (scaled from 0 to 100)

nd Security Energy Access a Quality of Electricit y Suppl y EleHcotruisciethyolPdrices ImNpeotrEtsnergy Economic Development and GrowthWhGoalessParleices Access to Energy Subsidies Clean Cooking Fuel Imports Fuels PM 2.5 Externalities

Electrification ImDpivoerrtsification Fuel Exports Energy IntensityFueDl ivMeirxsification CO2 Per Capita CO2 Intensity of Energy Environmental Sustainability

PM2.5 ­ Fine particulate matter air pollutant

20 Fostering Effective Energy Transition 2020 edition 4.1.1 Economic development and growth Over the past six years, the fuel exporting countries saw a greater decrease in scores on the economic Global GDP increased from $50 trillion in 2000 to $82 development and growth dimension of the ETI than trillion in 2018 (constant 2010 $),25 representing a 60% the importing countries. increase. Keeping pace with economic growth, global energy demand increased by 40%, from 10,000 million The affordability of energy services for households depends tonnes of oil equivalent (Mtoe) to 14,000 Mtoe26 over upon not just energy tariffs, but also per capita consumption the same period. At the same time, the per capita levels, household expenditures and disposable income. consumption of energy rose steadily, even as the Focusing on the cost of electricity, Figure 8 shows that population increased from 6 billion people worldwide Advanced Economies and Emerging and Developing Europe in 2000 to more than 7.5 billion in 2018.27 To support countries have high per capita electricity consumption, economic growth and maximize social welfare, it is which is expected to further increase with the rising share of essential for countries to ensure access to abundant and electricity in final demand. While household electricity tariffs diverse forms of energy at affordable prices. in these countries are comparable to those in the rest of the world (in purchasing power parity (PPP) terms), the affordability The economic development and growth dimension indicates challenge remains severe as high consumption levels imply the energy sector’s overall contribution to a country’s a higher share of utility bills in domestic expenditure. Figure 9 economy, and how well the energy system is positioned indicates the disproportionately higher share of electricity bills28 to ensure the cost competitiveness of the industry as an (annual, PPP) in household final consumption expenditure intermediate input, and the affordability to households in for Advanced Economies and countries from Emerging and final consumption. The global average score for this Developing Europe. Emerging economies from SubSaharan dimension has declined over the past year, effectively Africa and South Asia face an affordability challenge of a erasing the gains made since 2015 (Figure 6). different nature. While per capita consumption levels are low due to limited access to electricity, the retail electricity tariffs Until the recent systemic shocks from factors such as are among the highest in the world (in PPP terms). For these trade tensions, military interventions and the COVID19 countries, the affordability challenge is exacerbated as fixed pandemic, the past decade saw one of the longest costs are spread across a narrower consumer base, given economic expansions in history. However, the results commercial losses and less than universal electrification. were mixed for fuel exporting countries, which remained The affordability constraint is a risk to the energy sensitive to energy market volatilities, the evolving transition, as it affects the relative competitiveness of policy landscape in fuel importing countries, and fuels and technologies and may lead to sub-optimal technologyenabled energy productivity gains. decision-making, by locking in fuels that might be more competitive but less environmentally sustainable.

Figure 8: Household electricity tariffs (US¢ 2018, PPP) vs per capita* electricity consumption (kWh)

0 10 20 30 40 50 60 60000 Electricity Consumption per capita 2017 (kWh)ISL Median 30000 NOR SWE FIN 10000 5000 QAT SCAAUUNSAKOR LUX 4000 OMN RUS ISR 3000 AUS AUT SGP 2000 JPN 1000 TTO CHE NZL BEL DEU FRA IRL SVN CZE NLD EST ESP MLT GBR CYPITA DNK KAZ BGR HUN GRC SVK PRT CHN SRMBYS LTU POL

ZAF HRV CHL Median BIH LVA TUR

IRN

ARG LBN UKR THA URY VEN MEX ROU ZMB ETH BRA

MNG CRI ARM PAN AZE ALB

PRY EGY VNM JOR DOM DZA ECU PER MDA TUN

IND HNDSLV COL JAM NKIHCM ZWE BOL MAR LKA IDN PHL SEN BGD PAK GHAMOZ GTM CMR NPL NGA KEN HTI

10 20 30 40 90

Household Electricity Prices 2018 (US¢/kWh, PPP)

Advanced Economies Emerging and Developing Asia Sub-Saharan Africa Middle East and North Africa

Emerging and Developing Europe Latin America and the Caribbean Commonwealth of Independent States

*Based on total electricity consumption (does not consider segmentation by final demand category). Sources: World Economic Forum with data on 2018 household electricity tariffs from Enerdata, and on per capita electricity consumption from IEA, “Data and statistics” 2017

Fostering Effective Energy Transition 2020 edition 21 Figure 9: Average household electricity bills* as percentage of private final consumption expenditure per capita, 2018 (current international $, PPP)

0% 2% 4% 6% 8% 10% 12%

Iceland Finland Czech Republic Estonia Belgium

Spain Sweden Slovenia Portugal Germany Cyprus Norway Denmark Jamaica South Africa

China Vietnam Slovak Republic Singapore

Chile Poland Serbia Bosnia and Herzegovina Cambodia Thailand

Brazil Greece Hungary Albania Croatia Luxembourg Nicaragua

Italy Ireland Austria New Zealand Tunisia Uruguay Latvia Netherlands Jordan Honduras Bulgaria Morocco

Malta Malaysia Romania

India Philippines Saudi Arabia Russian Federation Azerbaijan

Colombia Lithuania Armenia

Ukraine Israel

Mongolia Dominican Republic

United Kingdom Peru Senegal

El Salvador Qatar

Algeria

Cameroon

Bolivia Oman Ecuador Costa Rica Guatemala Paraguay Sri Lanka Kenya Egypt, Arab Rep. Pakistan Lebanon Ghana Bangladesh Nigeria

Haiti

Advanced Economies Emerging and Developing Asia Sub-Saharan Africa Middle East and North Africa

Emerging and Developing Europe Latin America and the Caribbean Commonwealth of Independent States

*Calculated based on overall energy consumption (does not consider segmentation by final demand category) Sources: World Economic Forum with data on 2018 electricity tariffs from Enerdata; on per capita energy consumption from IEA, “Data and statistics” 2017; and on private final consumption expenditure from the World Bank, “Households and NPISHs [Nonprofit institutions serving households] final consumption expenditure, PPP (current international $)”, https://data.worldbank.org/indicator/NE.CON.PRVT.PP.CD

22 Fostering Effective Energy Transition 2020 edition Global energy demand increased by 2.9% in 2018, with Policymakers frequently use energy subsidies to address natural gas contributing to 40% of this growth.29 Prior to social and distributional objectives for households and the the price and demand shock resulting from the COVID19 competitiveness of industries. However, evidence suggests pandemic in 2020, wholesale natural gas prices had poorly targeted energy subsidies end up benefiting wealthy increased across the world except in North America30 over consumers, incentivizing overconsumption, distorting price the past two years (Figure 10). The cost competitiveness signals, and inhibiting investment in renewable energy and of natural gas is critical for industrial growth, as well as to energy efficiency.32 Pretax energy subsidies, which indicate replace more carbonintensive fuels in power generation. the difference between the actual price paid by consumers As shown in Figure 7, the global average score (scaled from and the full cost of supply, have progressively declined 0 to 100) for the indicator on wholesale gas prices is the over the years. Sustained low oil price environments (as lowest among the indicators of the economic development compared to a decade earlier) and efforts on fuel price and growth dimension, which indicates high variability in reform in many countries are contributing factors. This trend the landing costs of natural gas across countries. Different is supported by the ETI analysis, as 82% of countries price determination mechanisms, energy subsidy levels, that have improved their ETI scores over the past six underinvestment in midstream infrastructure and high years have also decreased their pre-tax energy subsidy costs along the LNG supply chain31 are limiting factors in levels.33 However, consumption subsidies are only a small the cost competitiveness and security of gas supply. Given fraction of total posttax subsidies, which include such the recent oil market volatilities, the uncertain supply externalities as air pollution, global warming, health risks, and demand outlook for 2020 presents an opportunity traffic congestion and accidents. Between 2013 and 2017, for importing countries to improve their industrial the unpriced externalities associated with global warming, competitiveness and increase price transparency. local air pollution and road congestion steadily increased (Figure 11), especially in emerging economies.34

Figure 10: Wholesale natural gas prices, 2013-2018 18

16

Wholesale Gas Price, $/MMBtu 14

12

8

6

4

2

0

2013 2014 2015 2016 2017 2018

Source: International Gas Union, Wholesale Gas Price Survey 2019 edition

Fostering Effective Energy Transition 2020 edition 23 Figure 11: Pre-tax and post-tax energy subsidy components, 2013, 2015 and 2017 (percentage of nominal GDP)

Pre-Tax Fuel Subsidies

2017 -50%

2017 Global Warming Local Air Pollution Road Congestion 2015 15% 6% 39%

Road Accidents Road Damage Foregone Consumption Tax Revenue -32% 2017 -1% -16%

0.0% 0.8% 1.6% 2.4% 3.2% 0.0% 0.8% 1.6% 2.4% 3.2% 0.0% 0.8% 1.6% 2.4% 3.2%

Source: World Economic Forum based on International Monetary Fund, “Global Fossil Fuel Subsidies Remain Large: An Update Based on CountryLevel Estimates”, 2019

