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• Introduction
• Severe consequences of energy insecurity
• Energy-transition barriers
• Applying the CEWG roadmap
• A global call to action
• Acknowledgments
• About the author
• About the Caribbean Energy Working Group Co-Chairs

Introduction

Countries in the Eastern Caribbean¹ are among the world’s most energy insecure nations. These countries grapple with high electricity costs that undercut economic competitiveness and growth, are heavily dependent on petroleum products, and are uniquely vulnerable to the effects of climate change. At the same time, a World Bank designation as middle- or high-income economies significantly limits access to concessional financing. The result is a slow transition to renewable energy power generation, including attracting commercial interest for the relevant infrastructure and unbundling utility systems that often stymie regulatory changes and curtail needed investments in the energy sector.

The time may be ripe for accelerating the pace of the transition in the Eastern Caribbean. A broad consensus exists among regional governments, the business community, and multilateral partners to further usher in a transition to renewable energy, given the unique vulnerabilities facing Eastern Caribbean countries. Meanwhile, countries in the Southern Caribbean (Guyana, Trinidad and Tobago, and Suriname) are leaning into their hydrocarbon reserves as they balance their own energy transition, while other countries are either attracting commercial interest or are far along in their renewable energy development relative to the Eastern Caribbean. Though there is an abundance of solar and wind power potential in the Eastern Caribbean—along with significant geothermal reserves in Dominica, Saint Vincent and the Grenadines, and Saint Kitts and Nevis—countries in this region are faced with defining how a realistic, affordable, and just energy transition can take place and unlocking new private sector and multilateral resources.

The Atlantic Council’s Caribbean Initiative engaged in a series of consultations with the Caribbean Energy Working Group (CEWG), whose members identified two main constraints to the region’s transition: the top-down vertically integrated nature of state-owned utility systems; and limited access to low-cost financing and credit to governments and clean energy developers. While recognizing that an energy transition requires a holistic approach, CEWG members propose that the starting points must be addressing utility constraints and access to finance to ensure a reliable and resilient energy system transformation that is sustainable and affordable for consumers, governments, and the private sector in the Eastern Caribbean. An energy transition in the Eastern Caribbean must ensure reliable power to combat price volatility for consumers while energy infrastructure should be resilient to the effects of climate change, hurricanes and strong tropical storms, and rising temperatures.

The CEWG brings together up to fifteen policy and technical experts from across the Caribbean, and was first convened in 2023 by the Atlantic Council. This publication builds off the CEWG’s first report, “A roadmap for the Caribbean’s energy transition,” which was published last year and outlined a five-step process that governments, developers, and regional partners can undertake to facilitate an energy transition in the Caribbean. The five-step process includes: conducting energy modeling and analysis; modernizing energy grids; diversifying utility structures; creating bankable projects; and scaling project investment to national and subregional levels. This publication focuses on applying steps three and four of the roadmap.

The CEWG met as part of two roundtable discussions, followed by five one-on-one consultation sessions across the group to identify barriers and solutions to accelerating a reliable and resilient energy transition in the Eastern Caribbean. This publication serves as a complement to existing initiatives and projects dedicated to facilitating an energy transition, with the aim of raising additional awareness of the reality and the urgency of the moment for the world’s most vulnerable countries.

Severe consequences for energy insecurity

Countries in the Eastern Caribbean are open facing, small market economies, vulnerable to ebbs and flows of the global financial system. The region’s import dependence means that supply chain constraints and rising global interest rates have a disproportionate effect on these economies. For example, when Russia’s war in Ukraine stemmed the flow of fertilizer to agriculture commodity exporters, food inflation in the Eastern Caribbean skyrocketed and remained high even as prices eventually declined in industrialized nations.² And although the price of renewable energy, such as solar photovoltaic (PV) power, has declined dramatically over the past decade, capital and investment in this sector naturally gravitated to the bigger economies in the Global North.

Stronger storms, more outages
Climate change is a significant driver of the energy transition in the Eastern Caribbean. Hurricanes and strong tropical storms cause flash flooding and high wind speeds that damage energy infrastructure. Global warming, as a result of increasing greenhouse gas emissions (GHG), is fueling stronger and more frequent tropical storms. The result is lost power for days and weeks, as was the case in 2017 when Hurricane Irma hit Antigua and Bermuda, damaging transmission lines and generators. Similarity, in 2019, Hurricane Dorian caused widespread power outages in Dominica.³

The makeup of these economies has resulted in Eastern Caribbean countries paying some of the highest electricity prices in the Americas, including double and sometimes triple of what the average consumer pays in the United States ($0.109 per 1 kilowatt-hour (KW/h).⁴ On average, consumer costs in Antigua and Barbuda ($0.367 per 1 KW/h) and Saint Kitts and Nevis ($0.333 per 1 KW/h) rank on the higher end of the spectrum, with Saint Vincent and the Grenadines ($0.185 per 1 KW/h) on the lower end, and the rest of the countries falling in between. These high costs coincide with an import dependence on petroleum products, with Antigua and Barbuda (100 percent), Dominica (92 percent), Grenada (93 percent), Saint Lucia (98 percent), Saint Kitts and Nevis (87 percent), and Saint Vincent and the Grenadines (95 percent) all relying on fossil fuels to satisfy almost all of their energy demand.⁵ The cost of these imports account for almost 7 percent of the subregion’s gross domestic product, cutting into public expenditure needed to invest in climate adaptation projects and social sectors such as education and health services.⁶

High electricity prices and energy imports undercut the competitiveness of key economic sectors in the Eastern Caribbean—notably the hospitality sector—and limit the purchasing power of consumers. According to the Inter-American Development Bank, six of the countries prioritized in this publication rank in the global top ten of tourism-dependent economies.⁷ The tourism industry accounts for a significant share of energy demand in these countries, increasing the prices for hotel rooms due to high usage of air conditioning and lighting.⁸ Given that the tourism industry is an economic driver, high energy costs can make industries uncompetitive vis-à-vis other tourist hubs in the region such as Jamaica and the Dominican Republic. Beyond the tourism sector, more than a quarter of energy demand in the Eastern Caribbean is for residential use.⁹ High power bills can take up a large share of household income and decrease the purchasing power of individuals, leaving them unable to spend money on local products and services, like food and transportation, which help to stimulate economic growth.

Despite the challenges facing the Eastern Caribbean, bright spots exist. Renewable energy, such as solar, wind, and geothermal reserves, are abundant. Across the region, the sun shines more than 200 days annually,¹⁰ has an estimated potential of almost 70 gigawatts of available offshore wind (excluding Dominica), and (excluding Antigua and Barbuda) houses an estimated 6,290 megawatts (MW) of available geothermal reserves.¹¹ But this potential has not been tapped. Current installed capacity of renewable energy (as a percentage) stands at: Antigua (4 percent), Dominica (25 percent including hydroelectric power), Grenada (4 percent), Saint Lucia (3 percent), Saint Kitts and Nevis (5 percent), and Saint Vincent and the Grenadines (17 percent including hydroelectric).

Geothermal development is a high priority in the Eastern Caribbean
Dominica has an estimated 1,390 MW of geothermal potential. The country’s small population and energy grid had not provided adequate incentive to develop that capacity, due to the high capital costs of exploring its geothermal reserves at scale- until recently. Commitment by the government in 2023 to develop its reserves and support this year from the World Bank have helped the country begin developing its geothermal potential. The World Bank is financing a new project at $38.5 million to support drilling of new geothermal wells and helping construct new transmission lines and substations to connect the future geothermal plants to consumers. Meanwhile, St. Kitts and Nevis is consistently looking for new partners to support its own geothermal ambitions for close to a decade, with a total project cost estimated at US $505 million. A mixture of bilateral and multilateral financing will be needed to bring this project closed to Dominica’s stage.¹²

Energy-transition barriers

The utility systems in the Eastern Caribbean are state-owned entities—excluding Saint Lucia, which has a public-private model—tasked with providing power to citizens. Tax revenues are used by governments to invest in critical and social services. These are top-down systems in vertically integrated structures, meaning that they single-handedly operate the generation, transmission, and distribution of power. This model can stifle innovation and competition, leaving customers without alternative choices and increasing the cost of electricity. Further, it means that introducing new clean energy technologies, when possible, must be financed and implemented by the utility, which is often devoid of the needed capital and technical assistance to act. Therefore, incorporating renewable energies into this model can be expensive—particularly since these technologies have high upfront costs. It is both a political and economic challenge that clean energy is not necessarily cheap energy.

However, unbundling utility systems is not a straightforward solution and not all state-owned entities are necessarily bad. Breaking these systems apart might divide consumer bases and may not lower the cost of electricity given the small size of Eastern Caribbean countries’ populations. Instead, as discussed below, the best-case scenario is to introduce innovation into the utility system, such as diversifying the utility structure across generation, distribution, and transmission by using public-private models. Maintaining an intact customer base is critical for utilities to keep the costs low for consumers while ensuring that utilities and the private-sector entities are still turning a profit. This does not mean that breaking up systems is the sole way to ensure low prices for renewable energy generation. Some markets, particularly in micro economies like in the Eastern Caribbean, might be too small to introduce competition and keep prices affordable. There is no one-size-fits-all solution, as changes in utility structures need to adapt to and be contextualized for each individual country.

Changing the business model of the utilities can help to create more incentives to incorporating renewable energy generation by factoring in the social cost externalities (the associated costs of fossil fuels on the broader public and society) of depending on fossil fuels as a realistic price comparison. Current models determine the price of electricity based on the cost of petroleum imports. But the emissions of fossil fuels—not just carbon dioxide but also other toxins that cause respiratory illnesses—increase cancer risks and, generally, overall poor health. The future healthcare costs for the consumer and the burden on governments to invest in adequate healthcare infrastructure are typically not added to the total cost of importing fossil fuels. If a full cost analysis and reformed business model are developed, then the price of importing fossil fuels might be higher than renewable power generation.

Commercial developers fund projects initially on their own before seeking to make projects bankable by obtaining loans that are backed by cash flow. Projects in the Eastern Caribbean take a long time to develop, given financing challenges due to unclear regulations and permitting, and a lack of investment-grade utility systems to guarantee payments under negotiated power purchasing agreements. Due to the long period of development, investors and governments look to derisk their projects by seeking full grants or convertible loan grants to help them clear these hurdles.

Commercial renewable energy projects also suffer from limited access to low cost and concessionary finance and capital. As discussed, state-owned utilities and governments are responsible for financing new renewable energy projects. These countries do not have the fiscal space or national budgets to self-finance these projects, leaving them to seek loans and grants from multilateral development banks (MDBs) and bilateral lenders. However, the World Bank classifies Eastern Caribbean countries as middle- and high-income economies, disqualifying them from accessing low-cost loans from the World Bank and those that also use this classification, such as the US Development Finance Corporation. This also applies to the business community and energy developers who need access to financing during the pre-project phase (prefeasibility studies, production of design drawings, and environmental social and impact assessments, among others).

Applying the CEWG roadmap

Addressing utility constraints and unlocking new access to finance and capital both are needed, but a well thought-out process that takes the context and nuances of each country into account is needed. To the international community, these countries are bound by their similarities (e.g., population and market size, and geographic location). Realistically, there are enough differences between them that suggest that no solution to the region’s energy transition challenges can be a one-size-fits-all approach. Each country’s context will determine how the below solutions are applied, from unbundling utility structures to attracting finance and capital based on renewable energy. While each country needs a transition that is contextualized to its own reality, technical assistance and transmission upgrades are at the core of the energy transition. Policy action and financial resources are both required, and Caribbean governments and regional institutions will need the assistance of partners like the US Trade and Development Agency and the Inter-American Development Bank (IDB) to deploy the assistance throughout the transition process.

Based on the small consumer bases and state-owned nature of utility systems in the Eastern Caribbean, unbundling utilities might not actually lower electricity costs. Instead, the structure of the utility might be reformed to a public-private partnership (PPP) model that also accounts for price comparisons between fossil fuel imports with social cost externalities attached to a transition to renewable energies. In essence, PPPs are a collaborative model that leverages the strengths of both the public and private sectors, which can help accelerate the deployment of renewable energy infrastructure while ensuring cost-effectiveness and financing sustainability. For example, needed transmission upgrades can be undertaken by governments to help absorb costs and prevent them from being passed to consumers. And the private sector can take responsibility for generation projects, driving down costs and improving competitiveness. Governments and utilities are still able to benefit from the revenue to use for public-sector investments while private-sector entities can streamline innovation in the energy sector, helping to attract more commercial interest.

Designing PPP models will be complex. Each country and its utility or utilities are unique. The challenge will be designing the appropriate model. Here, entities such as the IDB should work with the Caribbean Development Bank (CDB), and use input from private-sector companies in the region, to design a PPP model for utility structures. The IDB houses the experience and expertise in designing PPP models, and through its new One Caribbean program is already building a project preparation facility that can incorporate PPP designs into its model.¹³ The challenge is that Eastern Caribbean countries are not members of the IDB, though they are borrowing member countries of the CDB. In the past, the CDB and the IDB have worked together to streamline assistance to and analysis for the Eastern Caribbean. The same can be done here, with the added benefit of the CDB already understanding the nuances of each of the countries in the subregion.

However, designing and implementing a PPP model requires political will and government support. Governments might not be anxious to adopt renewables if the cost of the electricity does not lower prices—affecting key political constituents—and if accelerating an energy transition comes with increased public debt through high-interest loans. Simply put, a transition is only possible if governments are given assurances and feel comfortable that incorporating renewables will not affect their standing with their constituents, meaning that entities like the IDB, CDB, and partners, such as the United States, will have to secure government support before an energy transition can take place.

As utility systems are able to reform their models to ensure that renewable energy projects are affordable for governments and consumers, support to countries and investors is needed to finance projects through the project pipeline. As discussed in the CEWG’s first report, the projects in the Caribbean tend to fall in the “valley of death,” due to project delays ranging from limited site access to an inability to secure additional financing. Key to moving projects through the pipeline is to derisk them and ensure their bankability. Two steps are needed. First, Caribbean countries need access to the expertise and capacity to conduct feasibility studies, environmental social and impact assessments, and design power purchase agreements, among other things. Second, Eastern Caribbean countries need access to investment vehicles that prioritize grants or low-cost loans for the upfront costs of renewable energy projects. Entities like IDB Invest have pockets of financing that allows the institution to inject equity into projects, but the pool of funds is small relative to what is available for other countries or subregions in Latin America.