24 Fostering Effective Energy Transition 2020 edition 4.1.2 Environmental sustainability The environmental sustainability of energy systems is highly sensitive to recent developments, with the possibility of The environmental sustainability dimension of the ETI focuses lingering effects of oil price volatility and the COVID19 on emissions footprints of energy supply as well as demand. pandemic in the medium term. While annual emissions might The past year can be considered as a critical landmark in decline due to the slowdown in industrial activity, aviation the energy transition. The social pressures for accelerated and surface transportation, they should not be mistaken decarbonization intensified, as evidenced by widespread for gains made from structural transformation or policy youth climate protests. Many countries announced netzero measures. As governments act to maintain economic growth emissions ambitions, and critical policy instruments such as and employment, and companies reallocate investments to the European Green Deal gathered momentum. Central banks ensure business continuity, the environmental sustainability echoed similar ambitions, citing the systemic risk to financial agenda could lose momentum. Potential consequences systems from climate change,35 and an increasing number of include delays and capital constraints in renewable energy financialsector organizations declared goals to divest from projects, the lack of incentives to pursue energy efficient carbonintensive investments. Between 2015 and 2020, more alternatives, a targeted fiscal stimulus to carbonintensive than 70% of the countries have improved their score on this sectors, among others. Countries’ economic growth priorities dimension, with 30% improving it by more than 5 percentage have been a contentious issue in the energy transition, and points. The top 10 countries in the ETI rankings have improved these fault lines could be harder to navigate in a slow or on both per capita energy consumption as well as per capita declining economic growth scenario. Stakeholders need to CO2 emissions over the years. However, Figure 6 shows that be conscious of the long-term objectives of the energy this dimension has the lowest global average scores and the transition and adjust short-term priorities accordingly. minimum spread between high and low performers of the three dimensions. This suggests that while progress has 4.1.3 Energy access and security been made on environmental sustainability, improvement remains contingent on addressing the economic and Global average scores and improvement over time remain social priorities of the energy system. highest for the energy access and security dimension. More than 80% of the countries have improved on Global energyrelated CO2 emissions plateaued in 2019 this dimension since 2015. While Advanced Economies after two years of consecutive growth,36 in part due and fuel exporting countries display high scores due to to a decrease in energy intensity of GDP in advanced existing infrastructure and domestic reserves, respectively, economies, and slower energy demand growth in China the highest improvements on this dimension come from and India. From a sectoral lens, electricity generation led countries in Emerging and Developing Asia and to a the emissions reductions, as renewable energy capacity lesser extent in SubSaharan Africa, due to largescale and utilization increased across countries, and natural gas and sustained electrification programmes and improved replaced coal as the primary fuel.37 While the United States economics of decentralized electricity systems.39 has led emissions reductions from power generation by However, evidence is mounting that although measuring switching from coal to natural gas, the transition has been energy poverty through a binary definition of access to accompanied by high levels of methane emissions. More electricity or clean cooking fuels might be easy to track than half of global methane emissions last year came from and communicate, it does not necessarily capture its true North American shale oil and gas production.38 Given the extent.40 Electricity is considered as a proxy for all forms of high global warming potential of methane as compared to energy, which may not be fungible. Energy input for services CO2, it threatens to erode the gains made on environmental such as lighting, heating and refrigeration, mobility, process sustainability over the years. In view of the importance of heating and mechanized agriculture are different. Energy natural gas in the energy transition, technologies and access programmes need to be redesigned, prioritizing regulations to mitigate methane emissions should be considerations such as the diversity of energy services deployed urgently. available to households for productive use, access to energy-enabled community services, the distribution of energy consumption within countries, and the quality and reliability of supply.

Fostering Effective Energy Transition 2020 edition 25 While energy poverty might be an infrastructure or for countries at the upper and lower ends of the scale have “access” issue in developing countries, it is an affordability been marginal (Figure 12). Across all countries, the top concern41 in developed countries, which is exacerbated 10% income group consumes 20 times more energy than by pervasive economic inequality.42 Consensus is lacking the bottom 10%.43 To some extent, the inequality in energy over the definition of energy poverty, including the basket consumption levels between countries might be natural, of basic energy services and the minimum amount of each due to the distribution of conventional energy resources. service needed. Consequently, energy poverty manifests Given the more uniform distribution of renewable in diverse forms, unique to countryspecific circumstances. sources, particularly solar and wind energy, orienting Globally, the inequality in energy consumption between economies towards renewable energy can help bridge countries appears to be decreasing, but large gaps remain. inequality in energy consumption per capita and Specifically, the changes in energy consumption per capita improve energy security.44

Figure 12: (left) Energy consumption vs population, (right) Energy consumption per capita vs population, 2000 and 2017

100 800 80Percentage of global energy consumption 700 70 Energy consumption per capita (GJ/capita) 60 600 40 500 20 400 0 300 0 200

0

20 40 60 80 100 0 20 40 60 80 100

Percentage of global population Percentage of global population

2000 2017

Sources: IEA, World Energy Balances 2019; World Bank population data

26 Fostering Effective Energy Transition 2020 edition 4.2 Transition readiness Despite the overall improvement in the global average score for transition readiness, progress is not proportionate The energy system’s ability to deliver on the imperatives across the different enabling dimensions. Enablers described in the preceding sections depends on the such as the robustness of the institutional framework, presence of an enabling environment for the energy human capital preparedness and an innovative business transition, measured in the ETI framework by the transition environment require structural changes and are inherently readiness subindex. Energy transition readiness is slow moving due to inertia in social and technological captured by the stability of the policy environment and systems. A majority of the countries have improved the level of political commitment, the investment climate their energy transition readiness by targeting better and access to capital, the level of consumer engagement, access to capital and investment and increasing the the development and adoption of new technologies, etc. level of political commitment (Figure 13). Countries Some of these factors are beyond the scope of the energy with a robust enabling environment are more likely to system but nevertheless determine the effectiveness and sustain well performing energy systems. The ETI data future trajectory of energy transition in a country. As shown corroborates this, as advanced economies score highly in Figure 4, the global average transition readiness on both the system performance and transition readiness score has increased each year since 2015, indicating subindices. Moreover, a robust enabling environment a gradual improvement in the enabling environment also allows countries to better navigate the complexities across countries. of the energy transition. Figure 14 shows 10 countries that have made substantial progress on transition readiness between 2015 and 2020. While these countries have adopted diverse pathways to improve their readiness, they have simultaneously improved on multiple enablers, underscoring the importance of a systemic approach to energy transition.

Figure 13: Transition readiness dimension scores, 2015 and 2020

Regulations and Political Commitment Institutions and Governance Capital and Investment

Dimension Score (out of 100) 100 0

Infrastructure and Innovative Human Capital Energy System Structure Business Environment and Consumer Participation

0

0 10 20 30 40 50 60 70 80 90 100 0 10 20 30 40 50 60 70 80 90 100 0 10 20 30 40 50 60 70 80 90 100

2020 Scores 2015 Scores

Fostering Effective Energy Transition 2020 edition 27 Figure 14: Shift in Energy Transition Index scores for select countries, 2015 and 2020 Leading Potential challenges

System Performance (%) COL

HRV HUN

MAR

60 THA CZE

ARE NAM

50 KEN

JOR

30 Emerging Leapfrog

20 30 40 50 60 70 80

Transition Readiness (%)

2015 2020

Overall, the capital and investment and regulations The cascading effects of the COVID19 pandemic, and political commitment enablers show maximum immediately following prolonged international trade improvement, increasing by 12% and 6%, respectively, disputes, have brought the global economy to a grinding over the past six years, supported by technological halt ­ sending shockwaves through the energy markets. improvements and public engagement, and capitalizing As countries and companies rapidly reallocate resources on the economic expansion leading up to 2019. However, to protect lives and livelihoods, their immediate priorities the environment has shifted fast in the wake of compounded may shift away from energy transition and climate change. disruptions from the COVID19 pandemic, potentially The era of compounded disruptions is a litmus test straining the bandwidth of investors and policymakers for the energy transition, asserting the importance to pursue longterm plans for energy transition with the of the twin objectives of robustness and resilience. same sense of urgency. The energy system has withstood Robustness in policy design implies institutional and political recurring disruptions over the past few decades. While some characteristics remaining functional at a desired level during of these conditions, such as extreme weather events like external shocks, and resilience indicates the need for wildfires and tropical storms, and mixed reactions to carbon systems and processes to identify “black swan” events and prices or environmental legislation, have been localized to be prepared to address them when they occur.45 to countries or industry sectors, the current environment constitutes a perfect storm of compounded disruptions, touching every corner of the planet.

28 Fostering Effective Energy Transition 2020 edition 5. Imperatives for the energy transition

As the world becomes more interconnected, society The nearterm prospects of multilateral cooperation appear becomes increasingly susceptible to compounded bleak, with the postponement of the COP26 UN climate disruptions that reverberate globally. The beginning of change conference in Glasgow due to the COVID19 2020 has demonstrated the scale and impact of a global pandemic. In the current context, unilateral action by contagion and, subsequently, what these exogenous countries,50 including those where simultaneous gains shocks can do to the systems in place. Viruses are for the energy transition and the health emergency could spreading faster and wider, wildfires are intensifying, be achieved, should be sought. For example, the bailout hurricanes are causing more damage, the global financial package of the American automotive sector in 2009 in the system is more leveraged and vulnerable. Even our aftermath of the financial crisis required compliance with infrastructure is sensitive to cyberattacks from abroad. more stringent fuel economy standards.51 To encourage How our climate and energy imperatives in this era of governments to raise the level of ambition for the energy unprecedented shocks are managed remains to be seen, transition and environmental goals, it is important to but it is critical not to lose sight of longterm goals that consider the following: could easily be overshadowed by shortterm priorities. ­ Net-zero emissions commitments need consistent 5.1 Regulations and political commitment definition, tangible roadmaps and milestones. Although the cumulative emissions and energy While governments around the world are scrambling to consumption of countries with netzero ambitions deal with the fallout from the COVID19 pandemic, the oil remain a small proportion of the total (Figure 15), the shock and financial market volatility, maintaining focus on concept of “net zero” has different interpretations. the energy transition and climate change is essential. The Factors such as the choice of greenhouse gases, the effects of the COVID19 pandemic and climate change treatment of offsets and negative emission alternatives, are similar in terms of their global scale, the exponential boundaries for accounting emissions, and target starting growth of their impacts, the need for decisive action, the points and timelines can have different implications importance of scientific evidence, the risks to all parts of for establishing adaptation and mitigation roadmaps, the economy, and the existential threat to the less affluent including the speed and scale of the energy transition. sections of society. Moreover, as is the case with COVID19, Terms such as “carbon neutral”, “climate neutral”, “net it is only through concerted societal action that the zero”, “zero emissions” or “decarbonization” have been primary objective of “bending the curve”,46 in this case of used interchangeably,52 leading to ambiguity in setting emissions, can be achieved. Furthermore, effective actions milestones and monitoring progress. As more and more that withstand the test of time require a comprehensive countries step forward to declare their commitments, approach to decisionmaking that results in longterm, stable and ambitious policy actions. netzero targets need a consistent definition.