This is where regional partners like the United States and existing regional programs like the CARICOM Development Fund (CDF) and the Bridgetown Initiative¹⁴ should be utilized. The United States government, through the International Development Finance Corporation (DFC), should take advantage of the current DFC reauthorization process to create a carve out for clean energy projects in the region. The scale of investment is minimal compared to other DFC-financed projects and would have outsized effects in the small markets and grids in the Eastern Caribbean. This would take an act of the US Congress—particularly for a middle-income country exception—but there is precedent and increasing appetite to prioritize energy security in the Caribbean. Further, the United States should encourage the IDB and the CDB to work with the CDF and the Bridgetown Initiative to create a project pipeline (with attached equity investments available) to attract large-scale financing and grants from global donors. Capital and finance around the world are available if regional partners and entities are able to build mechanisms that streamline funding to energy projects in the Eastern Caribbean and build a project pipeline to attract commercial investors.

A global call to action

An energy transition in the Eastern Caribbean requires political will, regional coordination, and consistent technical assistance. Relative to the cost of the global energy transition, the needed capital in the Eastern Caribbean is minimal. But the tides are changing in the region, as more political actors and financial institutions are thinking creatively of how to accelerate an energy transition. Still, human capital and capacity limitations stifle the region’s ability to undertake this process alone. Partner governments like the United States and Canada have committed to the region’s energy security in the past few years, but these two countries do not have the funding or domestic political will to direct their attention consistently to the Eastern Caribbean. Addressing the climate crisis and facilitating a global energy transition is increasing in urgency each day, meaning that more actors across governments, international bodies, the business community, and foundations are unlocking new forms of support. Tapping into these resources will be critical. Regional governments and their partners need to continue raising the profile of the Eastern Caribbean and using regional and global platforms, from the Group of Twenty to the UN General Assembly to the COP29 climate talks in November to ensure that these countries are not left behind.

Acknowledgments

The Atlantic Council thanks board member Melanie Chen for her financial support of this publication and the corresponding working group. A thank you also goes to the CEWG members who joined the numerous one-on-one consultations and roundtables that informed this publication, including co-chairs David Goldwyn and Eugene Tiah. A special thank you goes to Jason Marczak, vice president and senior director of the Adrienne Arsht Latin America Center, which houses the Caribbean Initiative, for his guidance and comments throughout the working group and during the drafting of this publication. Maite Gonzalez Latorre managed the production flow of this publication.

About the author

Staff

Wazim Mowla

Associate Director & Fellow, Caribbean Initiative

Adrienne Arsht Latin America Center

Caribbean China

Wazim Mowla is the associate director and fellow of the Caribbean Initiative at the Atlantic Council’s Adrienne Arsht Latin America Center. He leads the development and execution of the initiative’s programming, including the Financial Inclusion Task Force, the US-Caribbean Partnership to Address the Climate Crisis (PACC) 2030 Working Group, and the Caribbean Energy Working Group. Since joining the Council, Mowla has co-authored major publications on the strategic importance of sending US COVID-19 vaccines to the Caribbean, strategies to address financial derisking, and how the United States can advance new policies to support climate and energy resilience.

About the Caribbean Energy Working Group Co-chairs

David Goldwyn is president of Goldwyn Global Strategies, LLC (GGS), an international energy advisory consultancy, and chairman of the Atlantic Council Global Energy Center’s Energy Advisory Group. He is a globally recognized thought leader, educator, and policy innovator in energy security and extractive-industry transparency.

Eugene Tiah is a senior business executive with in-depth knowledge and more than forty years of experience in the oil and gas business within the United States and the Caribbean region. He is also the president and CEO of the Caribbean Energy Chamber.

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But that assessment seems to be more of an issue of semantics than an accurate reflection of voter sentiment. Widespread discontent among Indian farmers and agricultural laborers (sectors that represent 43 percent of the country’s total workforce), persistent inflation, and a lack of jobs for India’s youth, have all been cited as reasons for the BJP’s slide. All of these problems, at least in part, are caused by climate change, whether post-election coverage acknowledges this or not. To maintain popular support, the coalition government will need to adopt long-term climate solutions that connect directly to the livelihoods and economic needs of India’s youth and agricultural sector.

Farmers have been struggling with the impacts of extreme weather events on their crops for years (not to mention their anger over Modi’s attempts to disincentivize crop residue burning). The corresponding rise in agricultural product prices has stoked inflation. Additionally, disruptions in supply chains caused by flooding, cyclones, and droughts exacerbated already high costs for consumer products. Certainly, extreme heat impacted worker productivity in the agricultural and construction sectors, contributing to lackluster hiring of young workers, who often fill these jobs. Climate change is the hidden hand behind many of these worrying economic trends.

Notably, the BJP did take some significant actions on climate change prior to the elections: Modi made pledges that India would achieve energy independence by 2047, have five hundred gigawatts of renewable energy by 2030, and become central to the manufacture of green technologies. While these are laudable goals, it seems that they were not ambitious enough, or targeted for dates too far into the future, to quell voters’ concerns. Going forward, Modi and his coalition government will need to do more to connect climate change initiatives with kitchen table issues.

An example of a winning climate change solution already exists in Punjab. India’s largest bio-compressed natural gas (CNG) facility became operational in Lehragaga, Punjab, in 2022, with support from the BJP’s Sustainable Alternative Towards Affordable Transportation program, even though Punjab is not a BJP-controlled state. This facility converts paddy stubble (the leftover plant debris after a rice harvest) into bio-CNG, which significantly reduces the need for stubble burning, a major cause of air pollution throughout India. The stubble is collected directly by the facility, alleviating the cost and time that normally burdens farmers, thereby making the harvesting process more profitable. The byproduct of the facility’s process is biomanure, which can be used to enrich soil, further benefitting farmers. Ultimately, the plant produces cost-effective renewable CNG, which can be used for cooking, automotive fuel, and other applications. Duplicating this kind of facility throughout the agricultural regions of India could win over disgruntled farmers, provide new renewable energy jobs for young people, address the harms caused by climate change, and strengthen India’s energy security. The BJP’s Waste to Energy Programme under the Ministry of New and Renewable Energy could be expanded and more aggressively mobilized to facilitate this.

Likewise, the use of vetiver grasses to mitigate the impacts of flooding, which has markedly increased due to climate change, has a long history in India. Unfortunately, a byproduct of the industrialization of agriculture in the name of enhanced productivity has caused traditional, yet effective, practices like the use of vetiver grasses to be left behind. These hardy grasses, when planted along rivers and other sources of floodwaters, strengthen embankments and can largely prevent the soil erosion responsible for catastrophic landslides. These grasses also absorb carbon from the atmosphere and help recharge local groundwater. A new coalition government program that encourages vetiver use would help farmers avoid crop damage from flooding, while also reducing the cost of irrigating fields. The program could create vetiver planting jobs (suitable for youth and agricultural workers) and dovetail with national goals for planting more carbon-sequestering vegetation. This is a climate change solution with a direct connection to the issues that voters care about. Notably, vetiver can also be harvested for use in cosmetics, perfumes, and other personal care products. It can also be used as a feedstock for producing cellulosic ethanol, a renewable fuel. Producing these products domestically using vetiver would also give a boost to Modi’s “Make in India” initiative.

While Modi’s emphasis on building infrastructure for transportation, power, and sanitation has proven popular with the Indian public, more can be done to improve the country’s water management. Rainwater and floodwater retention systems have a long history in India, with the famous Rani Ki Vav stepwell and rainwater retention system (located in Modi’s native state of Gujarat) even being featured on the one-hundred-rupee note. A government coalition program that emphasizes such kinds of water catchment systems would help recharge local groundwater and reduce the impacts of flooding, creating value for the agricultural sector while also allowing Modi to lean into traditional practices that provide a source of national pride. 

There are many climate change programs that connect with kitchen table issues and resonate especially well with farmers and youth; Modi has an opportunity to strengthen support for the BJP by redirecting some of his energies to these programs. His prior use of short-term subsidies on grain and cooking gas temporarily obscured underlying problems without fixing them (which likely had the effect of inhibiting the development of long-term climate solutions). Similarly, export restrictions on rice and other agricultural commodities dampened market demand and farmers’ incomes in the name of marginally helping the common person. Instead of these approaches, Modi and his coalition government would be well served by promoting long-term, job-creating solutions, such as those involving bio-CNG, vetiver grasses, and water retention and detention.

Whether acknowledged or not, climate change influences the Indian electorate and underlies the discontent felt by many voters. Importantly, making progress on climate change in ways that are highly visible to the common person will help galvanize support from India’s youth, who currently have pessimistic views of humanity’s prospects of enduring climate change. They also happen to be the key to winning future elections.

Shék Jain is a nonresident senior fellow at the Atlantic Council’s South Asia Center and chairman of the Pura Terra Foundation.

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Mexico’s nearshoring opportunity

Mexico features prominently in US ambitions to “nearshore,” whereby companies move their production facilities closer to home and away from far-flung industrial hubs—mainly China. This shift is influenced by the United States’ drive to build more resilient supply chains in the wake of the COVID-19 pandemic and heightened geopolitical competition with China.

Cross-border economic ties under the United States-Mexico-Canada (USMCA) free trade zone are growing. The United States and Mexico are now each other’s largest trading partner. This can be attributed to many factors, including a deteriorating trade relationship between the United States and China, which reinforces the argument for nearshoring.

Mexico presents a supply chain opportunity for the United States. But from the Mexican perspective, support for nearshoring is relatively subdued. The “national project” of AMLO and Sheinbaum’s Morena party emphasizes combatting inequality including by developing the country’s south and strengthening state-owned companies. By contrast, the bulk of nearshoring investments would be made by private companies and go toward Mexico’s industrialized north, along the US border. Perhaps as a result, nearshoring has not progressed as rapidly as many predicted. US investors will need to align with Sheinbaum’s agenda to build a Mexican energy system capable of turning nearshoring into a reality.

Is nearshoring even happening?

A closer look at investment data paints a mixed picture of nearshoring. On one hand, foreign direct investment (FDI) in Mexico—the only measure of whether investment in the country is rising—reached a record $20.3 billion in the first quarter (Q1) of 2024, a 9 percent increase over Q1 2023. Fifty-two percent of total FDI in Mexico originated from the United States. On the other hand, only 3 percent of this increase can be attributed to new investments, contradicting the narrative that large-scale nearshoring is occurring. Furthermore, manufacturing as a share of Mexico’s economy grew to only 21 percent in the first half of 2023, from a pre-pandemic level of 20 percent. Tesla, which in March 2023 announced one of the largest nearshoring projects, has yet to break ground on its facility in Nuevo León. Like other investors, Tesla has encountered rising costs and logistical challenges.

Grid constrains are stifling nearshoring

Nearshoring is being limited by structural issues faced by Mexico’s electricity sector. Mexico’s grid has struggled to keep up with rising demand. The country suffers an “energy deficit,” facing difficulty connecting new manufacturing plants to the grid and—by extension—to renewable energy sources. The latter is a potential sticking point for electric vehicle producers looking to relocate to Mexico such as Tesla, GM, and Ford. The Mexican Association of Private Industrial Parks notes that this issue has postponed some projects and has throttled nearshoring in the years since the pandemic.

Is Mexico’s electricity sector a constraint?

The fragility of Mexico’s grid presents another major nearshoring obstacle. This was made clear in early May 2024 when the electricity demand on the grid nearly exceeded the total available generating capacity, leading the national electric system operator, CENACE, to declare a state of emergency. It has been reported that much of this demand can be attributed to the rising use of air conditioning and electric cooling during a record-breaking, weeks-long heatwave. As Mexico gets hotter courtesy of climate change, demand for cooling technologies—particularly for industrial processes—is set to rise.

Mexico’s electricity sector needs to shape up to meet increased demand from nearshoring.

More competition is needed—US investors can help

Mexico’s electricity sector offers a promising path for the United States to align its nearshoring objectives with Sheinbaum’s agenda. But to do so, it must benefit state-owned companies and free up state funds for social programs aimed at reducing inequality.

Increased private sector participation in the electricity sector is a necessity for achieving greater capacity and connectivity to unlock nearshoring. One analysis from the National Autonomous University of Mexico argues that increasing private sector participation in the electricity sector would not displace the state-owned electricity company CFE, which controls 40 percent of Mexico’s electric generation capacity, produces 70 percent of its power with private partners, and controls the full transmission and distribution network of the national grid.

In fact, CFE could benefit from increased industrial demand driven by nearshoring. Increasing private sector involvement in power generation can even help CFE by freeing it to investment in other areas, such as upgrading its transmission and distribution network and strengthening its balance sheet in the long term.

New president, new opportunities

AMLO has tried to strengthen CFE by passing a measure in 2021 to discriminate against private sector electricity generation and negate the 2013 Electricity Industry Law, which was designed to promote competition in the sector. Although the measure has since been overturned by the Supreme Court, the administration has effectively halted new public auctions for independent power contracts, preventing growth in private sector investment. Despite this, the private sector drove the increase in solar and wind power from 2014-2020.

Reversing course on private investment will be critical to restoring and expanding the capacity of the electric system and lowering costs. In 2019, independent power producers generated electricity 35 percent cheaper than CFE.

Sheinbaum’s election may present an opportunity for greater private sector collaboration with the United States. Facilitating investment can both strengthen Mexico’s grid and bolster the Mexican state, outcomes that are in line with Morena’s socioeconomic justice goals. While Sheinbaum will likely continue to favor state-owned companies, the Wall Street Journal reports that she also aims to “attract billions of dollars in private investment for solar and wind farms, with the government keeping control and a majority share in the electricity market,” citing a close advisor to Sheinbaum.

How the US-Mexico partnership can boost nearshoring and the electricity sector

The United States should seize the opportunity to work with the incoming Sheinbaum administration to strengthen the Mexican energy sector, thereby enabling supply chain security gains through nearshoring. The relationship should uphold the mutually beneficial tenets of the USMCA, including its level playing field for private sector investment.

In addition, the United States should redouble its technical and regulatory cooperation efforts with Mexican electricity regulators as has been conducted through the U.S. National Renewable Energy Laboratory (NREL). The aim of this partnership should be to work toward goals which benefit the Mexican administration’s agenda while strengthening economic ties and boosting Mexico’s manufacturing potential.