Current policies and countries’ pledges could lead to global warming of more than 3oC by 2100,47 well above the emissions pathways consistent with the Paris Agreement’s longterm goal. According to the latest UNEP Emissions Gap Report, countries must increase their nationally determined contributions threefold to achieve the goal of below 2oC, and fivefold for 1.5oC.

The climate change policy landscape has been moving in the right direction, although the response requires additional pace and coordination across nations. In the past few years, many countries have declared, or are currently considering, ambitious netzero emissions goals. However, the world’s largest energy consumers or greenhouse gas emitters ­ including Australia, Brazil, China, India, the Russian Federation, Saudi Arabia and the United States ­ are yet to declare such targets (Figure 15). For many analysts, such recent developments as the rising coal plant capacity in China48 and the weakening of fuel economy standards in the United States49 raise concerns over the level of political commitment to the energy transition.

Fostering Effective Energy Transition 2020 edition 29 Figure 15: Status of net-zero emissions targets across countries

Net Zero Target Status Share (%) of Global Total Share (%) of Global Total Share (%) of Global CO2 Emissions Energy Supply, 2017 Nominal GDP, 2017 from Fuel Combustion, 2017 Achieved ~0% In Law ~0% ~0% Proposed Legislation 3.8% 8% 2.3% In Policy Document 8.7% 15% Under Discussion 0.5% 7.8% Uncovered 7.8% 1.5% ~0% 79.3% 6.9% 68.7% 6% 84%

Sources: Energy & Climate Intelligence Unit, “Net Zero Tracker, Net Zero Emissions Race”, February 2020, https://eciu.net/netzerotracker; Total energy supply: IEA, World Energy Balances 2019; Nominal GDP: World Bank, “GDP (current US$)”, 2019, https://data.worldbank.org/indicator/NY.GDP.MKTP.CD; Global CO2 emissions from fuel: Global Carbon Atlas, 2020, http://www.globalcarbonatlas.org/en/content/welcomecarbonatlas

­ A sector-specific approach, gradual implementation ­ Incentives and regulations can increase the and distributional considerations are critical for coverage of corporate commitments to climate success where carbon pricing mechanisms are action. Actions by corporations can make a significant established. So far, implemented or scheduled carbon difference, especially in countries where national targets pricing instruments account for 20% of global greenhouse are yet to be determined. An increasing number of gas emissions.53 At COP25 in Madrid, parties failed to companies have declared netzero emissions targets, agree on regulations and frameworks for carbon markets. doing so to respond to consumer preferences, gain a One of the reasons was the regressive nature of carbon competitive edge and future proof their business. By and taxes and the challenges to trade competitiveness that large, however, corporate commitments come from large could arise from carbon leakage. Evidence suggests global organizations, many with endconsumerfacing that leakage risks are restricted to sectors exposed to business models, operating in low abatement cost international trade and not to sectors with local boundaries, sectors (though not all). Organizations that are small such as power generation, transportation and buildings.54 or medium sized, in hardtoabate sectors or with Carbon pricing, if accompanied by targeted fiscal support less endconsumer interaction would benefit from to sectors vulnerable to a loss of competitiveness from more effective incentives and regulations to commit carbon leakage, could be more effective. Gradually to transforming their businesses in line with Paris increasing the carbon price floor to an optimal level, as Agreement targets. implemented in Canada,55 can mitigate the economic consequences by allowing business more time to adjust smoothly. Finally, to avoid a disproportionate effect on the cost of living of households in the lowerincome bracket, carbon pricing should include revenue recycling mechanisms56 for progressive taxation.

30 Fostering Effective Energy Transition 2020 edition Raising the climate change ambition

By Christiana Figueres, Founding Partner, Global Demands for governments to follow such a path are Optimism, United Kingdom surging. Whether it’s protestors in the streets, legal action, or appeals from health professionals, investors, unions and The COVID pandemic has coincided in 2020 with the nonprofits, the momentum behind the climate movement necessary climate turning point, the point at which is unstoppable. Demands for leaders to act on the scientific greenhouse gas (GHG) emissions must begin their imperative are driven by outrage and fear for the future, steady decline in order to avoid the worst impacts of but they’re also inspired by the undeniably desirable climate change. We know that greenhouse gases outcomes of such action: the clean air imperative, the will drop this year due to the worldwide economic health imperative, the energy independence imperative, paralysis, but that is by no means good news due the economic imperative, the resilience imperative, the to the high humanitarian price we are paying. It is social and intergenerational justice imperative and the also not the approach anyone would take to addressing jobs imperative, all stacked up on each other, mutually climate change. reinforcing, and pointing in the same direction.

To be effective, the decarbonization of the economy The fossil fuel and big agriculture industries were, in needs to be pursued in a planned and constructive their nascency, driven by noble imperatives as well, but manner, having overwhelmingly beneficial effects for the unintended consequences, so damaging to our society and the economy. That is precisely the potential planet and our health, are now well documented. The silver lining in the health crisis. We now have no option time is over for justifying policies and subsidies that but to rebuild our economy, and that rebuilding can be enable such damage to continue. We now have the thoughtfully designed to both provide millions of jobs in understanding, the technology and the capital to forge the short term, as well as strengthen the resilience of the a different path. A path full of opportunity, excitement economy in the long term. But we have to take those and benefit, and the ways forward ­ already under decisions now. pursuit by many ­ are laid out in this excellent report.

The scientific evidence is clear about anthropogenic Technology alternatives to fossil fuels are rapidly influences on climate change, and there is limited time maturing and ready to scale, and finance is already for action. Over the next 10 years, we must halve our shifting in favour of the great decarbonization. At the GHG emissions output by drawing down a staggering time of writing, US$39 trillion of the world’s annual amount of carbon now concentrated in our atmosphere gross domestic product (GDP), or around 49%, is being from coal, oil and gas combustion, deforestation and generated in jurisdictions with an actual or proposed commercial agriculture. netzero target. That includes 121 nations which have either set or proposed or are currently discussing a goal This 10year transformation will put us on track to limit to cut their carbon emissions down to net zero in or the temperature rise to 1.5ºC, enabling humanity to adapt before 2050. Carbon pricing has been implemented or as best we can to the challenges of our changing climate scheduled for over 20% of global GHG emissions across and to ultimately survive and prosper. 40 national jurisdictions. The challenge now is less about the direction of travel and more about speed. The impacts manifesting as a result of our inaction to date have been shocking: this year’s bushfires in But if we are to unlock faster progress in the energy Australia, the floods in Indonesia and the locust swarms transition, which we must, we will have to put our minds in East Africa have been deeply painful. Leaders are to it. We have to intentionally choose it. We now have waking up to what is at stake. firsthand experience of shattering impacts worldwide. As we also bear witness to the devastating impacts of As we have learned from the health pandemic, to be climate change on our homes and communities across effective in the face of risks, governments must be the globe, we can clearly see what a deteriorated decisive. Once governments choose to pursue the future will mean for our children. Delaying any further necessary emissions cuts and restoration of nature, is unconscionable. We must choose to increase our and their commitments are incorporated into improved ambition, to increase our emissions cuts, and to increase pledges under Paris, the post2020 Biodiversity our efforts to protect biodiversity. Framework and domestic policies, the door of resilience and possibility will be flung open. As the world turns its attention to the recovery we must ignite, we must commit to rising to the increasing global risks in a timely fashion. It is a commitment to ourselves, to each other and, above all, to all those whose destiny depends on us.

Fostering Effective Energy Transition 2020 edition 31 5.2 Capital and investment In developing countries, renewable energy projects continue to face headwinds, due to higher levels of financial risk and The global energy transition will require trillions of dollars investment costs that can put strain on the competitiveness in investment from private corporations and national of projects. Bankability and financing are among the main governments in the coming decade, but enormous issues for lagging progress in renewable development.57 amounts of capital have already been flowing into the In the years 2010 to 2019, $2.6 trillion was invested in sector. As technology improvements result in greater renewable energy (excluding hydro) globally. Of this amount, efficiencies and reduced costs, investors can put money $1.3 trillion was invested in solar, with wind close behind more reliably into emissionreduction opportunities without at $1 trillion, and biomass and wastetoenergy lagging at relying on government programmes and subsidies for $115 billion. China overall was the biggest investor, with commercial viability. Capital inflows into renewable energy $758 billion invested in renewable energy throughout the projects will likely slow in 2020, given financial market decade.58 Despite the push and substantial investment volatility and the COVID19 pandemic. Depending on from countries across the globe, several countries continue how deep the financial uncertainty goes, corporations to ramp up coal plant construction to fuel growth, thereby and individual investors may not be ready for investment. diminishing their readiness for a comprehensive energy Additionally, with oil prices cratering and potential trade transition. barriers or tariffs, some technologies may fall behind on cost competitiveness. That said, it is important for Globally, many financial vehicles are being used to companies and investors to see government interest and encourage growth and development. Among them, ESG stability in policies to advance the energy transition in light investments are rapidly growing, with $31 trillion invested of the global turmoil. With this stability and vision, investors in ESG worldwide. ESG criteria are a set of standards for a will be able to remain confident in their investments company’s operations that socially conscious investors can irrespective of shortterm shocks. reliably use to screen investments. They are guidelines and imperatives around which companies shape their business practices, as increasingly more companies are recognizing the need to focus not just on bottom line economics but also on corporate processes and culture.

Figure 16: UN 2030 Agenda for Sustainable Development definitions59

Principles of Governance Planet People Prosperity

The definition of governance An ambition to protect the An ambition to end poverty An ambition to ensure that is evolving as organizations planet from degradation, and hunger, in all their forms all human beings can enjoy are increasingly expected to including through and dimensions, and to prosperous and fulfilling define and embed their sustainable consumption ensure that all human beings lives and that economic, purpose at the centre of and production, sustainably can fulfil their potential in social and technological their business. But the managing its natural dignity and equality and in a progress occurs in harmony principles of agency, resources and taking urgent healthy environment. with nature. accountability and action on climate change, stewardship continue to be so that it can support the vital for truly “good needs of the present and governance”. future generations.

Source: World Economic Forum, “Toward Common Metrics and Consistent Reporting of Sustainable Value Creation”, 2020

32 Fostering Effective Energy Transition 2020 edition Despite these new guidelines for doing business and the For projects that aren’t captured through these large consumer demand for companies to do better, there is a funds, bankability continues to be a primary issue, lack of clarity on exactly how companies and funds are particularly in emerging economies. Regulatory fulfilling their social and environmental commitments. In the uncertainty, project delays and political or social instability absence of consistent and robust reporting, consumers can make it too risky for investors to put money into and investors are unable to reliably evaluate companies projects for fear of incompletion or lack of viability. Strong based upon their social or environmental impact. In policy and trustworthy institutions can help alleviate these conjunction with the leading accounting firms, the World concerns, but robust contract enforcement and a positive Economic Forum proposed metrics (under consultation) investment climate are necessary. As investors develop that could help identify universal disclosures that encourage more trust, both in the projects themselves and the companies to demonstrate both viability and sustainable funds that are supporting them, the energy transition will business practices (Figure 16). The goal is to establish a become increasingly more viable. more formal, widely accepted international accounting standard for ESG. To date, funding for ESG has increased Capital and investment may be one of the biggest challenges by 34% since 2016 and has also shown resilience amid the in 2020/2021 given the global upheaval from the COVID19 asset price collapse post COVID19. pandemic and the financial markets. Facilitating capital into energy projects is critical and can be supported by: Another incentive for “green development” in the energy transition has been the green bond. First issued in 2008 by 1. Providing defined criteria and transparency for ESG the World Bank, the green bond defined criteria that were funds and qualifying corporations eligible for its support, which helped to provide transparency and confidence for investors who wanted to put their money 2. Ensuring political will and policy stability to improve in a company that was contributing positively to society or investor confidence in renewable energy projects in reducing its impact on the environment. The issuance of developing countries green bonds grew by $255 billion in 2019, but it also has its setbacks.60 Namely, a major part of fulfilling climate goals 3. Broadening financial vehicles to include industries that by 2020 is the ability to finance decarbonization methods may not qualify for green bonds but need to offset their for carbonintensive industries, such as mining, utilities and carbon emissions transportation, industries that the green bond does not find compliant. By allowing these “brown” industries access to capital, many believe the gap between climate goals and actual progress can be reduced.

Fostering Effective Energy Transition 2020 edition 33 Sharing the burden of decarbonization

By Kenneth Rogoff, Thomas D. Cabot Professor of Phasing out coal is far more challenging for Asia Public Policy and Professor of Economics, Harvard than for Europe and the US, in part because coal University, USA plants in advanced economies are already nearing the end of their life cycle and in part because coal is It is hard to imagine any way forward on global warming plentiful. Of course, for this reason, carbon capture that does not centrally feature placing a uniform global technologies also have to be a leading option. price on carbon emissions. Global, because today emerging markets account for the lion’s share of Admittedly, the political economy of a World Carbon emissions growth. Uniform, because the cost of carbon Bank would be challenging. Rich countries, many in the emissions is roughly the same no matter what country the midst of populist uprisings, need to be persuaded that source, and having substantially different prices in different dramatic changes are needed for future generations. countries will lead to widespread distortions. Having a COVID19 has now forced a reallocation of resources price on carbon is important to incentivize producers and and will likely continue to do so until normalcy is restored. consumers to conserve carbonintensive activities, and Programmes for aid must be resistant to gaming to incentivize innovation and investment. The challenges because countries could exaggerate their plans to build are many, from developing clear technical standards to new coal plants. And there is the question of how to persuading richcountry citizens to change their lifestyles. transfer new technologies to emerging markets without simply bidding up prices for monopoly innovators, so that However, a major piece of any solution has to involve in effect most of the financial aid intended for emerging buyin from emerging markets and developing countries, markets ends up in the pockets of wealthy private where emissions growth is greatest (particularly out of entrepreneurs. These are challenges but, with thoughtful Asia) and where energy needs in many quarters are often design, it should be possible to overcome them. desperate. In Africa, only 43% of people have access to electricity, versus 87% worldwide. So far, most of the To be clear, eligibility for World Carbon Bank aid would political discussion in advanced economies has focused ultimately require that countries buy in to instituting a on how to decarbonize at home without recognizing that carbon tax at the global level. Alternative approaches to this will do little good if pollution continues unabated raising the price of carbon are possible, and it is true that elsewhere. Indeed, the debate has many parallels to various rationing schemes have proven more politically discussions of inequality in most advanced economies, palatable in domestic politics. However, centuries which reflect a legitimate need to achieve greater income of experience with international trade agreements equality within rich countries, but pay only cursory underscore that price mechanisms are much more attention to the rest of the world, which is by and large transparent and straightforward to monitor. vastly poorer. For the inequality debate, the disconnect sometimes seems hypocritical. For dealing with global It should be mentioned that Europeans aim to incentivize warming, if rich countries continue to ignore the needs of emerging markets with the stick of a border adjustment the rest of the world, it could prove catastrophic. tax, imposed on countries that do not institute a carbon tax/price at the European level. This is far from It is high time to think about building global institutions adequate, however, first because it may simply redirect to help facilitate the necessary transfer of resources and trade and production, but perhaps more importantly technologies from highincome to lowincome countries, because developing countries will likely see this as a and to get serious about how to finance them. There are trade war. The US and Europe have been responsible many possible approaches, but a practical one is to start for most of the carbon buildup to date and still have a World Carbon Bank that will serve both to facilitate far higher carbon emissions per capita. For them to transfers, but also house technical expertise, and to say they will stabilize or slightly reduce their high per provide a platform so that country governments can capital emissions, but developing countries should just share experiences and best practices. accept that they cannot follow the same energyintensive development path, is a recipe for unsustainable political From an administrative point of view, I have in mind a frictions. Any plan, including a border tax plan, needs framework parallel to the World Bank and International to support carbonreduction adaptation in emerging Monetary Fund, with their emphasis on having markets, and any plan needs a technocratic framework outstanding technocratic staff and the use of “mission for implementing the politically agreed solution. technology”, both honed for providing policy advice. Importantly, however, the financing for the World Carbon There is no single comprehensive solution to global Bank must come in the form of outright aid and not warming, but a global carbon tax is the nearest thing. simply subsidized loans. At the same time, the likely And it will be meaningless to try to enforce one without scale of the aid will be far greater than the annual cost enthusiastic participation from major emerging markets of the existing institutions. As for the early projects of such as India and China. A World Carbon Bank is a a World Carbon Bank, probably none is higher priority logical step forward. than helping sharply scale back the use of coal in Asia.

34 Fostering Effective Energy Transition 2020 edition 5.3 Innovation and infrastructure the costs and efficiency of solar photovoltaics (PV), onshore wind turbines and lithiumion batteries (Figure 17). In 2019, Innovation is a prerequisite for change and has been a global solar capacity was 593 GW61 and onshore wind critical catalyst for the world adopting less carbonintensive capacity reached 650 GW,62 while energy storage capacity processes in energy, manufacturing and technology. The climbed to 175 GW in 2018.63 While policies have enabled past three decades have seen significant advances in this progress, they are still lagging for hardtoabate energy technology. Progress has been particularly strong in industrial sectors and negative emission technologies.

Figure 17: Levelized cost of energy for onshore wind, solar PV and lithium-ion batteries, 2009-2018

Onshore Wind ­ Unsubsidized, $/kWh Solar PV ­ Unsubsidized, $/kWh Li-ion Battery Pack, $/MWh 140 350 1200 1000 120 300 100 250 800

-69% -88% -85%

80 200 600 400 60 150 200 40 0 0 0

Sources: Lazard, “Levelized Cost of Energy and Levelized Cost of Storage 2018”, 8 November 2018, https://www.lazard.com/perspective/ levelizedcostofenergyandlevelizedcostofstorage2018; BloombergNEF, “A Behind the Scenes Take on Lithiumion Battery Prices”, 5 March 2019, https://about.bnef.com/blog/behindscenestakelithiumionbatteryprices

As an immediate response to the COVID19 pandemic, ­ Investing in long-term infrastructure during

governments and businesses have sharply adjusted their economic crises can be a powerful vehicle to

nearterm priorities to mitigate the economic consequences. drive further economic development and generate

There could be immediate consequences for infrastructure employment. Inertia from legacy energy infrastructure

development and R&D. Governments are focused on and the prohibitive costs of modernization have been key

responding to the healthcare crisis through fiscal and barriers to accelerating the energy transition. The lack of

monetary measures, ensuring access to essential goods sufficient grid capacity and interconnections have led to

and services, and supporting monetary policy. Similarly, as the curtailment of renewable energy sources in multiple

also seen in the aftermath of the global economic recession countries, thereby affecting their competitiveness.

of 20082009, corporations could either reduce their R&D Similarly, lacking infrastructure for production and

investments or shift focus to shortterm lowrisk projects.64 distribution is a key constraint in realizing the potential

While the shape of the subsequent economic recovery is of the hydrogen economy. At the same time, investment

being debated,65 investment in innovation and infrastructure in LNG infrastructure can be a catalyst in decarbonizing

will be an essential catalyst in emerging from the economic the power sector, especially in countries where coal

crisis. It can be an opportunity to accelerate structural continues to be the primary fuel. While the selection

shifts by integrating longterm concerns in shortterm of priority areas for energy infrastructure development

policy packages, orienting them towards sectors that might differ across countries, the development can

offer higher economic and societal returns. This includes help address the objectives of economic recovery,

investing in green infrastructure, encouraging research and job creation and the energy transition, and help the

development, and upgrading the skills of workers.66 economy recovery faster and more sustainably.