US-Mexico cooperation on electricity sector regulation can facilitate private sector investment in generation that could decrease the burden on CFE as the sole entity responsible for expanding the grid. Ceding greater financing responsibility to the private sector—with CENACE retaining control of the national electric system—could enable CFE to expand its business alongside the private sector and permit the Mexican state to focus on investments that promote increased prosperity for all its citizens.

With higher private sector participation conducted in a manner that respects the central role state-owned companies play in Mexican society, the electricity sector in Mexico can be transformed into an enabler of the nearshoring trend.

William Tobin is an assistant director with the Atlantic Council Global Energy Center.

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Global Energy Center

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The IEA’s recent analysis concludes that the world is on a path to achieve only one-third of the necessary reductions to limit global warming to 1.5 degrees C by 2030. The establishment of a new financing structure that catalyzes private investment in developing countries through innovative financing guarantees is crucial for achieving ambitious carbon reduction goals.

Climate Change & Climate Action Energy Markets & Governance

EnergySource Jul 11, 2022

Climate and energy at the US-Mexico bilateral summit

By David L. Goldwyn, Neil Robert Brown, Andrea Clabough

Energy and climate issues will feature heavily when Mexico’s president visits the White House this week. President Biden faces the tough task of fostering greater cooperation while asserting US demands for treaty compliance and a free and fair energy market.

Americas Energy & Environment

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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A recent survey by the Yale Program on Climate Change shows that Indians are highly aware of climate change and its impact on India’s future: A staggering 86 percent “favor the Indian government’s commitment to reduce India’s carbon pollution to nearly zero by 2070.” According to the survey, 85 percent agree that “transitioning from coal to wind and solar energy to produce electricity will reduce air pollution,” and 82 percent say “doing so would reduce global warming.” Surprisingly, the survey revealed that 84 percent “favor banning the construction of new coal power plants, closing existing ones, and replacing them with solar and wind energy.”

At the same time, Indians are concerned about the unintended consequences of climate change policies. The Yale survey showed that 61 percent say transitioning from coal to wind and solar energy to produce electricity “will increase unemployment in India,” 58 percent say “it will cause electricity outages,” and 57 percent say “it will increase electricity prices.” 

Indians are aware that they are among the world’s top emitters of greenhouse gases, including carbon dioxide (CO2). India’s CO2 emissions are relatively low per capita, ranking just sixteenth in Asia and ninety-ninth globally. But India’s burgeoning population, need for economic and job growth, and role in the global digital and technology ecosystem mean that India will need multiple power sources, including coal and other fossil fuels, for the near future. In fact, the International Energy Agency’s 2021 India Energy Outlook notes that the country needs to add a power system the size of the entire European Union grid to meet its energy requirements over the next twenty years. A blend of energy sources that moves swiftly toward green energy is the only viable option.

Indian leaders have committed to lowering their country’s dependence on coal and other fossil fuels, reduce its carbon intensity by 45 percent, and achieve 50 percent cumulative electric power from renewables by 2030. Equally ambitious, India would like to achieve net-zero carbon emissions by 2070. A 2023 report by the International Energy Agency stated that India is expected to produce over half of the world’s new capacity for renewable energy over the next three years. Much of this should be credited to India’s aggressive renewable energy policies.

Three opportunities for Modi to boost clean energy

But with Prime Minister Narendra Modi winning a historic third consecutive term, leading a coalition government, he has the mandate to go beyond issuing regulations and providing government financing. There are three opportunities that the Modi government could take right away to further support and strengthen its clean energy agenda.

First, businesses require certainty. Indian laws and regulations are not required to have sunset provisions and can be revoked or terminated at any time. This discourages large-scale private sector commitments and investments. Defined regulatory and legislative terms articulate the government’s commitment to its policies and allow businesses to accurately assess its financial commitments. Similar to the United States’ 2022 Inflation Reduction Act, the Modi government could commit to a ten-year sunset for its clean energy programs. After ten years, when the regulations need to be reauthorized, the laws can be updated to meet current demands.

Second, to help support clean energy businesses, the government needs to expand its institutional capacity at the state level and properly invest in education systems to produce a skilled workforce.

Third, with the increase in power generation, India must ensure that its electrical grids can receive and transmit the power to customers (the last mile). Failure to do so could cause India to miss its clean energy targets and lead to a slowdown in economic and job growth.

Over the past three decades, more than 3,500 climate policies have been announced by nations around the world, according to the World Economic Forum. From 2010 to 2015, China issued the highest number of climate policies. But from 2015 to 2022, India took the lead by issuing more than fifty climate change policies. These ranged from production-linked incentive schemes to policies that encourage the use of clean energy products such as rooftop solar energy. This multifaceted approach is backed with the objective of reducing India’s carbon intensity by 45 percent compared with 2005 levels and generating 50 percent of electric power from renewable sources by 2030.

What the private sector is already doing

The private sector has positively responded to India’s ambitious goals. For example, in 2022 the Adani Group* started developing the world’s largest renewable energy park. Through an ecosystem of manufacturing, generation, and transmission, the Khavda renewable energy park, located in the deserts of Gujarat, is combining wind and solar power to generate 30 gigawatts of energy for the national grid. When completed in 2029, the park will power 16.1 million homes and eliminate 58 million tons of CO2 emissions annually, the developers say. To put that in perspective, it is the equivalent of planting more than two billion trees or not burning 60,300 tons of coal each year. Another massive Indian conglomerate, Tata Group, recently completed India’s largest solar and battery energy storage system via its Tata Power Solar Systems subsidiary. Tata says that the facility, which is in Chhattisgarh, combines a 100 megawatt solar photovoltaic project combined with a 120 megawatt hour battery storage system. The developers expect the project to reduce India’s carbon footprint by 4.87 million tons of CO2 over twenty-five years.

However, more is needed. The Adani Group has the size and diversity of businesses to marshal the necessary resources to build something like Khavda. It was able to develop the basic infrastructure—including the roads and telecommunications systems, an airstrip, a self-sustaining ecosystem for a workforce of more than eight thousand, and the transmission lines—within twelve months of launching the project. But Adani, Tata, and other major Indian conglomerates are the exception more than the rule in terms of ability to marshal resources.

To encourage even more private capital and participation, public-private partnerships (PPPs) will be needed. For example, earlier this year, First Solar inaugurated India’s first fully vertically integrated solar manufacturing plant in Tamil Nadu. Buoyed by a $500 million loan from the US International Development Finance Corporation, the First Solar facility will produce its Series 7 photovoltaic solar modules supported by an annual capacity of 3.3 gigawatts while employing approximately one thousand people. This can be a model for future PPPs.

India’s emissions will continue to grow before they peak and fall. The question is, can a third Modi administration continue creative policies that fulfill India’s ambitious climate goals—and will the rest of the world meet India both where it is today and can be tomorrow?

Kapil Sharma is the acting senior director and a senior fellow at the Atlantic Council’s South Asia Center.

Note: The Adani Group is a donor to the Atlantic Council’s South Asia Center.

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At a time of rapid growth in renewable energies such as solar and wind, it would be easy to write off the region (as some are doing) as a waning power, both in terms of energy and geopolitics. After all, how good can the outlook be for petrostates in a world focused on moving to net-zero emissions? In our view, the opposite is true: the region is well placed to become not just a major source of renewable energy, but also a central and indispensable player in the global energy transition, uniquely able to balance supply and demand for all types of energy, both hydrocarbons, and renewables.

Saudi Arabia and other GCC countries are already moving in this direction, perhaps faster than many outside the region realize, thanks to a powerful mix of investment, infrastructure, and political determination. They have a unique opportunity to take the lead in putting the world on a more sustainable energy footing while simultaneously diversifying and enriching their economies.

A critical question is whether and how the other countries in the region follow their lead. A new phase of cooperation within MENA will be needed if the potential for the region in a reconfigured energy setup is to be realized.

GCC countries are in a strong starting position for the energy transition in large part because of their natural advantages. Thanks to abundant sunshine and wind, they can produce and export renewable energies at a consistently lower cost than any other region. For example, Saudi Arabia’s Al Shuaiba project is projected to generate solar energy at a levelized cost of electricity (LCOE) of 1.04 US cents per kilowatt hour, which is just one-fifth of the 2023 global average for solar photovoltaic (PV) energy. This is followed by the United Arab Emirates’ 2 gigawatt (GW) Al Dhafra Solar PV project, which can produce solar energy at a price as low as 1.35 US cents per kilowatt-hour.

The abundance of both fossil and renewable resources means that, at every point on the path from a hydrocarbon-based energy system to a fully decarbonized one, GCC countries can deliver the cheapest configuration for the desired CO2 emissions level without compromising on energy security. In other words, they are well placed to continue with their role of balancing supply and demand—not just with oil and gas, but in a new, green era with a full range of energy resources, both renewable and traditional.

Other advantages are the region’s central geographical location, which provides comparatively easy access to large import markets in both Europe and Asia, as well as to developing markets such as those within Africa, and a ready supply of capital to help finance the transition. Moreover, the closely regulated single-buyer market in GCC countries, which grants regulators greater control over the whole electricity system, enables them to efficiently enact state policy and ensure a choreographed deployment of supply and transmission investments.

For the GCC alone, as we write in our recently published book, Arabian Gambit, these advantages provide the opportunity to become a global force in green hydrogen, recycled plastics, artificial proteins, and even some low-energy manufacturing, among other prospects. For instance, we estimate that every million tonnes of recycled plastics produced could create around 1,450 jobs and contribute US$650 million directly to the GCC’s gross domestic product. Furthermore, attracting 10 percent of global manufacturing in high-potential products could bring up to US$300 billion in foreign direct investment and create 150,000 new jobs, while also unlocking US$25 billion in nonoil exports and offsetting 75 million tonnes of CO2-equivalent emissions annually. Where does that leave other countries in MENA—a region that is particularly exposed to climate change as well as to global efforts to mitigate it?

It’s important to draw some distinctions between countries: MENA is not a monolith and can be distinguished into three groups based on national governmental budget and net energy exports. The first group consists of countries with a budget surplus and large net energy exporters, such as Saudi Arabia, the UAE, Kuwait, and Qatar. With their strong financial position, they can invest heavily in renewable energy infrastructure. The second group consists of countries with a budget deficit, but are net energy exporters, such as Oman, Libya, and Algeria. These countries might face challenges in transitioning to renewable sources of energy due to budget constraints. Egypt is a country in this category, but it has already made significant progress in the renewable transition despite similar constraints. The third group consists of countries with a budget deficit which are net energy importers such as Morocco, Jordan, and Lebanon. Morocco and Jordan focus heavily on renewable transition and have considerable potential to become significant hubs for renewable energies.

The push into renewables in many of these countries is impressive. The International Energy Agency (IEA) estimates that, over the past decade, North Africa has managed to increase its renewable energy production by 40 percent. Countries like Egypt and Morocco are leading in solar and wind energy production outside the GCC, according to the IEA. Egypt alone added 25.5 GW of new generating capacity between 2015 and 2019, including 1 GW of solar PV and nearly 840 megawatts (MW) of new wind capacity—and in the process, went from chronic power shortages to having a 25 percent surplus of electricity supply. Morocco, meanwhile, accounts for three-quarters of the region’s renewable electricity production growth. Home to one of the largest solar farms in the world, the Noor Ouarzazate complex, Morocco is on track to increase the share of renewables in electricity to 60 percent to 65 percent by 2030, according to IEA estimates. Jordan has also been developing substantial solar and wind projects.

Much more still needs to be done to press home the renewable energy advantages that the whole MENA region has—and help those countries still lagging accelerate their energy transition. Wind and solar energy are only the beginning: even when countries have renewable resources and land on which to build installations, they lack some of the other attributes that are needed, including long-term finance, trust of investors and other potential stakeholders, appropriate regulatory regimes, and the government offtake that will make these installations viable.

This is where the GCC countries can help, taking the lead to build a collaborative energy framework and network across the region. The GCC members have a natural edge through their access to capital and the stability that allows for long-term investments that some other countries in the region may lack—and they can be the prime movers and facilitators of such a network.

There are multiple opportunities for greater collaboration. These include opportunities to integrate more renewables overall: creating possibilities to balance loads by exchanging renewable energy with neighboring countries, building out renewable energy infrastructure, and, potentially, marketing jointly to other regions such as Europe. GCC countries could facilitate the transfer of technology and expertise to other MENA countries, focusing on training and capacity building in renewable technologies. They can do so by fostering joint ventures and public-private partnerships with local companies and government agencies in those countries.

Further, the GCC countries can lead in developing a harmonized regulatory framework for renewables that encourages investments across the region. Harmonization of renewable energy practices and standards among MENA countries would be a big step forward to greater cooperation. For financing, GCC countries could develop a foreign direct investment approach, stepping in to help, where useful. They can establish a MENA renewable fund to support projects in countries with budget deficits and high solar or wind potential and use this to drive demand for the export of components manufactured in the GCC. For manufacturing, for example, GCC countries could help finance and develop the capacity to produce solar and wind turbines elsewhere in the region. If the cooperation develops strongly, it could even give rise to the creation of a clean energy souk, or marketplace, that brings together all the different elements under a single umbrella.

Some of this is already starting to happen, particularly on the investment front. Saudi Arabia is heavily investing in the renewable transition of MENA countries. The Saudi firm ACWA Power is looking to ramp up investments in both Egypt and Morocco to further clean energy projects there. This includes setting up a 200 MW solar project in Kom Ombo, Egypt, and a 150 MW solar plant as part of the Noor Ouarzazate solar complex in Morocco. The UAE also is driving large investments in solar and wind projects in Egypt, Morocco, and Jordan. In Egypt, Abu Dhabi’s Masdar signed an agreement to build a US$10 billion wind farm, and AMEA Power completed a US$1.1 billion deal to deploy 1 GW of wind and solar energy. Further, AMEA Power has won a contract to build two solar power plants in Morocco, and Masdar is set to develop a 1 GW wind project in Jordan. Additionally, Arab Petroleum Investments Corporation has taken a 20 percent stake in a major Jordanian wind project.

This is just the beginning, and more can be done to promote ties and further cooperation in clean energy across the MENA region. Much is at stake and much can be gained: the energy transition amounts to a larger regional reset as a global clean energy powerhouse. For all their differences, MENA countries have the essential components required to step into the new role. Now they need to take decisive steps toward realizing that potential.