Fostering Effective Energy Transition 2020 edition 35 ­ The economic rationale is strong for continuing to invest in innovation in the current economic climate. Evidence from an analysis of public investment in R&D in Germany during the economic crisis of 20082009 indicates spillover effects on production, valueadd and employment worth twice the initial investment.67 Moreover, foregone innovation investments have a cumulative effect on the future trajectory, by reducing the pool of future opportunities.68 While the progress on solar PV, onshore wind and energy storage have been remarkable over the past decade (Figure 17), a wide array of technologies will need to be matured at a faster rate. Deploying public R&D investments into ideas that appear to be moonshots given the current state of R&D, such as nuclear fusion, advanced energy storage chemistries and largescale economical solutions for hardtoabate sectors (heating, aviation, shipping, heavy industries), can deliver high innovation dividends.

­ Human capital development is necessary to reap the innovation dividend. The economic shock from the COVID19 pandemic and resulting energy market fluctuations have already led to largescale layoffs. The availability of trained workers is critical for energy transition, especially in areas requiring highskilled talent such as R&D in energy technology. Effects on R&D investment during times of economic crisis can weaken the availability of talent for future R&D activities, and exposure to longterm unemployment can lead to the gradual depletion of skills due to low exposure to technology. This is also relevant for emerging economies, where technology transfer is a key component in the development and diffusion of new technologies. Countries with higher human capital have been able to maximize the spillover effects of technology transfer and foreign investment in clean energy R&D.

36 Fostering Effective Energy Transition 2020 edition 5.4 Economic structure economic growth from energy consumption, and hence from carbon emissions from fuel combustion, has been The energy intensity of countries, a measure of the ability an ambitious policy goal. Reducing energy intensity is key of an economy to convert energy units used into GDP, in a country’s decarbonization strategy as it means that depends on income levels, industrial structure, efficiency economic growth is met through less energyintensive standards, urbanization, etc. In 2016, on average, a 1% activities which, in turn, results in less emissions from the increase in GDP per capita was accompanied by a 0.7% energy system (assuming a certain carbon intensity of increase in per capita primary energy supply.69 Decoupling energy consumption/production).

Figure 18: Average energy intensity (GJ/$GDP PPP, 2011) for regional clusters, 2007 and 2017

9.0 8.0 Average Energy Intensity, 2007 Average Energy Intensity, 2017 8.3 6.5

8.0 5.2 5.2 5.1 5.4 5.2 4.9 6.9 4.8 4.7 4.3 4.3

7.0

6.0

5.0

4.0

3.0

2.0

1.0

0.0

Commonwealth Sub-Saharan Middle East Latin America Emerging and Emerging and Advanced of Independent Africa and North Africa and the Developing Asia Developing Economies Europe States Caribbean

Source: IEA, World Energy Balances 2019

Figure 18 shows the average energy intensity for the workforce, and economic growth relies to a large extent on 115 countries in the ETI, by regional classification. Some the demand for consumer goods in developed economies. highincome countries have managed to decouple the Notwithstanding the importance of basic activities to energy consumption and total carbon emissions from produce essential items, substantial productivity and economic growth, by shifting the structure of their energy efficiency gains can help emerging economies transition to system and the economy as a whole. Transforming the higher complexity activities. structure of the energy system requires a mix of supply and demandside interventions, to shift the installed ­ Countries with higher levels of economic complexity base of technologies in energy production and final are better prepared for the energy transition. Figure demand towards lowcarbon alternatives. On the other 19 illustrates that a higher level of decoupling between hand, shifts in the economic structure imply diversifying emissions and economic growth72 is associated with economic activities to reduce dependence on fossil fuels both a higher degree of economic complexity73 and and changing the composition of a country’s productive transition readiness (as measured in the ETI). The output to higher valueadd and complex sectors. capabilities leading to increasing levels of economic Complex economies generate a larger share of GDP complexity in countries are largely similar to the enablers from knowledgeintensive products, characterized by for energy transition, indicating the synergies between sophistication and specialization. While an increase in structural economic transformation and effective economic complexity leads to a short-term increase in energy transition. In addition to the traditional economic emissions, evidence from multiple countries shows a growth model with capital and labour inputs, structural decline in emissions in the long run.70 Moreover, a higher transformation can be accelerated though capabilities level of economic complexity is also associated with lower such as human capital development, physical and digital levels of unemployment.71 This is particularly relevant for infrastructure, and a robust institutional framework with emerging economies, where energyintensive sectors like rule of law, property rights, etc.74 agriculture and extractives employ significant portions of the

Fostering Effective Energy Transition 2020 edition 37 Figure 19: Transition readiness and economic complexity index scores vs level of decoupling of emissions and GDP growth

1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1

0 Higher level of decoupling between total emissions and GDP growth EC Score ­ Normalized Transition Readiness

Sources: Economic complexity from the Atlas of Economic Complexity, Harvard University, https://atlas.cid.harvard.edu/, and Transition Readiness from the World Economic Forum

­ The Fourth Industrial Revolution offers countries an opportunity to leapfrog into economic growth while achieving productivity gains, but urgent measures must be taken. Emerging growth areas such as in artificial intelligence and the internet of things are not widespread, especially in developing countries. Considering the future economic growth potential and the necessary economic transformation in emerging economies to achieve energy transition and climate change mitigation, new international cooperation mechanisms are required (e.g. technology transfer, capacity building, etc.) to accelerate the progress of the Fourth Industrial Revolution.

38 Fostering Effective Energy Transition 2020 edition 5.5 Consumer engagement in products and services used in daily life, decisions made by endconsumers are critical for the success of any Effectively engaging society on the energy transition country’s energy transition strategy. As with most habits, requires careful consideration on two key aspects. First, customs or lifestyles, a behavioural “lockin” can be hard energy transition can exacerbate existing socioeconomic to counteract when environments need to change. The inequalities, unless the costs and benefits of policies and COVID19 pandemic, despite being a human and economic regulations are distributed appropriately. The recent spike tragedy, has resulted in sharp decreases in emissions in protests in many countries against fuel price hikes or from industrial activity and transportation. However, different forms of carbon taxes underscores the importance experience from previous systemic shocks, such as the of consumer acceptance for these types of policies. The financial crisis of 2008 and the oil embargo of the 1970s, COVID19 pandemic is an example of the disproportionate indicates that emissions tend to spike in the aftermath, as risks from systemic shocks to vulnerable segments of industrial activity regains normalcy. Sustained behavioural society; people unable to work remotely, dependent on transformation could offer a silver lining, as remote working public transportation or living in high occupancy dwellings arrangements might gain popularity, highemission have been at higher risk of contagion. The relative longdistance travelling could reduce drastically, and people economic cost is also higher for workers in the informal may choose to prioritize responsible consumption in terms sectors. Second, given the ubiquity of energy consumption of both quality and quantity.

Figure 20: Selected survey responses from “Youth Perspectives on Energy Transition” (n = 150)

41%

To what degree does the energy 15% 25% 13% efficiency labelling of devices 7% inform your purchase decisions? None 15% Top priority Strong Moderate Minor None 29% 31% 14% 5% To what degree do employers’ 12% None

positions on energy and environment

inform your career preferences?

Top priority Strong Moderate Minor

36% 32%

To what degree do politicians’ 22% positions on energy and environment 5% inform your voting preferences?

Top priority Strong Moderate Minor

Fostering Effective Energy Transition 2020 edition 39 ­ Youth perspectives on energy transition strongly ­ Consistent, transparent and fact-based

favour faster and decisive action. A survey conducted communication is necessary to engage all

among the World Economic Forum’s Global Shapers stakeholders in an effective energy transition.

community, comprised primarily of students and Keeping the members of the public well informed

young professionals from across the world between and educated about the energy transition is critical

the ages of 18 and 30, revealed that most of the to secure their buyin and engagement. However,

respondents favour the strong prioritization of energy there are conflicting narratives on the progress of the

and environmental issues in decisionmaking. More energy transition76 depending on the choice of metrics,

than half reported prospective politicians’ positions on starting points, timelines, etc. As decisionmakers

energy and environment as a top or strong priority in consider these narratives to determine the efficacy of

voting decisions (Figure 20). Other aspects of individual current actions and prioritize next steps, the discourse

decisionmaking such as career choices and purchasing can be selffulfilling. The experience of the COVID19

decisions exhibit similar trends, though to a lesser pandemic emphasizes the importance of heeding

degree. This is consistent with the rapid escalation of scientific evidence at the right time, to avoid the risks

climate change activism worldwide among youths. from delayed actions. Only through a factbased

exchange can stakeholders identify the right destination,

­ Easy access to understandable information on imperatives and enablers of the energy transition.

carbon footprints can drive consumer participation.

Energy efficiency labelling on appliances has been a

key factor in accelerating innovation and the adoption

of more efficient alternatives, especially in daily use

appliances such as electric bulbs, refrigerators and

air conditioners. Similarly, given the energy footprints

across a wide range of consumer products, the

uniform labelling of products based on their energy

or environmental footprints can be instrumental in

accelerating the adoption of sustainable and efficient

alternatives, while creating growth opportunities for

more sustainable products and brands. Although

not an easy task given the challenges to adopt

consistent carbon intensity measurement and

reporting mechanisms, and the political components

in international trade, research suggests that providing

information on footprints that is easy to convey and

understand is an effective tool. It serves as a reminder

to consumers of their values and preferences when

making purchasing decisions, prompting them to make

choices more consistent with their values.75 Specifically,

labelling with additional information on durability and

reparability for consumer durables could be a key

driver in promoting the circular economy.

40 Fostering Effective Energy Transition 2020 edition Political support for the energy transition

By David Victor, Professor, University of California, Lurking in all this are important matters of justice. San Diego (UCSD), USA Subsidies and other forms of price controls are often cloaked in the logic that they help the poor. (Gabriela and Consumer acceptance is essential to sustainable energy I found that, for the most part, these subsidies benefit transitions, especially in these hard economic times richer consumers.) caused by the global pandemic. Consumers, of course, ultimately pay for whatever happens in the energy Often those who pay the most have a hard time system. They are also constituents whose interests ­ organizing and expressing their political voice, which reflected in many ways from voting to protest to other is why careful attention to consumer impacts is so forms of political support and opposition — shape what important. The political system, on its own, won’t is feasible. For too long, analysts have been imagining ensure a just transition. Many elements of the energy clever energy transitions that can solve many problems transition that are most exciting and urgent, such as of environmental sustainability, such as climate change deep decarbonization and the creation of distributed and water scarcity, without paying enough attention to prosumers around power grids, are unlikely to be free political sustainability. Consumers sit at the centre of that or even cheap. Policies that can make the energy political equation. transition align with the goals of social justice will have many dimensions, including worker retraining and One thing that is clear about consumer behaviour is reemployment. At the centre, however, will be active that people are often highly sensitive to visible changes policies to manage the cost impacts on consumers who in price. That’s particularly evident in the politics of fuel are the least well off economically. pricing, which can be treacherous. Even as political leaders have found multiple ways of adopting costly Technology will be pivotal. On the one hand, policies in many sectors of the economy, anything that technological change has made it easier to segment conspicuously raises fuel prices must be treated with markets and to tailor services exactly to the people who political caution. The “yellow vests” movement in France is can pay. Those innovations have the potential to erode but one example. Fuel riots in Iran and consumer pressure the social contract that has guided much of modern against climate policies in the United States are others. energy supplies — for example, the idea that every household should have access to a reliable power grid at In all these cases, consumer reactions are a blend of reasonable cost. On the other hand, technologies such many different factors — the yellow vests movement, as smart cards and modern control systems have made for example, isn’t simply about the cost of a carbon tax it easier to target the benefits of subsidies and other but also about the cost of living in rural areas and the energy policies to the households that need them most. peripheral feeling of being left behind while elites at the Technology and markets, on their own, won’t ensure a centre, in Paris, push the country in new directions. But just transition. the fact that fuel prices become the weapon for protest makes politicians skittish, and that makes politically On every front, then, policy is essential to steering the sustainable energy transitions hard to organize. energy transition. In a global economic crisis, with lots of potential for massive reform and restructuring, This political wariness of creating visible costs from it is particularly important to focus on how policies policy has been particularly evident to reformers of affect consumers and what they are willing to support fossil fuel subsidies. For decades it has been known politically. It can help ensure that energy transitions are that subsidy reform is one of the most costeffective just and reasonable — and effective at delivering what ways to reduce emissions and get market signals society wants from its energy systems. aligned in energy markets. For decades, politicians have learned that subsidy reform is hard ­ in part because For too long, analysts have been special interests are tightly comingled with consumer imagining clever energy transitions that wariness about change. Working with a team of experts can solve many problems of environmental from the World Bank, leading economist Gabriela sustainability, such as climate change and Inchauste and I published a study in 2017 that looked water scarcity, without paying enough closely and systematically at the politics of subsidy attention to political sustainability. reform and found that successful reform strategies Consumers sit at the centre of that require politically strategic choices. They must figure out political equation. which interest groups can be taken on and also how to keep broad public acceptance of reform. Reform, nearly always, is not acrosstheboard following elegant, simple principles of economic policy design, but a kind of sausagemaking that must navigate political obstacles and create political allies.

Fostering Effective Energy Transition 2020 edition 41 6. Conclusion

The ETI 2020 analysis indicates gradual progress on As countries act to control the economic and social the energy transition over the past six years. A majority consequences of COVID19, the situation today could of countries have made varying degrees of progress on provide an opportunity to leapfrog into the energy the three dimensions of the energy triangle: economic transition. Applying economic stimulus to areas such development and growth, environmental sustainability, and as energy infrastructure modernization, research and energy access and security. The lack of consistent progress development, and human capital development can in many countries, however, highlights the challenges in deliver longterm sustainable economic growth, while navigating the complexity of the energy transition. The also achieving step change in the energy transition. gaps between the top performers and the rest have been Policymakers, privatesector entities, civil society groups steadily decreasing, mainly due to rising levels of political and consumers will play a critical role in this process ­ commitment and improving access to capital for investment highlighting the importance of a common understanding of in emerging economies. This also highlights the need for the priorities among all stakeholder groups, and increased transformative and breakthrough solutions to unlock the next multistakeholder collaboration at the national, regional and wave of substantial gains for advanced economies. global levels.

Going forward, new challenges are likely to emerge on the economic development and growth pillar of the energy triangle. Apart from budgetary implications on oil exporting countries, the low energy price environment could lead to constraints on investment and R&D, potentially affecting the pipeline of new technologies necessary for the energy transition. Energy access and security, despite being the pillar with higher scores and progress, is being tested from the widespread and frequent disruptions caused by extreme weather events. The rapidly unfolding repercussions of the COVID19 pandemic across the energy system illustrate the need for resilience ­ not just in physical infrastructure and cyberspace ­ but also in energy transition policies, roadmaps and international cooperation mechanisms.

The energy system has strong forward and backward linkages in a modern economy, and shocks in the energy demand and supply outlook will create ripple effects across the interlinked industries and services. With the current uncertain shortterm outlook, the imperatives highlighted in this report can help create the right fundamentals for accelerated recovery. While certain industries or countries might stand to gain in the short term from a low energy price environment, efforts towards the longterm goal of a transition to a sustainable, secure, affordable and inclusive future energy system should be maintained.

42 Fostering Effective Energy Transition 2020 edition Fostering Effective Energy Transition 2020 edition 43 Appendices

1. Annual Energy Transition Index score differences, 2015-2020

2015 16 17 18 19 20 Delta 2015- 2015 16 17 18 19 20 Delta 2015-

2020 (%) 2020 (%)

Year-on-year decline No change Year-on-year improvement

Advanced Economies Note: The Energy Transition Index benchmarks countries on the performance of their energy system, as well as their readiness Commonwealth of Independent States for transition to a secure, sustainable, affordable, and reliable future energy system. ETI 2020 scores on a scale of 0 - 100. Emerging and Developing Asia Emerging and Developing Europe Latin America and the Caribbean Middle East, North Africa and Pakistan Sub-Saharan Africa

44 Fostering Effective Energy Transition 2020 edition 2. Methodology

The framework for the ETI, the classification of indicators in dimensions and their respective weights are summarized in Figure 21: Figure 21: Energy Transition Index dimensions and variables

ETI score

System Performance score Transition Readiness score 50% 50%

Economic Environmental Energy Access Capital & Regulation Institutions & Infrastructure Human Energy Development & Sustainability & Security investment & Political Governance & Innovative Capital System Commitment Structure Growth 33% 33% 17% 17% Business 17% 17% Environment 17% 33% 17%

Fossil fuel dependency Electricity energy mix Energy demand growth

Jobs in renewable energy sector

Quality of education

Innovative business environment Transportation infrastructure Trade logistics Stable finances Rule of law Transparency & political stability Regulation to support EE, RES, Access Commitment to intl. agreements Recent investment into RES Recent investment into EE Access to capital Ability to invest

Security of supply

Energy access

Carbon emissions per capita Carbon intensity Energy intensity Air pollution

GDP contribution Cost of externalities Fossil fuel subsidies Industry competitiveness Affordability

20% 20% 20% 20% 20% 25% 25% 25% 25% 33% 33% 33% 25% 25% 25% 25% 33% 33% 33% 33% 33% 33% 33% 33% 33% 50% 50% 33% 33% 33%

Details on the selection, aggregation and normalization of indicator data and the data sources can be found in Singh et al., “The energy transitions index: An analytic framework for understanding the evolving global energy system”, Energy Strategy Reviews, vol. 26, 2019.