Dr. Shihab Elborai and Anthony Yammine are partners, and Pavel Popikov is a manager, at Strategy& Middle East, a strategy consultancy part of the PwC network.

The post Policy memo: What will it take to make the MENA region a renewable energy powerhouse? appeared first on Atlantic Council.

Brazil offers a useful case study of China’s strategy—and whether it’s sustainable.

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Over the course of 2023, the value of Chinese BEV exports to Brazil surged eighteen-fold as automakers like BYD expanded their presence in the country. Chinese BEVs accounted for 92 percent of Brazil’s total BEV imports in this period.

This trend has continued durably thus far. As of April 2024, Brazil has surpassed Belgium as the top export market for China’s EVs.

Those aren’t the only numbers pointing to Brazil’s growing prominence as a market for Chinese BEVs, which constitute 88 percent of China’s total exports of electric vehicles, a category which includes both battery and plug-in hybrid electric vehicles (PHEVs).

In fact, Brazil imported $735 million worth of Chinese BEVs in 2023, nearly three times the value of Mexico’s imports of these Chinese vehicles. Despite increasing attention on Mexico as a destination for exports of Chinese BEVs, 2023 marked the second straight year that Brazil has ranked as Latin America’s largest importer of Chinese BEVs.

Furthermore, growth in Chinese exports of BEVs to Brazil far exceeded the overall rate of increase in exports across China’s “new three” industries—electric vehicles, lithium-ion batteries, and solar photovoltaic cells—that are critical pillars of China’s export-driven manufacturing plans. In 2023, China’s worldwide exports of these three industries increased by 30 percent—a significant jump amid sluggish global GDP growth overall, suggesting limited ability for markets to absorb this export growth.  

Whether Brazil can continue to absorb China’s overproduction of BEVs, similarly, is increasingly in doubt.

Strong domestic sales, slacking foreign competition

In recent years, EV sales in China have been robust, with BEVs—which are almost entirely produced domestically—accounting for 25 percent of total car sales in 2023. It is worth noting that this includes foreign firms, however, such as Tesla and Volkswagen.

China’s manufacturing of BEVs has outpaced domestic demand. While this might have resulted in millions of cars sitting unsold in Chinese lots, the overproduction has coincided with Western automakers such as General Motors, Ford, and Volkswagen tempering their EV ambitions amid weakening demand growth in their core markets.

This confluence of trends created an opportunity for Chinese BEV makers to boost sales abroad, as demonstrated by the 70 percent jump in BEV exports during 2023. Chinese BEV firms, and BYD in particular,  are making a concerted effort to expand outside of mainland China, offering products that outcompete peers on price, and sometimes compete strongly with internal combustion engine vehicles.

China’s growth ambitions cause concern

Rather than incentivize consumption, China is doubling down on its investment-driven growth model with an upcoming manufacturing stimulus program. Investment, expressed in World Bank data as gross capital formation, already represents 40 percent of China’s GDP, far above the global average of 25 percent and exceeding the emerging market average of 30 to 34 percent, illustrating China’s reliance on sectors like manufacturing to fuel growth.

China’s decision to expand its export-driven manufacturing sector is causing handwringing in target markets. The Brazilian government has opened a number of probes into China’s alleged “dumping” of goods. The European Union has also opened investigations into potential “non-market practices and policies” adopted by China.

China’s exports of its record surplus of manufactured goods beyond current levels will depend on other countries’ willingness to let China take market share from domestic industry. In an increasingly protectionist era, that seems far-fetched.

Will Brazil absorb China’s manufacturing surplus?

The surge in imports of BEVs from China has been rapid, offering little time to react. However, for Brazil, the stakes for its industrial competitiveness are high, and its tolerance for China’s encroachment on its automotive industry may be limited.

For one, automobiles are a critical cog in Brazilian industry. As of 2020, 89 percent of vehicles sold in the country were domestically produced, although this may have decreased slightly amid a surge of Chinese BEV imports. The car sector accounts for about 20 percent of industrial GDP, an area of critical importance to Brazil, where value-added manufacturing’s share of GDP has declined from 26 percent in 1993 to 11 percent in 2022.

Second, Brazil does not want to deepen its reliance on imports of high-tech and value-added products. In 2021, Brazil’s imports of capital, consumer, and intermediate goods accounted for 93 percent of total goods imports, a symptom of the country’s increasing trade specialization in the export of raw materials, which represented 55.7 percent of Brazil’s exports of goods. The government has expressed its discontent with this status quo, seeking to avoid trade arrangements that “condemn our county to be an eternal exporter of raw materials,” in the words of President Luiz Inácio Lula da Silva.

Furthermore, Brazil has made supporting the domestic auto sector a priority. In May 2023, the Lula administration unveiled a series of measures to promote domestic auto manufacturing via credit lines, tax breaks, and incentives for the use of domestic content.

A continued rise in cheap Chinese EV imports would not align with Lula’s top-down push for re-industrialization, designed to foster formal high-wage employment, innovation, and economic diversification. In fact, his administration has announced new tariffs on electric vehicles, which will ramp up to a 35 percent import tax by 2026.

As such, China will likely need to find more willing buyers of its surplus EVs. Although it is difficult to forecast where the next surge in imports will take place, South and Southeast Asian markets such as India, Indonesia, and Thailand could begin to exhibit stronger uptake, as could markets in Latin America such as Colombia and Mexico.

William Tobin is an assistant director at the Atlantic Council Global Energy Center.

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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William Tobin

Assistant Director

Global Energy Center

Africa China

EnergySource Feb 24, 2023

Lula is back. Are Brazil’s climate credentials?

By Lizi Bowen, Maia Sparkman, William Tobin

Lula’s return to office in Brazil heralded a renewed commitment to environmental stewardship. But steps must be taken to ensure that renewal becomes as concrete and effective as possible.

Brazil Climate Change & Climate Action

EnergySource May 23, 2024

Without tariffs, the EU faces a flood of Chinese imports of the ‘new three’

By Joseph Webster

Europe faces a surge in Chinese cleantech imports following recent US tariffs. This should prompt Brussels to selectively impose its own tariffs while also strengthening domestic industries to protect its economic and strategic interests.

Central Europe China

EnergySource May 13, 2024

What US tariffs on Chinese batteries mean for decarbonization—and Taiwan

By Joseph Webster

In response to Beijing’s attempts to cement its dominant position across the “new three” technologies of solar photovoltaics (PVs), electric vehicles (EVs), and batteries, the Biden administration is poised to issue tariffs on key Chinese products. A look at China’s battery exports, and its associated battery complex, reveals both opportunities and risks for US and allied […]

China Energy Transitions

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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The post Brazil is buying lots of Chinese EVs. Will that continue? appeared first on Atlantic Council.

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The European Union’s imports of the new-three cleantech export categories have skyrocketed in recent years. Over the course of 2023, China’s exports to the EU totaled $23.3 billion for lithium-ion batteries, $19.1 billion in solar panels, and $14.5 billion for electric vehicles.

Sources: PRC General Administration of Customs, Author’s Calculations

Europe’s imports of these cleantech products have fallen in recent months, partly because of the global glut in solar panels and constraints on installations. The EU’s anti-subsidy investigation into electric vehicles, launched in October, has also cooled shipments.

Europe’s most consequential tariff decisions concern EVs and batteries, as these products hold economic and strategic relevance.

With the automotive sector indirectly providing 6.1 percent of total EU employment and 7 percent of GDP turnover, EVs and batteries are a key future driver for the EU’s economy. This sector is at risk due to China’s heavily subsidized auto exports.

While transitioning to EVs from internal combustion engines will necessitate disruptions, ceding Europe’s auto industry would deliver a “second China shock” of mass economic dislocations, all but ensuring a fierce political blowback with potentially calamitous implications for the European project.

Reasonable people could disagree about the wisdom of allowing cheap Chinese imports to undercut domestic industries in the 1990s and 2000s. At the time, many believed that greater economic linkages between the West and China would produce rising living standards across the board, reduce geopolitical frictions, and potentially even lead to constructive political changes within China itself.

That didn’t happen. While trade with China led to complicated, often ambiguous impacts for Western economies, Beijing threatens global democracy more than ever, and the Communist Party continues to rule mainland China with an iron fist.

Recognizing this dynamic, various European Union bodies have characterized the Chinese government as a “systemic rival”—as well as a partner.

While European threat perceptions of Chinese exports largely center around economic and political concerns, security dimensions shouldn’t be overlooked.

China’s exports of sensor-laden connected vehicles pose potential espionage and sabotage risks. Chinese security services could use these vehicles to monitor European military and political facilities, as well as collect real-time economic and mobility data. In a worst-case scenario, these vehicles’ software systems would be vulnerable to hacking.

China’s lithium-ion battery complex also has latent military potential, as batteries are critical components for diesel-electric submarines, unmanned maritime platforms, and aerial drones. Moreover, technological advances in solid-state batteries could offer significant, potentially game-changing performance improvements for military use cases.

Given the economic and security risks, Europe should impose tariffs on Chinese exports of EVs and lithium-ion batteries. To balance decarbonization goals with these other needs, however, Europe could follow the US approach by phasing in certain tariffs, such as on Lithium-ion non-electrical vehicle batteries. These batteries are useful for grid decarbonization but pose few direct security threats.

China is unsubtly hinting it will respond to any European tariffs with countermeasures, including against wine and dairy exports.

Yet Europe is better off accepting short-term pain than allowing the formation of a clean energy cartel overseen by a systemic rival.

In other cases, such as solar panels, Chinese clean tech exports pose few economic and security risks to Europe. This industry has left Europe and isn’t coming back, especially since European solar potential is limited. Although inverters should be monitored closely, there are no known security risks for solar panels, which cannot communicate with the grid. Consequently, Europe should accept Chinese solar imports while still ensuring that global supply chains are not held hostage to a single supplier.

Importantly, the West should continue to emphasize to Beijing that it seeks to de-risk rather than decouple supply chains. While Western trade with China has not fundamentally improved ties, commercial ties nevertheless can provide ballast for the relationship, mitigate security dilemmas, and provide economic benefits.

To stop political ties from deteriorating further while maximizing trade and climate benefits, Europe and its partners should identify products where commerce can be conducted with China without damaging economic or security interests.

Still, Europe should rapidly employ tariffs and fiscal support to bolster critical industries and technologies, including EVs and batteries. Balancing decarbonization objectives with economic and security needs is no easy task, but Brussels must find sure footing on this tightrope, and quickly.

Joseph Webster is a senior fellow at the Atlantic Council and editor of the independent China-Russia Report. This article represents his own personal opinion.

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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Joseph Webster

Senior Fellow, Global Energy Center

Global Energy Center Indo-Pacific Security Initiative

Central Asia China

EnergySource May 13, 2024

What US tariffs on Chinese batteries mean for decarbonization—and Taiwan

By Joseph Webster

In response to Beijing’s attempts to cement its dominant position across the “new three” technologies of solar photovoltaics (PVs), electric vehicles (EVs), and batteries, the Biden administration is poised to issue tariffs on key Chinese products. A look at China’s battery exports, and its associated battery complex, reveals both opportunities and risks for US and allied […]

China Energy Transitions

EnergySource May 9, 2024

China builds more utility-scale solar as competition with coal ramps up

By Joseph Webster

China’s transition to more utility-scale solar installations furthers its decarbonization efforts. However, regional resource limitations, limited interprovincial electricity transfers, and cheap coal present structural and economic headwinds.

China Energy Transitions

New Atlanticist Mar 7, 2024

A geopolitical European Commission is a must for 2025 and beyond

By James Batchik, Stuart Jones

The next European Commission president will need to prioritize the bloc’s defense transformation and economic security.

Defense Policy Economy & Business

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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The post Without tariffs, the EU faces a flood of Chinese imports of the ‘new three’ appeared first on Atlantic Council.

1. What is the Biden administration trying to accomplish with these tariffs?

The Biden administration’s objectives are threefold. First, it seeks to foster the growth of the fledgling US clean energy complex against Chinese rivals, many of which have received vast subsidies from national, provincial, and local governments. 

Second, and relatedly, the tariffs aim to ensure that clean energy technologies are not dominated by a sole supplier. This action reduces the probability that a single entity can establish control over vital technologies such as EVs, lithium-ion batteries, and other products.

Third, the tariffs may slow China’s development of certain dual-use technologies that have latent military potential. Lithium-ion batteries, for instance, are used for not only EVs and electricity grid storage, but also for military applications such as diesel-electric submarines, aerial drones, and unmanned maritime platforms. 

The tariffs will, all else being equal, curb China’s industrial capacity, which could be repurposed for its defense industrial base. They will also reduce the probability that China will be the first to make technical or commercial breakthroughs in battery technologies, such as solid-state batteries, that could be military game-changers. 

—Joseph Webster is a senior fellow at the Atlantic Council’s Global Energy Center, where he leads the center’s efforts on Chinese energy security.

Fundamentally, Biden administration officials are trying to avoid repeating the mistakes of past decades when, they believe, the United States (and its allies) did not do enough to counter China’s unfair trade practices until it was too late and Chinese products flooded markets and cost jobs. Now they want to get ahead of the curve, especially on EVs with a staggering 100 percent tariff. It’s worth noting that only 1 percent of all US EV imports currently come from China—so this is about the future, not about now.

It’s not that China hasn’t been creating overcapacity for decades; it’s that the sectors China is now doing it in are considered critical for national security. That is what is driving so much of this reaction.

—Josh Lipsky is senior director of the Atlantic Council’s GeoEconomics Center and a former adviser to the International Monetary Fund.

The Biden administration has made several large strategic bets in industrial policy around semiconductors, EVs, solar, and infrastructure investment. As the administration has sought to onshore productive capabilities throughout these supply chains, one looming concern has been overcapacity and the potential for gluts of cheap imports shuttering newly built US plants. In many respects, these tariffs are preventive measures to guard against that possibility. By taking preventive measures, rather than post hoc remedies, the administration may also be trying to signal to the private sector that any investments they make in onshored critical supply chains will be protected from wild price swings. In this regard, this slate of tariffs attempts to make the long-term math on supply chain resilience work.

—Sarah Bauerle Danzman is a resident senior fellow in the GeoEconomics Center’s Economic Statecraft Initiative.