Fostering Effective Energy Transition 2020 edition 45 Addendums on the methodology ­ Indicators are arithmetically scaled between minimum and maximum threshold values and standardized on a scale ­ The indicators for ETI 2020 represent the trends leading of 0 to 100 for aggregation, with the exception of certain up to (and including) 2019. Time lags differ across highly volatile variables. The following variables were indicators, given that the ETI sources data from more transformed to control their sensitivity in the composite than 20 international data providers. For the trend scores, while maintaining the effect of their direction and analysis, ETI composite and dimension scores were magnitude in the comparative analysis across countries: backcasted for the consistent group of 115 countries. Countries with more than a threshold number of missing Cost of externalities (as % of GDP): Logarithmic indicators in a dimension were excluded. transformation

­ Historical data for some indicators was revised at the New renewable capacity addition (as % of total power source (e.g. the PM2.5 data published by the World generation capacity) and jobs in clean energy (as % Bank). In such cases, historical scores and rankings were of total labour force): Previous year scores + 0.1 x recalculated with updated data for the trend analysis. (current year score previous year score)

­ The availability of technology indicator in the ­ Change in data source: infrastructure and innovative business environment dimension was dropped due to the unavailability of Access to clean cooking fuel: Tracking SDG7, The updated data, and the indicator weight was redistributed Energy Progress Report ­ Downloads ­ Datasets among the remaining indicators in the dimension on ­ “Section 7.1.2 Clean Fuels and Technologies for infrastructure and innovative business environment. Cooking Dataset” (Source: World Health Organization 2018), https://trackingsdg7.esmap.org/downloads

Share of renewable energy sources in power generation: IEA, World Energy Balances 2019, https:// www.iea.org/reports/worldenergybalances2019

Share of coal in power generation: IEA, World Energy Balances 2019

Share of hydroelectricity in power generation: IEA, World Energy Balances 2019

3. Regional classification

Others (No Data) Emerging and Developing Europe Middle East and North Africa Latin America and the Caribbean

Commonwealth of Independent States Advanced Economies Emerging and Developing Asia Sub-Saharan Africa

This map was created for illustrative purposes only, using publicly available sources. The boundaries shown do not imply any opinion on the part of the World Economic Forum. No citation or use of this map is allowed without the written consent of the World Economic Forum.

46 Fostering Effective Energy Transition 2020 edition Contributors

Data partners World Economic Forum

Climate Action Tracker, Enerdata, Fitch Ratings, Heritage Fahad Alidi, Fellow, Platform for Shaping the Future of Foundation, International Energy Agency, International Energy and Materials Gas Union, International Monetary Fund, International Renewable Energy Agency, Moody’s, PBL Netherlands Roberto Bocca, Head of Shaping the Future of Energy and Environmental Assessment Agency, Standard & Poor’s, Materials, Member of the Executive Committee Transparency International, UN SEforALL, UN Statistics Division and UNCTADstat, World Bank Group, World Health Pedro G. Gómez Pensado, Head of Oil and Gas Industry Organization, World Trade Organization Wan Sayuti, Fellow, Platform for Shaping the Future of Chief expert advisers Energy and Materials

The World Economic Forum acknowledges and thanks the Harsh Vijay Singh, Project Lead, Platform for Shaping the individuals and experts without whose support this report Future of Energy and Materials (lead author) would not have been possible:

Alessandro Blasi, Special Advisor to the Executive Director, International Energy Agency, Paris

Dominic Emery, Chief of Staff, BP, United Kingdom

Simone Landolina, Counsellor, Partnerships and Innovation, International Energy Agency, Paris

Lin Boqiang, Dean, China Institute for Studies in Energy Policy, Xiamen University, People’s Republic of China

Bertrand Magné, Senior Economist and Energy Specialist, International Atomic Energy Agency, Vienna

Davide Puglielli, Head, Long Term Strategic Assessment and Group Positioning, Enel, Italy

David Victor, Professor, University of California, San Diego (UCSD), USA

Rigoberto Ariel Yepez-Garcia, Chief, Energy Division, InterAmerican Development Bank, Washington DC

Payne Institute of Public Policy (Colorado School of Mines)

Morgan Bazilian, Executive Director and Research Professor of Public Policy

Alison Schwab, MS Candidate, Mineral and Energy Economics

Fostering Effective Energy Transition 2020 edition 47 Endnotes

1. Diehl, Jackson, “From Hong Kong to Chile, 2019 is the year of the street protester. But why?”, The Washington Post, 28 October 2019, https://www.washingtonpost.com/opinions/globalopinions/fromhongkongtochile2019istheye arofthestreetprotesterbutwhy/2019/10/27/9f79f4c6f66711e98cf04cc99f74d127_story.html.

2. Bank for International Settlements (BIS), The green swan: Central banking and financial stability in the age of climate change, 2020, https://www.bis.org/publ/othp31.pdf.

3. United Nations Development Programme (UNDP), “Sustainability becomes central in Davos while the World Economic Forum (WEF) celebrates its 50th anniversary”, 24 January 2020, https://www.undp.org/content/undp/en/home/ newscentre/news/2020/worldeconomicforumcelebratesits50thanniversary.html.

4. U.S. Energy Information Administration (EIA), “Today in Energy”, 7 January 2020, https://www.eia.gov/todayinenergy/ detail.php?id=42415.

5. Slav, Irina, “An oil buyers club is threatening OPEC’s dominance”, Business Insider, 6 July 2018, https://www.businessinsider.com/anewoilcartelisthreateningopecsdominance20187?r=US&IR=T.

6. Campbell, Alexander and Vickram Singh, “Lessons from the cyberattack on India’s largest nuclear power plant”, Bulletin of the Atomic Scientists, 14 November 2019, https://thebulletin.org/2019/11/ lessonsfromthecyberattackonindiaslargestnuclearpowerplant/.

7. European Network of Transmission System Operators for Electricity (ENTSOE), “ENTSOE has recently found evidence of a successful cyber intrusion into its office network”, 9 March 2020, https://www.entsoe.eu/ news/2020/03/09/entsoehasrecentlyfoundevidenceofasuccessfulcyberintrusionintoitsofficenetwork/.

8. Sussman, Bruce, “Revealed: Details of `First of Its Kind’ Disruptive Power Grid Attack”, SecureWorld, 8 October 2019, https://www.secureworldexpo.com/industrynews/firstu.s.powergridattackdetails.

9. Lee, Jordy, et al., “Reviewing the Material and Metal Security of LowCarbon Energy Transitions”, Renewable and Sustainable Energy Reviews, vol. 124, 2020, pp. 124.

10. International Energy Agency (IEA), “Global CO2 emissions in 2019”, 11 February 2020, https://www.iea.org/articles/

11. Lederer, Edith, “UN: Global economic growth in 2019 was lowest of the decade”, AP News, 17 January 2020, https://apnews.com/43db310d5fce2a745bdc974815b15a2e.

12. Rathi, Akshat and Jeremy Hodges, “Even Under Trump, U.S. Renewable Investment Hit a Record in 2019”, Bloomberg Green, 16 January 2020, https://www.bloomberg.com/news/articles/20200116/ evenundertrumpusrenewableinvestmenthitsarecord.

13. CarbonBrief, “Analysis: Global coal power set for record fall in 2019”, 25 November 2019, https://www.carbonbrief.org/ analysisglobalcoalpowersetforrecordfallin2019.

14. Power magazine, “10 Power Sector Insights from the IEA’s World Energy Outlook 2019”, 1 January 2020, https://www.powermag.com/10powersectorinsightsfromtheieasworldenergyoutlook2019/.

15. As of 20 March 2020; see Fossil Free: Divestment, “Overview”, https://gofossilfree.org/divestment/commitments/.

16. Cooper, Rachel, “Green bonds issuance hit $255 billion in 2019”, Climate Action, 21 January 2020, http://www.climateaction.org/news/greenbondsissuancehit255billionin2019.

17. Firestone, Karen, “How Investors Have Reacted to the Business Roundtable Statement”, Harvard Business Review, 20 November 2019, https://hbr.org/2019/11/howinvestorshavereactedtothebusinessroundtablestatement.

18. Pearce, Fred, “Analysis: As Climate Change Worsens, A Cascade of Tipping Points Looms”, YaleEnvironment 360, 5 December 2019, https://e360.yale.edu/features/asclimatechangesworsensacascadeoftippingpointslooms.

19. Cherp, Aleh, et al., “Integrating technoeconomic, sociotechnical and political perspectives on national energy transitions: A metatheoretical framework”, Energy Research and Social Science, vol. 37, 2018, pp. 175190.

20. For a discussion on the energy system’s interlinkages with other systems, see Fostering Effective Energy Transition ­ 2019 edition, World Economic Forum.

48 Fostering Effective Energy Transition 2020 edition 21. Singh, Harsh Vijay, et al., “The energy transitions index: An analytic framework for understanding the evolving global energy system”, Energy Strategy Reviews, vol. 26, 2019.

22. The countries are scored after accounting for outliers and missing values.

23. Appendix 1 shows changes in ETI scores for countries from 2015 to 2020.

24. World Bank, “Power Sector Economic Multiplier Tool: Estimating the Broad Impacts of Power Sector Projects, Methodology”, White Paper, 2015, http://documents.worldbank.org/curated/en/619851495526236959/ pdf/115164WPPowersectoreconomicmultiplierPUBLIC.pdf.

25. World Bank, “GDP (constant 2010 US$)”, https://data.worldbank.org/indicator/NY.GDP.MKTP. KD?end=2018&start=2000.

26. International Energy Agency (IEA), World Energy Outlook 2019, https://www.iea.org/reports/ worldenergyoutlook2019.

27. World Bank, “Population, total”, https://data.worldbank.org/indicator/SP.POP.TOTL.

28. Household electricity bills were estimated by multiplying household electricity tariffs (purchasing power parity, 2018) by annual electricity consumption per capita (purchasing power parity, 2018).

29. BP, BP Statistical Review of World Energy 2019, 68th edition, 2019 https://www.bp.com/content/dam/bp/ businesssites/en/global/corporate/pdfs/energyeconomics/statisticalreview/bpstatsreview2019fullreport.pdf.

30. International Gas Union (IGU), Wholesale Gas Price Survey 2019 edition, 2019, https://www.igu.org/sites/default/files/ nodedocumentfield_file/IGU_Wholesale%20Gas%20Price%20Survey%202019_Final_Digital%20_100519.pdf.