The Biden administration has two main goals. The first is protecting infant or currently undeveloped industries supported by the Inflation Reduction Act and other efforts. The second is protecting US critical supply chains, such as for personal protective equipment, the importance of which became clear during the COVID-19 pandemic.

Posing the announcement as the outcome of the long-running, multiyear investigation under Section 301 of the 1974 Trade Act, the Biden administration believes that its tariffs will be much more effective than Trump-era tariffs, which the Biden team believes inadvertently caught intermediate goods that hurt US producers. These tariffs will be more targeted to the two goals above. For example, semiconductor tariffs are expected to be on imports of chips themselves, not final products that include semiconductors.

—David Hathaway is a nonresident senior fellow at the Atlantic Council’s Global China Hub and principal for China at the Asia Group.

2. What will be the practical effect on the affected industries in the United States and China, and on the fight against climate change?

In the short term, this will likely raise the price of key clean energy goods, or at least prevent these goods from decreasing as quickly in price as they otherwise would. However, emerging markets could very well be flooded with extremely cheap clean energy items from China, which could help them in their energy transition, but might also be seen as threatening from the perspective of the United States.

—Sarah Bauerle Danzman

Due to existing high tariffs, there is virtually no trade in EVs between the United States and China. But China is, by far, the largest exporter of lithium-ion batteries to the United States. Chinese imports are especially consequential for grid storage that complements intermittent solar power. Consequently, and depending on details of the tariffs, US efforts to decarbonize its grid could slow down. 

Certain critics of the tariffs will likely decry their impact on the US electricity grid. But the reality is it’s too soon to say how the tariffs will impact the global fight against climate change, in either the short term or the long term. In the short term, higher US tariffs will divert certain clean energy products to other markets, including China’s own domestic market. It’s possible that short-term trade diversion could actually deliver a higher environmental return on investment, given global carbon emission patterns. For instance, deploying solar and battery storage projects in certain coal-addicted Chinese provinces would deliver greater climate benefits than, say, installing more clean energy capacity in California. Over the long term, the tariffs could deliver climate benefits by preventing a single country from forming its own clean energy cartel. The Chinese government has a long history of using economic coercion to achieve its desired political ends. It is naïve to believe that Beijing would not exercise this same leverage in certain clean energy fields. 

—Joseph Webster

It’s worth noting that tariffs on several major ticket items, such as lithium-ion batteries, don’t kick in until 2026. This gives some adaptation time but also signals that the United States doesn’t think this policy will actually change China’s behavior.

—Josh Lipsky

There will likely be impacts to affected US industries, which could indeed complicate US efforts on climate change. The announcement included tariffs on some batteries, for example. For China, the tariffs, if effective, may blunt China’s ability to trade in products seeing heavy overcapacity, although Chinese producers will likely seek to shift to other markets, including in Europe. (See more below.)

—David Hathaway

3. How will this move affect the broader economies of both countries?

Tariffs on Chinese EVs will have comparatively little impact since US consumers are not buying many Chinese EVs. Economic impacts are more likely in other sectors in which replacements for Chinese products are considerably more expensive. However, the administration likely believes that the tariffs are necessary to support its goals to protect key industries, increase capacity via friendshoring, and secure critical supply chains.

—David Hathaway

Tariffs do create deadweight loss, so we can expect them to exact some costs on the US economy. The Biden administration has insisted that this approach to tariffs is more targeted and less inflationary than the across-the-board tariffs that former President Donald Trump has proposed. The tariffs have a couple of years to set in, which may help with adjustment. And, as mentioned above, the certainty in price protection that these tariffs afford producers could induce new investments in the US supply chains for these items.

—Sarah Bauerle Danzman

4. How might China react?

China won’t be shocked—in fact, it’s likely that US Treasury Secretary Janet Yellen and US Secretary of State Antony Blinken previewed this announcement on their respective trips there in April. China will, as is typical, play a long game—and accelerate its own reshoring policies as it tries to expand production in a range of countries, including Mexico. The United States is aware of that strategy, and that’s why you’ll see a lot of shuttle diplomacy between Mexico City and Washington ahead of the United States–Mexico–Canada Agreement renewal in 2026.

—Josh Lipsky

China has likely already baked such actions by the United States into its thinking. It must already understand that actions on trade are to be expected in the run-up to the US presidential election in November. However, the Biden administration is certainly expecting some form of material retaliation, likely below a level that could be considered escalatory. There is an awareness that one Chinese industry response may be to shift production to places such as Southeast Asia and Mexico. I understand that the US government is working actively with partners to prevent this.

—David Hathaway

I expect the Chinese government to consider more export controls on raw and processed critical minerals. The problem is that this might create short-term supply constraints for the United States. But the Section 301 tariffs cover some of these minerals, and so such moves will only further help the administration achieve its goals of independence from Chinese supply.

As David mentioned, Chinese companies are likely to try to invest in third markets to serve the United States and other protected markets. Attempts to build EV battery plants in places with trade agreements with the United States, such as Mexico, will further push Washington to engage with partners to shore up their investment regulatory regime. The United States may also start thinking about how to address ownership and control issues in its supply chain, especially since rules of origin through which tariff rates are set are based on the location of production, rather than on who ultimately owns that productive capacity.

—Sarah Bauerle Danzman

5. How does the US approach compare with Europe’s?

That’s the million- or trillion-dollar question. If Europe and the Group of Seven (G7) countries match or mirror US policies at the summit in Italy in June, it may cause Beijing to realize that this time is different. On the other hand, if Europe hedges coming out of its own antidumping review, it could affirm China’s view that their challenge is primarily with the United States, not the rest of the advanced economies. The next few weeks will be telling.

At the same time, the United States is not only going to rely on the G7 here. Watch for coordination with countries that have been skeptical of the United States, including Brazil, because they also share a concern about Chinese overcapacity.

—Josh Lipsky

I really hope that the United States provided ample notice to Brussels about this move. The Europeans are currently undertaking their own anti-dumping review of Chinese EVs, and their market is far more vulnerable to Chinese EV imports than the United States’. 

Europe is a bit handicapped compared to the United States when it comes to a more forceful use of tariff policy. The Biden tariffs arising from this Section 301 review are quite prospective in nature; they are anticipating a problem and applying tariffs preventively, particularly with respect to EVs. Additionally, the United States is able to pass well-funded industrial policy measures to further aid domestic production. The European Union (EU) has traditionally been more attentive to World Trade Organization rules around when and how to apply tariffs, and generally needs evidence of actual, realized harm before it acts. This means that EU producers will have to be hit hard by Chinese imports before the EU is likely able to act to protect them. Additionally, the intra-EU politics of industrial policy is much more complicated than in the United States, which further limits its scope of action.

—Sarah Bauerle Danzman

The tariffs may force Brussels’ hand, since higher tariffs in the United States on Chinese goods could result in substantial trade diversion to Europe. Brussels will have to act quickly, either to put its own tariffs in place or to accept a flood of Chinese-made products. 

—Joseph Webster

The post What to know about Biden’s new tariffs on Chinese EVs, solar cells, and more appeared first on Atlantic Council.

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On one hand, lithium-ion (li-ion) batteries, including those made in China, the world’s largest li-ion manufacturer, are useful for decarbonizing the US grid, improving the economics of solar deployment, and providing a key input for electric vehicles. On the other hand, ceding a new and important clean tech industry could pose long-term economic damages. Allowing China to dominate this sector hollows out US manufacturing capacity and know-how, while giving China’s battery complex the opportunity to grow in capacity and provide synergies with its submarine and drone-making capabilities, which are increasingly important in modern warfare. This rise in industrial capacity could prove significant in military contingencies involving Taiwan.

Managing these battery dilemmas will be challenging, but not impossible. Most immediately, the United States and its allies, friends, and partners should rigorously investigate where Chinese-made batteries do—and, significantly, do not—pose security risks. Most importantly, however, they should accelerate development of their own battery supply chains. 

Chinese li-ion battery exports and US decarbonization objectives

China’s global lithium-ion battery exports reached $65 billion in 2023, up nearly 400 percent from pre-COVID levels in 2019. More than half of these 2023 exports were shipped to the European Union and the United States-Mexico-Canada (USMCA) free trade zone.

Chinese li-ion battery exports are largely bound for the European Union and North America.

Source: PRC General Administration of Customs, author’s calculations

Chinese battery exports to USMCA are highly correlated with EV manufacturing capacity and solar installed capacity, which are often paired with battery energy storage systems. In North America, these facilities are overwhelmingly concentrated in the United States, which accounts for the lion’s share of USMCA’s lithium-ion battery imports, according to Chinese trade statistics. (Note: the United States and China report slightly different total trade figures, due to reporting lags and the timing of international shipments.)

Chinese exports to USMCA are largely routed through the United States.

Source: PRC General Administration of Customs, author’s calculations

According to the US Census Bureau, in 2023, the United States directly imported $13.1 billion in lithium-ion batteries from China, accounting for 70 percent all US li-ion battery imports in 2023, as measured in value. US li-ion imports are split between storage and batteries for electric vehicles.

US lithium-ion batteries derive primarily from China, both directly and indirectly.

Source: US Customs Data, author’s calculations

It’s worth noting that China’s share of all US li-ion batteries is understated in official statistics, in both absolute and relative terms. Chinese battery companies, as well as big battery players based in South Korea and Japan, often have manufacturing facilities in third-party countries that export to the United States.

In other words, China is currently an important player in US decarbonization, particularly when it comes to energy storage. China exported $10.8 billion of Li-ion storage batteries to the United States in 2023, accounting for 72 percent of all US imports of the product.

Chinese imports are particularly important in the storage market.

Source: US Customs Data, author’s calculations

These li-ion storage batteries are useful for decarbonizing the US power sector and complementing solar generation. As recent research shows, California and other western states have significantly increased their uptake of storage batteries on the grid, enabling solar’s percentage share of all generation to rise, advancing state and national decarbonization objectives.

The security risks from China’s battery complex

While mainland China’s li-ion batteries are useful for decarbonization, its battery complex poses often-overlooked security risks, especially in the event of a contingency over Taiwan. Batteries figure increasingly prominently in military affairs, including for diesel-electric submarines and unmanned platforms. Critically, US restrictions on Chinese li-ion batteries or of electric vehicles, another end use of li-ion batteries, will limit China’s industrial capacity that could readily be repurposed from the civilian industry to its defense industrial base. Just as crucially, by diminishing China’s battery business, US tariffs could constrain Beijing’s ability to secure technological breakthroughs with military uses.

China’s battery complex complements its military capabilities in multiple ways. Take aerial drones, which often employ lithium-ion batteries for propulsion. These weapons are already a critical element in Russia’s full-scale invasion of Ukraine, as both sides are estimated to field at least 50,000 first-person-view suicide drones per month.

Drone technology could play an even larger role in any confrontation over Taiwan. Mainland China’s industrial capacity in aerial drones and batteries could loom large in any confrontation, as its manufacture of dual-use drones dwarfs production seen in both Ukraine and Russia. There are limitations to the role batteries could play in the aerial domain due to constraints in energy density and range. Still, advances in battery technology could increase the potency of aerial drones in a potential Taiwan contingency.

Batteries are also useful for unmanned underwater vessels, unmanned surface vessels and, critically, conventional (i.e. non-nuclear powered) submarines. Diesel-electric submarines are powered by batteries charged by onboard diesel generation. Those with li-ion batteries offer performance improvements over those with lead-acid batteries, including quieter operations, and higher speeds for sprinting and cruising. Japan’s Maritime Self-Defense Force is the only navy known to operate diesel-electric submarines with li-ion batteries.

But the possibility that China could also develop li-ion submarines is a concern. Its battery complex has made undeniable technical advances in recent years and is, in many ways, technologically ahead of advanced economies, including Japan and South Korea. It is likely only a matter of time before China’s navy develops advanced li-ion diesel-electric submarines—if it is not doing so already.

Another risk posed by China’s battery complex is its development of solid-state batteries (SSBs), which enjoy further performance advantages over li-ion batteries, including greater density, capacity, range, and no risk of fire. While SSBs have yet to be commercialized, their development could offer substantial performance improvements for both diesel-electric submarines and unmanned systems.

The massive industrial scale and growing technological sophistication of China’s battery complex could therefore not only enable Beijing to secure the commanding heights of a global industry, but also enhance its military capabilities in ways that threaten US interests.  

Finding a balanced approach

Because the Chinese battery complex presents decarbonization opportunities, but also security risks for the United States and other constitutional democracies, policymakers should adopt a balanced approach to batteries, working together with allies, friends, and partners to take risk mitigation steps when necessary.  

Similar to its investigation into connected vehicles, Washington should comprehensively study where batteries pose potential security risks and take countermeasures where appropriate. Given the need to decarbonize the electricity system, Washington should act against existing installations or near-term imports of Chinese batteries for grid storage only when there is a compelling reason. Despite concerns about the security of Chinese-made grid storage batteries, any efforts by China to destabilize the grid appear far more likely to emerge from offensive malware operations or China’s cryptocurrency mining assets. As an interim measure, however, the United States and its allies should increase resiliency against potential grid subversion by undertaking more spot checks of battery imports and by booting Chinese-made batteries from sensitive locations, such as military bases.  

The best way to mitigate battery-related risks, however, is to develop a US and “friend-shored” supply chain. Washington, Brussels, and other allies and partners should de-risk the entirety of the battery supply chain. The coalition should focus on potential supply chain chokepoints, especially graphite, as the United States has no existing production sites for this key battery material. Fortunately, the United States has already made substantial progress on developing its battery industry, as nearly $34 billion in actual investment into battery manufacturing has occurred in 2023 alone.

But more can be done. Washington should enact policies to speed up clean energy deployment to both reduce emissions and enhance national security. This includes permitting reform, which is critical for connecting clean energy to the grid. Also, deployment of more US-made batteries could provide synergies with key defense industrial capabilities, including for unmanned platforms and manned submarines. Similarly, the United States should continue to build out its domestic charging infrastructure for electric vehicles, which are an important use for lithium-ion batteries. Finally, the United States and its treaty allies—Japan, South Korea, and the Philippines—should explore siting battery manufacturing capabilities in areas relevant for contingences involving Taiwan and the South China Sea.

Striking a responsible balance between the competing imperatives of national security, economic interests, and decarbonization is challenging. Many actors fail to grasp that multiple things can be true at once: climate change poses a massive threat to our shared global future—but so does mounting clean energy dependence on the Chinese Communist Party. US tariffs on Chinese batteries aim to take a balanced approach to managing this complicated dilemma.

Joseph Webster is a senior fellow in the Global Energy Center and the editor of the independent China-Russia Report. This article reflects his own personal opinion.

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Joseph Webster

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EnergySource May 9, 2024

China builds more utility-scale solar as competition with coal ramps up

By Joseph Webster

China’s transition to more utility-scale solar installations furthers its decarbonization efforts. However, regional resource limitations, limited interprovincial electricity transfers, and cheap coal present structural and economic headwinds.

China Energy Transitions

EnergySource Feb 10, 2021

A paradigm shift under President Joe Biden: From “energy dominance” towards climate cooperation

By Friedbert Pflüger

The US return to the Paris Agreement and the appointment of John Kerry as the new US Special Presidential Envoy for Climate indicate a new paradigm: international energy and climate cooperation is back on the agenda. While there may be challenges to achieving broader goals, hopes are up for a transatlantic New Energy Deal between the United States and the EU in light of new policy substance with ambitious climate targets, and a new tone.

Climate Change & Climate Action Energy & Environment

Seizing the advantage May 27, 2021

A connected world is a vulnerable world. The US can help secure it.

By Benjamin Jensen

National security is no longer measured by the size of a country’s military forces. It is measured by how efficiently and securely a country, as part of a network of allies and partners, exchanges information, resources, and ideas.

China Cybersecurity

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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The post What US tariffs on Chinese batteries mean for decarbonization—and Taiwan appeared first on Atlantic Council.

California’s experience shows that batteries will play an important role in lifting solar power’s share of all electricity generation. The Golden State is showing that it can ramp up solar generation and, thanks to batteries and greater transmission connectivity, that it can do so without a sharp rise in curtailment. On the leading edge of this transition, the state’s success or failure could inform how local and national governments worldwide go about greening their grids. 

Batteries rising

Batteries are helping improve the economics of Californian solar and decarbonize the grid of its California Independent System Operator (CAISO), which covers most of the state (and parts of Nevada). Batteries are succeeding in CAISO because they are helping mitigate its curtailment problems, which surged in the first part of 2023.

Solar curtailment in CAISO and elsewhere is determined by two main factors. In conditions of system oversupply, the grid does not have enough demand for renewable electricity generation. Local transmission constraints also produce curtailment. By shifting electrons into less-congested and higher-priced times of the day, storage batteries avoid saturating system demand or overwhelming local bottlenecks, improving the economics of solar and other clean energy sources and easing duck curve constraints.

California is mitigating curtailment via batteries. US battery storage installations are overwhelmingly concentrated in solar-rich areas of the country: California, Texas, and the “Mountain West battery states” of Arizona, Colorado, New Mexico, and Nevada.

California has traditionally been the United States’ leading solar market. In 2023, solar power’s share of all net generation in the Golden State stood at 19 percent; in Texas and the Mountain West battery states, conversely, its proportion reached only 5 percent and 9 percent, respectively, although solar notably accounted for 23 percent of Nevada’s net generation.

California is also, not coincidentally, the nation’s largest battery market. In addition to deploying nearly 19 GW of cumulative solar capacity, it currently has more than 10 GW of batteries, with its clean energy goals requiring more than 50 GW by 2045.

All these batteries are complementing solar generation and leading to lower curtailment. Battery capacity as a share of solar generation capacity in CAISO surged in the past twelve months, rising from 29 percent in January 2023 to 41 percent by December 2023. As new batteries have entered the grid, curtailment as a percentage of all solar generation has reversed its upward trend and even declined from recent highs, suggesting that more electrons are finding their way to the grid economically. While recent analyses catalogued that CAISO’s solar curtailment rose in early 2023, the newest data shows that batteries—and, crucially, new transmission lines—have reversed this trend, at least in relative terms.

Lower curtailment has lifted solar generation’s share of all electricity output. Solar’s twelve-month average of CAISO’s electricity load, or demand, totaled 18.6 percent in February 2024. That’s an all-time high—even as curtailment as a percentage of all solar generation has dropped.

Importantly, relative curtailment has decreased from recent highs despite the addition of significant new solar generation. While solar generation continues to rise as a percentage of the total load, curtailment’s percentage of all solar production has declined from recent highs. While CAISO’s overall curtailment rose by nearly 135 gigawatt hours (GWh) in the last six months of 2023 from prior year levels, it also generated 3,725 GWh more in solar electricity.

CAISO’s recent relative curtailment downtick could be due to several factors besides batteries, such as weather conditions and new transmission lines. Still, grid storage battery deployment has undeniably been an important element. CAISO’s addition of over 2.4 GW of battery storage capacity from June 2023 through the end of the year coincided with a sharp reduction in curtailment.

CAISO is set to continue deploying even more batteries in 2024. The US Energy Information Administration’s latest estimates suggest it will install nearly 5 GW of incremental battery storage capacity in 2024, along with 3.5 GW of new solar photovoltaic capacity. While not every project in queue will ultimately move forward, CAISO’s absolute increase in battery capacity and its relative rise as a percentage of solar capacity will mitigate curtailment.

More encouragingly, it’s early innings in the rise of batteries. While lithium-ion battery technologies are most prevalent on the grid today, other advances are possible. Most deployed batteries today, such as lithium-ion batteries, have storage of around four hours or less. New technologies, such as iron air batteries, could provide multiday storage solutions. As the quantity and quality of battery deployments improve, the grid will become more resilient and, all else being equal, solar generation’s share of the electricity grid will continue to grow.

Of course, solar and batteries face substantial challenges ahead: namely, geopolitics and economics. China’s massive role across clean energy supply chains raises thorny questions and difficult tradeoffs. China dominates solar supply chains and is deeply enmeshed in battery supply inputs, including for lithium. Political tensions with China could spike prices, especially if Beijing interferes with markets. Even without geopolitical disruptions, however, renewables could face growing costs and disruptions due to supply chain bottlenecks and the boom-bust cycle of commodities and inputs. With a prolonged period of high interest rates posing challenges to capital-intensive renewables, policymakers should alleviate inflation by accepting short-term increases in hydrocarbon output and accelerating housing construction. Meanwhile, managing illiquid commodities and inputs for solar and batteries could require creative policy mechanisms, such as financing hedging instruments or creating new benchmarks.

Increasing solar electricity’s share of generation via batteries would be good news for consumers and the environment. By some metrics, unsubsidized solar is the cheapest generation source, while solar photovoltaic plus storage is economically competitive with other, more polluting resources. Additionally, solar panels and lithium-ion batteries require virtually no water after entering service, unlike coal, for example. The increasing wave of solar and batteries hitting the grid could aid the economic and environmental goals of California and other states.

Joseph Webster is a senior fellow at the Atlantic Council’s Global Energy Center. This article represents his own opinion.

The post California’s battery boom is a case study for the energy transition appeared first on Atlantic Council.

The post Webster quoted in Recharge News on Chinese wind power dominance appeared first on Atlantic Council.

Public Event Wed, April 24, 2024 • 3:00 pm ET

CEO Scott Nathan on DFC’s work on energy security and other strategic priorities

An #ACFRONTPAGE EVENT—Scott Nathan, chief executive officer of the US International Development Finance Corporation, discusses the agency’s role in US efforts to advance global energy security and other strategic US priorities.

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The US International Development Finance Corporation (DFC) isn’t “directly competing” with China, according to its chief executive officer Scott Nathan, but it is “offering an alternative.”

Nathan spoke at an Atlantic Council Front Page event hosted by the Council’s Global Energy Center on Wednesday, explaining that the DFC is different from Chinese development banks or Chinese investment initiatives (such as the Global Development Initiative and Belt and Road Initiative) because it supports the private sector directly. The DFC doesn’t lend money to governments for “big and also sometimes bloated” projects that aren’t “appropriate for local laws and conditions,” he said, alluding to China’s investments that have pushed countries into deep debt.

The DFC head recalled how foreign government officials have told him that “they don’t want to be dependent on one country for their source of finance.”

“Good development is good foreign policy,” he explained. “That’s in our national interest.”

Here are more highlights from the conversation, moderated by Amelia Lester, executive editor of Foreign Policy.

Standing out in the marketplace

• How exactly does the DFC differ from China’s investment engines? Nathan said it’s in part because “we maintain the highest standards possible” when it comes to “environmental, social, [and] labor” practices. It is “critical,” he added, not only to support economic development but also to “promote . . . values.”
• One important area is in internet connectivity—in which China is investing heavily, particularly in the Indo-Pacific. The DFC, meanwhile, is supporting projects that push forward secure equipment and networks that protect privacy, Nathan said, highlighting specific DFC-supported projects in Australia and Africa that are offering an alternative to China’s services. “This is critical for growth,” he said, adding that infrastructure is “not just energy, airports, and railways. You need the infrastructure of the twenty-first century for economic development.”
• Nathan explained that the DFC was created by Congress in 2018 due to a “strong sense” among both Republicans and Democrats that the United States needed to improve its economic-diplomacy game. “We needed to show up in the developing world and offer an alternative to what was being offered by authoritarian governments and our strategic competitors,” he said.
• The DFC is due to be reauthorized by Congress in 2025. “There is a strong demand signal for us to do more to show up,” Nathan said. “That requires us being reauthorized; it requires continuous funding.”

Showing up for Ukraine

• Nathan explained that the DFC has provided nearly $500 million in financing to businesses in Ukraine and has offered political risk insurance—which includes coverage for war-related risks—that has catalyzed more investments in Ukraine’s private sector.
• The most critical tool to support Ukraine’s private sector, however, is “solid air defense,” Nathan said. It’s “hard to make decisions around investment and capital expenditure in an environment of such high insecurity.”
• Nathan explained that the United States has had a long history of providing political risk insurance. Since the Overseas Private Investment Corporation (DFC’s predecessor) started offering the insurance, he said, the United States has “done over $50 billion. . . of political risk insurance” and has had “just over a billion dollars of claims.” The institutions have covered 97 percent of those claims, he added. “So it’s not only been very important for economic activity. . . but it’s been very profitable.”
• Working in Ukraine, Nathan said, has shown him how important it is for the DFC to work closely with its peers, including the European Bank for Reconstruction and Development, International Finance Corporation, and European Investment Bank.

A diversified system

• Earlier this year, the DFC provided a $500 million loan to US company First Solar to build a new solar panel manufacturing facility in Tamil Nadu, India. Nathan said that the plant, which will use cadmium telluride sourced from India instead of China, “fits into the [DFC’s] supply chain diversification goals. . . We need to make sure that we’re not dependent on one country or one company for the inputs of the industries of the future.”
• “If we can do this kind of thing elsewhere in the world to make sure that supply chains are broadly diversified, that helps with resilience,” he argued, adding that the United States must not “replace dependency on oil” with dependency on “a couple of nations,” as that would bring “all sorts of strategic vulnerabilities.”
• “Having countries be able to be self-reliant, to have the energy they need for economic development, that promotes stability. . . that’s good for our security,” he said.
• On critical minerals, Nathan highlighted several projects underway in Africa, including one on graphite in Mozambique. And, he added, as the DFC invests in that project, it will also be working with the US Department of Energy, which has loaned a company in Louisiana funds to expand its capacity to produce graphite-based materials for batteries. “It’s critical to start with the sourcing of the minerals,” Nathan said. “But there’s a whole value chain” to support.

Katherine Walla is an associate director on the editorial team at the Atlantic Council.

Watch the event

The post How the US is pitching a development finance ‘alternative’ to China’s initiatives, according to Scott Nathan appeared first on Atlantic Council.

The post Ellinas in Financial Mirror: Egypt’s natgas woes continue appeared first on Atlantic Council.

Boasting the largest agricultural landmass in Europe, Ukraine’s biomethane potential is unrivaled across the continent. The country is not only able to produce volumes that could singlehandedly cover the equivalent of a medium-sized European nation’s annual natural gas consumption; it can also do so at prices that are comparatively cheaper than other EU states.

Although Ukraine adopted legislation regulating the production of biomethane last year, it could not realize its full potential because of restrictions introduced at the start of Russia’s full-scale invasion in February 2022. Immediately after the start of war, Ukrainian policymakers imposed a blanket ban on the export of natural gas, fearing the country would be left without supplies to keep the lights on or provide heating to consumers.

While this ban was designed with natural gas in mind, wartime restrictions also extended to biomethane because it is approximately equal to natural gas in quality. As a result, many companies which had invested in producing biomethane using biomass crops had to suspend production or postpone investments as they could not access lucrative European markets.

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

With restrictions now lifted, biomethane companies are aiming to export the first volumes to Germany by May. Ukraine is expected to develop its own EU-aligned guarantees of origin which will demonstrate compliance with European Union sustainability criteria. These guarantees will then be linked to the EU’s Union Database for Biofuels (UDB), becoming part of the EU’s single market. Although this process may take two years to complete, Ukrainian companies looking to start exports immediately will be able to do so by providing customs-agreed certificates of compliance or proofs of sustainability.

Ukraine’s enthusiastic embrace of biomethane will help the country move further away from its past reliance on Russian gas and coal imports. Crucially, this shift toward green energy will also support Ukraine’s efforts to monetize its agricultural resources in a way that benefits both local producers and European consumers.

Five biomethane refining plants are currently gearing up to produce and export 77 million cubic meters of biomethane this year. Another ten plants are expected to enter commercial operation in 2025, nearly doubling production. As there is keen interest from large international customers to secure more biomethane from Ukraine, there are expectations that output may be scaled up even further to cover 20% of the EU’s biomethane demand of 35 billion cubic meters by 2030. Within 20 years, Ukraine’s annual output could potentially rise to around 22 billion cubic meters, one of the highest expected levels in Europe.

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Online Event Thu, August 15, 2024 • 9:00 am ET

Ukraine’s advance in Kursk: What’s next and implications

Conflict Russia Security & Defense Ukraine

To a significant degree, the Ukrainian biomethane industry’s success depends on its ability to export fuel to Europe. Under current regulations, Ukraine doesn’t subsidize internal production, which means it is only viable if exported to countries which have financial support schemes in place. Beyond that, there are also a number of challenges related to potential opposition from European farmers who may fear Ukrainian competition.