31. Including transmission, liquefaction and regasification.

32. Bergasse, Emmanuel, “The relationship between energy and economic and social development in the southern Mediterranean”, MedPro Technical Report no. 27, 2013.

33. The energy subsidy data from the International Monetary Fund has a twoyear lag from the year of the ETI publication.

34. International Monetary Fund (IMF), “Global Fossil Fuel Subsidies Remain Large: An Update Based on CountryLevel Estimates”, IMF Working Papers, no. 19/89, 2019, https://www.imf.org/en/Publications/WP/Issues/2019/05/02/ GlobalFossilFuelSubsidiesRemainLargeAnUpdateBasedonCountryLevelEstimates46509.

35. Grippa, Pierpaolo, Jochen Schmittmann and Felix Suntheim, “Climate Change and Financial Risk”, IMF, Finance & Development, vol. 56, no. 4, 2019, https://www.imf.org/external/pubs/ft/fandd/2019/12/ climatechangecentralbanksandfinancialriskgrippa.htm#author.

36. International Energy Agency (IEA), “Global CO2 emissions in 2019”, 11 February 2020, https://www.iea.org/articles/

37. Frazin, Rachel, “U.S. energyrelated carbon dioxide emissions lowered in 2019: report”, The Hill, 11 February 2020, https://thehill.com/policy/energyenvironment/482601usenergyrelatedcarbondioxideemissionsloweredin2019report.

38. Howarth, Robert, “Ideas and perspectives: is shale gas a major driver of recent increase in global atmospheric methane?”, Biogeosciences, vol. 16, 2019, pp. 30333046, https://www.biogeosciences.net/16/3033/2019/ bg1630332019.pdf.

39. Schoolman, Anya, “Decentralizing Energy for a HighDemand, LowCarbon World”, One Earth, vol. 1, no. 4, 2019, pp. 388391.

40. Culver, Lauren, “Energy Poverty: What you Measure Matters”, Stanford Natural Gas Initiative, 2017.

41. European Union, “Energy ­ Introduction”, 2009 https://ec.europa.eu/energy/content/introduction5_en.

42. Galvin, Ray, “Letting the Gini out of the fuel poverty bottle? Correlating cold homes and income inequality in European Union countries”, Energy Research & Social Science, vol. 58, 2019, https://www.sciencedirect.com/science/article/pii/ S2214629619301021.

43. School of Earth and Environment, “Shining a light on international energy inequality”, 16 March 2020, https://environment.leeds.ac.uk/see/news/article/5311/shiningalightoninternationalenergyinequality.

Fostering Effective Energy Transition 2020 edition 49 44. Lawrence, Scott, et al., “Global Inequality in Energy Consumption from 1980 to 2010”, Entropy, vol. 15, 2013.

45. Capano, Giliberto and Jun Jie Woo, “Resilience and robustness in policy design: a critical appraisal”, Policy Sciences, vol. 50, no. 3, 2017, pp. 399426.

46. Ramanathan, Veerabhadran, et al., “Bending the Curve: Ten scalable solutions for carbon neutrality and climate stability”, 2016.

47. UN News, “UN emissions report: World on course for more than 3 degree spike, even if climate commitments are met”, 26 November 2019, https://news.un.org/en/story/2019/11/1052171.

48. Ambrose, Jillian, “China’s appetite for coal power returns despite climate pledge”, The Guardian, 20 November 2019, https://www.theguardian.com/world/2019/nov/20/chinaappetiteforcoalpowerstationsreturnsdespiteclimatepledge capacity.

49. Phillips, Anna and Russ Mitchell, “Trump weakens fuel economy standards, rolling back key U.S. effort against climate change”, Los Angeles Times, 31 March 2020, https://www.latimes.com/politics/story/20200331/ trumprollsbackfueleconomystandards.

50. World Economic Forum, The Net-Zero Challenge: Fast-Forward to Decisive Climate Action, Insight Report, 2020.

51. Wharton University of Pennsylvania, Public Policy Initiative, “A Reflection on the 2009 American Auto Bailout”, 22 March 2017, https://publicpolicy.wharton.upenn.edu/live/news/1779areflectiononthe2009americanautobailout.

52. Kuriakose, Jaise, et al., “Setting climate targets: when is net zero really net zero?”, Manchester Policy Blogs: Energy and Environment, University of Manchester, 15 April 2019, http://blog.policy.manchester.ac.uk/energy_ environment/2019/04/settingclimatetargetswhenisnetzeroreallynetzero/.

53. World Bank, “Carbon Pricing Dashboard”, https://carbonpricingdashboard.worldbank.org.

54. World Economic Forum, The Net-Zero Challenge: Fast-Forward to Decisive Climate Action, Insight Report, 2020.

55. Plumer, Brad and Nadja Popovich, “These Countries Have Prices on Carbon. Are They Working?” The New York Times, 2 April 2019, https://www.nytimes.com/interactive/2019/04/02/climate/pricingcarbonemissions.html.

56. Pomerleau, Kyle and Elke Asen, “Carbon Tax and Revenue Recycling: Revenue, Economic, and Distributional Implications”, Tax Foundation, 6 November 2019, https://taxfoundation.org/carbontax/.

57. Rödl & Partner, “Ways of Financing Renewable Energy Projects in Emerging and Developing Countries”, 2016, https://www.roedl.com/insights/erneuerbareenergien/201610/financingrenewableenergyprojectsemerging developingcountries.

58. Frankfurt School of Finance & Management, Global Trends in Renewable Energy Investment 2019, 2019, https://wedocs.unep.org/bitstream/handle/20.500.11822/29752/GTR2019.pdf?sequence=1&isAllowed=y.

59. The four pillars were developed through a discussion analysis by the World Economic Forum, Deloitte, EY, KPMG and PwC. The definition for Governance was developed by Deloitte. The definitions for Planet, People and Prosperity were taken from UN report Transforming our world: The 2030 Agenda for Sustainable Development, 2015.

60. Cooper, Rachel, “Green bonds issuance hit $255 billion in 2019”, Climate Action, 2020, http://www.climateaction.org/ news/greenbondsissuancehit255billionin2019.

61. GlobalNewswire, “Solar Photovoltaic (PV) Market Report 2019: World Solar PV Capacity Estimated to Increase Significantly from 593.9GW in 2019 to 1,582.9GW in 2030”, 13 November 2019, https://www.globenewswire.com/ newsrelease/2019/11/13/1946223/0/en/SolarPhotovoltaicPVMarketReport2019WorldSolarPVCapacityEsti matedtoIncreaseSignificantlyfrom5939GWin2019to15829GWin2030.html.

62. Global Wind Energy Council, “Global Wind Report 2019” Overview, Key findings, https://gwec.net/globalwindreport2019.

63. Center for Sustainable Systems, University of Michigan, “U.S. Grid Energy Storage Factsheet”, Pub. no. CSS1517, August 2019, http://css.umich.edu/factsheets/usgridenergystoragefactsheet.

64. McKinsey & Company, “R&D in the downturn: McKinsey Global Survey Results”, April 2009, https://www.mckinsey. com/businessfunctions/operations/ourinsights/randampdinthedownturnmckinseyglobalsurveyresults.

50 Fostering Effective Energy Transition 2020 edition 65. Kennedy, Simon, and Michelle Jamrisko, “V, L or `Nike Swoosh’? Economists Debate Shape of Global Recovery”, Bloomberg, 2 April 2020, https://www.bloomberg.com/news/articles/20200402/ economistsdebateshapeofaglobalrecoveryaftercoronavirus.

66. Pellens, Maikel, et al., “Public Investment in R&D in Reaction to Economic Crises: A Longitudinal Study for OECD Countries”, Centre for European Economic Research, Discussion Paper no. 18005, 2018.

67. Brautzsch, HansUlrich, et al., “Can R&D subsidies counteract the economic crisis?­Macroeconomic effects in Germany”, Research Policy, vol. 44., no. 3, 2015, pp. 623633.

68. Organisation for Economic Cooperation and Development (OECD), OECD Science, Technology and Industry Outlook 2012, Part 1, Chapter 1, “Innovation in the crisis and beyond”, 2012, https://www.oecd.org/sti/ stioutlook2012chapter1innovationinthecrisisandbeyond.pdf.

69. Calculated from IEA energy demand data, and World Bank population and GDP (in real dollars) statistics (2016 and 2017). 70. Neagu, Olimpia, “The Link between Economic Complexity and Carbon Emissions in the European Union Countries: A

Model Based on the Environmental Kuznets Curve (EKC) Approach”, Sustainability, vol. 11, no. 4753, 2019. 71. Adam, Antonis, et al., “Economic complexity and jobs: An empirical analysis”, Munich Personal RePEc Archive

(MPRA), Paper no. 92401, 2019. 72. Shuai, C., et. al., “A threestep strategy for decoupling economic growth from carbon emission: Empirical evidences

from 133 countries”, Science of the Total Environment, vol. 646, 2018, pp. 524543. 73. Harvard University, Harvard Growth Lab, “The Atlas of Economic Complexity”, https://atlas.cid.harvard.edu/. 74. Hidalgo, Cesar and Ricardo Hausmann, “The Building Blocks of Economic Complexity”, Proceedings of the National

Academy of Sciences of the United States of America, vol. 106, no. 26, 2009, pp. 105705. 75. Camilleri, Adrian, et al., “Consumers underestimate the emissions associated with food but are aided by labels”,

Nature Climate Change, vol. 9, 2019, pp. 5358. 76. World Economic Forum, “The Speed of the Energy Transition: Gradual or Rapid Change?”, White Paper, 2019.

Fostering Effective Energy Transition 2020 edition 51 The World Economic Forum, committed to improving the state of the world, is the International Organization for PublicPrivate Cooperation. The Forum engages the foremost political, business and other leaders of society to shape global, regional and industry agendas.

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