Following the introduction of wartime regulations easing Ukrainian access to EU markets, farmers in a number of EU countries have been pushing for greater import controls on Ukrainian agricultural products. This is forcing European politicians to address domestic agricultural sector opposition while also continuing to support Ukraine in the fight against Russia. Since biomethane production is an emerging industry, Ukrainian and EU policymakers have a window of opportunity to find mutually attractive solutions capable of easing Ukraine into the European single market while preparing farmers to face fair competition.

The most important and immediate challenge that Ukraine faces is the Russian threat to its energy infrastructure. A series of Russian missile and drone strikes in late March represented the largest concentrated attack on Ukrainian energy infrastructure since the start of the full-scale invasion in February 2022. This has added to the comprehensive damage already sustained by Ukraine’s energy infrastructure over the past two years. Ukraine’s new biomethane plants will be dotted across the country, but they will not be completely shielded from similar strikes.

To protect the country’s infrastructure and help Europe secure clean sources of energy, Ukraine urgently needs additional air defense systems in large quantities. Failure to act will endanger more Ukrainian lives and could also undermine Europe’s chances of securing competitively-priced green energy.

Dr. Aura Sabadus is a senior energy journalist who writes about Eastern Europe, Turkey, and Ukraine for Independent Commodity Intelligence Services (ICIS), a London-based global energy and petrochemicals news and market data provider. Her views are her own.

Further reading

UkraineAlert Mar 21, 2024

Putin fires navy chief as Ukrainians cheer success in Battle of Black Sea

By Peter Dickinson

The chief of the Russian Navy has been dismissed by Vladimir Putin in the latest indication that Ukraine is winning the Battle of the Black Sea, writes Peter Dickinson.

Conflict Defense Technologies

UkraineAlert Mar 25, 2024

The mood in wartime Ukraine: Weariness, resolve, and exasperation

By Steven Pifer, John Herbst

Ukrainians are war-weary but remain resolved to continue the fight despite growing exasperation with the country’s most important partner, the United States, write Steven Pifer and John Herbst.

Conflict Drones

UkraineAlert Mar 21, 2024

Russian victory in Ukraine would leave Europe at Putin’s mercy

By Mykola Bielieskov

A Russian victory in Ukraine would reinvigorate Putin’s war machine and leave much of Europe at the mercy of the Kremlin, writes Mykola Bielieskov.

Conflict Defense Industry

The views expressed in UkraineAlert are solely those of the authors and do not necessarily reflect the views of the Atlantic Council, its staff, or its supporters.

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UkraineAlert is a comprehensive online publication that provides regular news and analysis on developments in Ukraine’s politics, economy, civil society, and culture.

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The post Ukraine paves way for green energy future amid Russia’s escalating attacks appeared first on Atlantic Council.

Recently, the US Treasury released its critical hydrogen guidance, called 45V, but the domestic hydrogen ecosystem has yet to see major positive final investment decisions (FID). While 45V is an undeniably important element in determining the future of the industry, and its related emissions, insufficient attention is being paid to the substantial technical, commercial, and regulatory challenges that must be overcome if hydrogen is to realize its potential as a key decarbonization vector. 

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45V is a tax credit for the production of what the US Treasury terms “qualified clean hydrogen.” The US Treasury released its 45V draft guidance in late December, imposing strict guidance on the so-called “three pillars” of temporal matching, additionality, and deliverability.

Critics of the 45V guidance argue it is too restrictive and will prevent the industry from reaching scale, or even cede the sector to China. Conversely, environmental groups and academics are broadly supportive of the Treasury’s decision, holding that hydrogen’s ambitions must match its thermodynamic and technoeconomic realities, as insufficient restrictions could actually increase US emissions at the cost of tens of billions of dollars.

While 45V will have enormously consequential impacts on US hydrogen’s scalability, as well as emissions, it’s not the only factor affecting the industry. These challenges include the following:

• Elevated interest rates and lengthy permitting times for new clean infrastructure are slowing capital-intensive energy deployment, including clean hydrogen. 
• Technology and supply chain issues are also impacting hydrogen development. While hydrogen production tax credits will improve project costs, they do not address persistent issues with integration of the supply chain and onsite systems. Hydrogen suppliers are inexperienced, with many having just come out of a technology-development phase. They often lack operations support and robust system design around the core technology. 
• Poor technical integration due to the lack of robust modern digital platforms that can communicate with and manage assets across the supply chain impairs a project’s ability to pass FID. Hydrogen generation projects will not pass FID unless offtake is secured. Integration challenges will continue to delay FIDs. 
• Technical scope will be highly project dependent, making economies of scale difficult to achieve. Hydrogen production projects will change significantly in scope—and cost—depending on the offtaker.

For instance, mobility end users will require significant hydrogen storage, compression trains or liquefaction trains, and export systems. Conversely, industrial customers will seek to develop systems designed specifically to avoid potential unintended consequences of hydrogen blending in gas pipelines. These technical requirements from the offtaker impose significant scope change to the production project.

Infrastructure limitations will result in market inefficiencies, adding a commercial hurdle to scaling hydrogen. Due to limited pipeline infrastructure, hydrogen markets have virtually no inter-regional connectivity with one another, limiting the number of buyers and sellers in each market.

To wit, there are only 1,600 miles of hydrogen pipelines in the United States, mostly along the Gulf Coast. In comparison, nationwide there are about 3 million miles of natural gas pipelines. Additionally, existing hydrogen networks are typically private-carrier pipelines, which are used by incumbents but not necessarily open to new producers.

Limited inter-regional trade in clean hydrogen means that the number of buyers and sellers will be highly constrained in local markets, especially in parts of the United States where there is little or no existing merchant trade in hydrogen. This could create considerable market distortions in places where industrial-scale clean hydrogen consumers will be the dominant—if not sole—offtaker in their local market. Markets where there is a sole buyer—a monopsonist—are prone to inefficiencies.

With some hydrogen markets unable to rely on fully competitive market structures, which rely on many buyers and many sellers, the development of the technology may be constrained. Notably, credit conditions for projects seeking to sell to a sole offtaker may be challenging. 

The US hydrogen hubs, supported by funding from the Department of Energy, aim to solve this foreseeable problem by building an ecosystem of many buyers and sellers, aggregating demand and supply to create a more efficient market. Indeed, in existing ports and industrial zones, there will be few risks of a monopsony problems due to varied potential customers. Still, less developed H2 markets will be subject to this risk.

Most importantly, a lack of reliable demand exists for green hydrogen in any volume outside the heavy mobility market in California, and grey hydrogen producers will not be incentivized to switch until price parity is achieved, either via carrots (such as incentives in 45V), or sticks (such as pollution fees or regulatory measures). The issue is one of price, and it’s not clear that the combination of carrots and sticks in enough to achieve a switch from grey hydrogen to lower carbon products. 

In sum, while the Treasury Department’s guidance on 45V is grabbing a lot of attention, multiple other factors impacting the clean hydrogen industry must be addressed. Industry and policymakers need to grapple with these challenges and identify effective solutions.

Matthew Blieske is the former CEO and co-founder of LIFTE H2, which develops and deploys novel end-to-end hydrogen supply chains. Blieske sold his stake in the company in October 2023 and is now an independent hydrogen consultant.

Joseph Webster is a senior fellow at the Atlantic Council. This article represents their own personal opinion.

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Data from Ukraine’s electricity grid operator, Ukrenergo, indicates that the country is making full use of its interconnection capacity to sell electricity to Hungary, Moldova, Romania, Poland, and Slovakia, with over 13 gigawatt hours (GWh) flowing across the border during daylight hours. Outflows are driven by ample renewable production in Ukraine at this time of year, which makes it commercially attractive to sell to EU markets during the day, when the country has surplus solar production. At night, flows tend to reverse, allowing Ukraine to import from Europe when internal production from other sources may be insufficient.

The fact that in spring 2024 Ukraine is not only able to produce electricity but also export to the EU at full throttle is testament to the country’s extraordinary wartime resilience. Over the past two years, Russia has attempted to destroy Ukraine’s energy infrastructure as part of Vladimir Putin’s full-scale invasion. These efforts have included a six-month campaign of intensified air strikes against power stations and transmission lines during the first winter of the war that caused widespread blackouts and plunged the country into darkness amid temperatures well below freezing. The World Bank estimates the cost of wartime damage to Ukraine’s energy sector at $12 billion, with attacks ongoing.

Ukraine’s renewable capacity has also been badly hit. Invading Russian forces have bombed or occupied approximately 90% of Ukraine’s wind capacity along with half of its solar plants, and are also accused of destroying the Nova Khakovka hydro plant, one of the largest in the country.

The human cost of keeping the lights on in Ukraine has been staggering. On the second anniversary of the full-scale invasion in February 2024, leading Ukrainian electricity producer DTEK stated that 252 of its employees had been killed while working to keep the system operational. Meanwhile, the company’s electricity infrastructure had sustained over 9,700 attacks in the past two years. DTEK’s experience is thought to be typical among Ukraine’s energy sector companies.

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The Ukrainian energy sector has been demonstrating its resilience since the very first night of Russia’s full-scale invasion, when Ukraine unplugged from the old Soviet grid in preparation for planned synchronization with the rest of Europe. This set the tone for more wartime progress in the following months, with Ukraine fully connecting to European infrastructure and starting commercial flows to the region in summer 2022, more than a year earlier than expected.

Further advances were achieved during the second year of the Russian invasion. Ukrenergo managed to more than triple importing capacity from 500 megawatts (MW) in January 2023 to 1,700MW this year, while export capacity to Europe now exceeds 700MW per month, enough to power more than 700,000 homes.

Even as Russian missiles and drones were striking Ukraine’s electricity infrastructure, Ukrainian engineers were busy building a new interconnection line with Poland, which has facilitated the expansion of capacity. Similar works are planned with Romania and Slovakia, although details remain confidential for security reasons. Just as important has been Ukraine’s ability to align its own domestic regulations governing commercial flows with those of the EU, ensuring that import or export transmission capacity is allocated fairly and transparently.

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Ukraine’s efforts to expand its electricity interconnections with neighboring European countries will not only further increase its resilience, allowing it to import energy in case of shortages; it could also turn Ukraine into a major future exporter of clean energy to the region. Much will depend on Ukraine’s ability to rebuild the renewables sector by scaling up its installed wind, solar, biomass, and hydro capacity, and by deploying a nimble decentralized transmission system with self-contained clusters of production close to high-demand urban areas.

Ukraine’s potential for renewable power generation is almost unparalleled in Europe, with solar capacity alone thought to be capable of expanding to more than one-third of the EU’s existing total. Onshore wind plants could eventually be even larger, with the potential to make up half the EU’s current total of 255GW.

This large renewable potential, combined with Ukraine’s plans to expand its electricity interconnections with continental Europe, could provide a real boon to regional countries looking to break their addiction to polluting fossil fuels. However, none of this will materialise if Western partners fail to unblock financial and military support to protect Ukraine’s infrastructure and help the country defeat Russia.

Ukraine currently needs additional air defense systems to protect energy generation facilities and safeguard key parts of the country’s transmission infrastructure. The longer US and European partners delay sending aid, the easier it will be for Russia to undo Ukraine’s energy sector gains and jeopardize the safety of transmission lines connecting the country to the EU.

Over the past two years, Ukraine has more than proven its resilience. The country has repeatedly demonstrated its ability to complete energy infrastructure projects well ahead of time in the most challenging of circumstances. This is one of the success stories of the Ukrainian war effort. It is vital that the country’s international partners now provide the support that will enable Ukraine to consolidate these gains.

Dr. Aura Sabadus is a senior energy journalist who writes about Eastern Europe, Turkey, and Ukraine for Independent Commodity Intelligence Services (ICIS), a London-based global energy and petrochemicals news and market data provider. Her views are her own.

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Introduction

Cities and states are at the forefront of US efforts to achieve decarbonization goals, manufacture low-carbon technologies, and identify opportunities to align the energy transition with economic opportunities for businesses and workers. These subnational strategies align with ambitious nationwide objectives, including reducing US greenhouse gas emissions 50–52 percent below 2005 levels by 2030, achieving 100-percent carbon pollution-free electricity by 2035, and attaining a net-zero emissions economy by 2050. Achieving these targets will require cities and states across the United States to adopt decarbonization technologies, policies, and strategies. The leadership of state, local, and tribal leaders in climate action is pivotal for ensuring the long-term and sustainable decarbonization of the US economy.

Cleveland, Ohio, a mid-sized lakefront city with a rich manufacturing history, was once the fifth-largest city in the United States. However, as was the case with many Midwestern cities, Cleveland’s deindustrialization led to its economic decline. Yet Cleveland has an opportunity to establish itself as a leader in low-carbon and equitable growth. The city is pioneering valuable lessons learned and best practices to share with other cities facing similarly challenging conditions. It provides an example of how cities can leverage the benefits of the low-carbon transition to address climate change while providing public health, social, and economic opportunities for everyday Clevelanders—and to use this transition as an opportunity to reestablish itself as an industrial powerhouse in a low-carbon economy.

Cleveland is building toward a decarbonization agenda that envisions a city and region that are more equitable, sustainable, and livable. Yet while there are important voices advocating for an environmentally and socially sustainable future, it has proven challenging to build the critical mass of support required for structural, long-term change in Cleveland. Progress toward a comprehensive decarbonization vision, therefore, has been uneven in both the city and the surrounding region, including Cuyahoga County.

Nonetheless, key stakeholders continue to press forward to ensure that the Cleveland region will have a decarbonized future for all its citizens. For that to occur, the city’s public, private, philanthropic, and civil-society leaders will have to build upon their existing efforts, expanding and deepening the coalition of groups and interests that want to transform Cleveland’s economy in a decarbonized direction.

Following his election in 2021, Cleveland’s mayor, Justin Bibb, reaffirmed his predecessor’s commitment to sustainability and climate action. He announced a goal to transition Cleveland to 100-percent renewable energy by 2030, funded an initiative focusing on the circular economy, and stressed environmental justice as a core priority of his administration, among other actions. The city launched its Climate Action Plan in 2013, and updated the plan in 2018 to provide a framework for the city’s approach to tackle climate change across five focus areas: energy efficiency, clean energy, sustainable transportation, food systems, and clean water and vibrant green space. The plan also addressed cross-cutting priorities across the focus areas of social and racial equity, good jobs, climate resilience, and business leadership. The city is currently working on updating the 2018 iteration and expects to release an updated version in 2024. Members of the Greater Cleveland Partnership, the city’s Chamber of Commerce, for example, have begun to monitor their scope-one and scope-two emissions due to increasing customer demand for sustainability. And a steering committee, consisting of representatives from leading organizations in the region, has been formed to support an update to the city’s essential targets and goals—and, ultimately, to advance a unified vision for the city.

Cleveland: Basics

The Cleveland-Elyria Metropolitan Statistical Area (MSA), defined as the core city of Cleveland plus the surrounding Cuyahoga, Geauga, Lake, Lorain, and Medina Counties, had a population of 2.1 million people in 2020. The once-thriving city of Cleveland has experienced substantial population decline, from nearly one million residents in 1950 to 364,000 in 2022. The city’s population loss was the surrounding Cuyahoga County’s gain (Cuyahoga is by far the largest county among the five in the MSA), although it too has declined in population, from around 1.7 million in 1970 to 1.24 million people in 2022. The core city’s population decline stemmed from several forces that were common to US cities in the postwar era, including net out-migration, underinvestment in public infrastructure, and a shifting economic base, especially industrial-plant closures. Many of these demographic shifts resulted from the long-term decline, starting in the 1960s, of Cleveland’s industrial and manufacturing bases, which continue to be the backbone of Cleveland’s economy.

Such changes also landed unequally on Cleveland’s population. As just one of many possible examples, the construction of highways through Cleveland starting in the 1950s split the city unevenly, and to the detriment of poorer minority communities. Today, the legacy of Cleveland’s unequal economic geography remains, in particular for the city’s Black population, which remains concentrated in neighborhoods characterized by lower incomes, employment, and educational attainment. Within the city of Cleveland, 31.4 percent of residents live below the poverty line.

Decarbonization: State and local

With respect to greenhouse gas (GHG) emissions, the city of Cleveland has made some progress in mitigating its climate impact. Cleveland’s GHG emissions stood at 11.65 million tons in 2018, down 7 percent from 2010 levels, with an 11-percent improvement in emissions per dollar of gross domestic product (GDP). Cleveland’s GHG reductions occurred as regional eGrid emissions fell on coal-to-gas switching, as well as the increased adoption of clean energy. At the state level, Ohio’s use of coal in the electricity sector halved to 59 terawatt hours (TWh) over the same time period, while its natural gas usage rose 545 percent to 46 TWh to 2018; generation from clean energy sources, such as nuclear energy and wind, also rose sharply from 2010 to 2018. As is true of other US cities, greenhouse gas emissions in the greater Cleveland region are lowest toward the city center and highest toward the region’s periphery, owing to the roles played by population density, mixture of uses, commute lengths, and housing sizes.

While at the city level, Cleveland has notched key gains toward decarbonization, it faces state-level headwinds. Policymakers in Ohio’s state government appear willing to tilt energy markets toward fossil fuels. State officials have implemented restrictive legislation concerning the transition to renewable power sources, instituting onerous property-setback requirements for wind turbines and making approval processes for wind and solar projects much more difficult. As a result, Ohio’s electricity grid fuel mix will constrain Cleveland’s decarbonization ambitions. Ohio’s electricity generation is dominated by coal and natural gas, with clean energy sources such as nuclear, wind, and solar accounting for a very low proportion of overall output. In 2022, Ohio garnered only 15.4 percent of all electricity generation from nuclear, wind, or solar sources, versus nearly 51 percent for natural gas and nearly 32 percent for coal. Because clean electricity accounts for only a small fraction of Ohio’s total generation, there will be fewer decarbonization benefits to Cleveland from the electrification of vehicles or heating of buildings.

At the same time, there are countervailing forces at work within the state. The Inflation Reduction Act (IRA) of August 2022 has already generated new investments totaling $8.03 billion and more than five thousand good-paying clean energy jobs in Ohio, per research from the nongovernmental organization Climate Power, suggesting the clean energy transition’s economic potential there. Reflective of Ohio’s industrial history, Honda, LG Energy, and EdgeEnergy have invested in the electric vehicle economy and First Solar and Invenergy have invested in solar manufacturing. Federal support also aims to reduce energy bills through the Home Energy Rebate program and energy-efficiency grants.

While investment outcomes are typically tracked at the state level, local organizations in Cleveland are attempting to catalyze clean energy investments into the city. The GO Green Energy Fund, headquartered in Cleveland, is not only the nation’s first Black-led green bank program, it is also leading an initiative to secure $250 million in funding from IRA to support residential solar uptake for low-income residents across twenty counties, including Cuyahoga. In addition to solar, the fund is also examining other clean energy technologies, such as appliances and weatherization. With state policymakers evincing little interest in advancing decarbonization, local groups are aggressively pursuing federal funding from the Environmental Protection Agency (EPA).

Cleveland: Decarbonization pillars

Despite the constraints at the state level on decarbonization parameters, Cleveland and other local jurisdictions are setting forth strategies to reduce carbon emissions where possible. Cleveland’s efforts can be summarized with four key pillars: environmental justice; industry and manufacturing; transportation; and conservation. The pillars are generally aligned with the cross-cutting focus areas outlined in the city’s 2018 version of the Climate Action Plan (these include environmental justice, the green economy including business leadership, climate resilience, clean energy and efficient buildings, transportation, land and water conservation, and food security).

Environmental justice

As occurred in other US cities, Cleveland’s economic development historically disadvantaged poor and minority communities. East Cleveland, a suburb, was redlined on racial grounds and now has the lowest median income in Ohio, a 50.3-percent child-poverty rate, and 40 percent of its Black population living in poverty. The city’s decarbonization strategy includes a commitment to ensure that decarbonization efforts are equitable. For example, Mayor Bibb announced a $15-million investment for three disadvantaged neighborhoods to actualize the concept of a walkable or bikeable “fifteen-minute city,” and intends to allocate $50 million from the American Rescue Plan Act (ARPA) funding to prepare a thousand acres of vacant land to attract development and revive well-paying jobs in the city.

The historical legacy of discriminatory practices has cast a long shadow over Cleveland, amplifying the adverse impacts of economic and environmental outcomes such as high energy costs. Electricity and gas bills in Cleveland consume 6.6 percent of the average household income, nearly double the national average of 3.6 percent. Within the region, there are efforts to provide relief while pursuing decarbonization. The city of Cleveland, for example, is implementing a pilot program to install solar panels on the homes of low- and moderate-income families. Such efforts overlap with those by co-ops such as the Solar United Neighbors, Cuyahoga County Solar Cooperative, and Cleveland Solar Cooperative, which also develop solar assets in low- to medium-income neighborhoods.

Industry and manufacturing

Industry and manufacturing played a pivotal role in both Cleveland’s growth and its decline, but also should play an important role in the city’s rejuvenation efforts. Industry and manufacturing are Cleveland’s largest electricity consumers, using about 60 percent of the city’s total electricity. Energy efficiency is a central pillar of Cleveland Cliffs’ environmental strategy (the company, which is headquartered in Cleveland, is the largest flat-rolled steelmaker in the United States). Its Cleveland Works plant produces hot-rolled, cold-rolled, and hot-dip galvanized sheet and semi-finished slabs, and has the capacity to manufacture more than three million tons of raw steel annually using its two blast furnaces. Working closely with the Department of Energy’s Better Plants program, Cleveland Cliffs is committed to achieving a 10-percent reduction in energy intensity over ten years and announced a target to purchase two million MWh annually of renewable power.

Transportation

The transition to electric vehicles (EVs) is a vital step in reducing the city’s emissions, but its effectiveness in achieving decarbonization goals relies on the electricity grid. The absence of signals from the state pertaining to grid decarbonization fosters hesitation regarding investments in, and adoption of, decarbonization technologies like EVs. Cleveland’s EV adoption remains limited, accounting for merely 2.2 percent of new vehicle registrations in the Cleveland-Akron metro area, in contrast to comparable cities such as Columbus (3.7 percent), Detroit (4 percent), and Indianapolis (3.1 percent). The slow growth of EVs can be attributed partly to the lack of state-level EV tax incentives in Ohio, a contrast with other states such as Washington, Oregon, and California that are offering substantial incentives, leading to higher levels of EV registration rates in cities such as Seattle (17.2 percent), Portland (13.1 percent), and San Francisco (32.9 percent).

EV-charging infrastructure in Cleveland remains underdeveloped, although the mayor’s office has initiated the installation of its first free EV-charging station in the Lee-Harvard neighborhood, with plans for multiple additional installations throughout the city. The Greater Cleveland Regional Transit Authority’s 2020–2030 strategic plans include measures to introduce electric-powered buses, integrate alternative power at stations, provide EV charging at its facilities, and support multimodal connections to its transit systems. At the state level, there are plans to install EV-charging infrastructure across a corridor of 1,870 miles, facilitating a more comprehensive charging network across the region. Additionally, the Northeast Ohio Areawide Coordinating Agency (NOACA) has identified forty-seven locations for charging stations, spanning five counties in the region.

The city of Cleveland’s Mobility Plan demonstrates a proactive approach toward improving the city’s bike and pedestrian infrastructure, a step toward realizing Mayor Bibb’s fifteen-minute city framework, which has the potential to reduce vehicular traffic and associated emissions. This plan is multifaceted, aiming to bolster transit-oriented development, inject investment into Cleveland’s neighborhoods, and encourage multimodal transportation options. Currently, the city’s bicycle lanes are disjointed, catering to pockets of the city. Bike Cleveland, a local nongovernmental organization (NGO), has identified twenty-seven miles of potential new or improved bike facilities to enhance biking connectivity and safety.

Conservation

The conservation of land resources is integral to any vision that seeks to improve Cleveland’s livability, local economy, and environmental sustainability, while contributing to climate adaptation and energy efficiency. Among other benefits, conserving land helps mitigate climate-change impacts, contributing to local air and water quality and reducing urban heat-island effects. As with so many other aspects of the Cleveland case study, its conservation story is a combination of a troubling history and promising future.

For many decades, Cleveland was known as the Forest City for the extent and diversity of its tree canopy. Trees provide shade, reducing the heat-island effect, and can thus lower energy demand and associated emissions for keeping buildings cool. Since the 1950s, the city of Cleveland has lost half its tree cover, now estimated at around 18 percent of what the Cleveland Tree Coalition estimates as a possible upper limit. The city continues to lose trees at the rate of seventy-five acres per year. Unsurprisingly, the lowest coverage levels are in the city’s poorest neighborhoods contributing to poor air quality and access to shade, a result of systematic underinvestment in the city’s tree canopy there. An Urban Forestry Commission has been reconstituted under the aegis of the city government. It has the express goal of reversing the loss of tree cover through identifying appropriate policy remedies and generating public and civil-society buy-in to reforestation of the city.

The city’s history shows that a concerted, collaborative effort can accomplish this major conservation and decarbonization goal. The Cuyahoga River, which flows through Cleveland, is an iconic example of the city’s ability to achieve such an ambitious aim. The river is known for the 1969 fire that helped spark the mass environmental movement across the United States. Over decades, the determined efforts of federal, state, and local officials—as well as industry, civil society, and the Cleveland-Cuyahoga County Port—have brought the Cuyahoga back from its near-dead status of half a century ago.

Conclusion and recommendations

For the city of Cleveland and the surrounding region to successfully decarbonize, leaders from the public, private, and philanthropic sectors, plus those from civil society, will need to sustain and strengthen the coalitions that are moving the region in this direction. There are many promising signs on this front, as shown by the growing efforts of the Climate Action Plan steering committee and efforts to update the 2018 version of the plan. The city has made progress toward ensuring a just transition to a clean energy community, promoting low-carbon industrial production, advocating for an increase in EV adoption and charging infrastructure, and conserving tree cover, but much more work is needed to realize its climate and decarbonization agenda. The city will need to overcome remaining challenges by continuing engagement with all stakeholders: at the household and business levels to promote wider adoption of low-carbon technologies such as heat pumps, EVs, and charging systems; with the city’s utility, Cleveland Public Power, to develop a clean-energy grid; and through recognition by industry and large firms that decarbonization strategies are a better way of doing business.

Despite the state of Ohio’s recalcitrant policies toward renewable energy, there is much opportunity for Cleveland in this domain. For example, the city and region have numerous synergies between onshore and offshore wind on the one hand and steelmaking on the other. Great Lakes offshore wind must overcome several hurdles, including permitting challenges, height restrictions on wind turbines, cost inflation, and more, yet the Cleveland region nonetheless has a unique opportunity to accelerate decarbonization and economic development by leveraging its existing industrial base for wind development.

Finally, an oft-repeated message in consultations with key stakeholders is that the city and region need to realize the opportunities and benefits of recent federal legislation like the Inflation Reduction Act, CHIPS Act, and Infrastructure Investment and Jobs Act, as seen by recent investments in other regions of Ohio. There is enormous public funding available for investment from these acts. Leaders will need to bring the right groups of stakeholders together to aggressively pursue federal incentives and funding.

Staff

Peter Engelke

Senior Fellow, Scowcroft Strategy Initiative

Global Energy Center Scowcroft Center for Strategy and Security

Technology & Innovation Europe & Eurasia

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Joseph Webster

Senior Fellow, Global Energy Center

Global Energy Center Indo-Pacific Security Initiative

Central Asia China

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Maia Sparkman

Former Associate Director, Climate Diplomacy

Global Energy Center

Africa Climate Change & Climate Action

The Atlantic Council would like to thank the Natural Resources Defense Council for its support of this work.

The authors would like to thank the following local and state stakeholders who provided valuable insights that informed this report:

• Deepa Vedavyas, director of resiliency and sustainability, NOPEC
• Jennifer Lumpkin, manager of local partnerships, Cleveland, Alliances for Great Lakes
• Joel Brammeier, president and CEO, Alliance for the Great Lakes
• Emily Keller, manager of sustainability initiatives, Greater Cleveland Partnerships
• Jacob Schwemlein, director for Drive Electric Ohio, Clean Fuels Ohio
• Tim Cho, senior manager of federal grants and special projects, Clean Fuels Ohio
• Hannah Ruscin, program manager, Clean Fuels Ohio
• Eleanor Jersild, senior manager of compliance and operations, Clean Fuels Ohio
• Paige Lampman, Professional Services Manager of Projects, Clean Fuels Ohio
• Joe Flarida, Executive Director, Power a Clean Future Ohio
• Jacob VanSickle, Executive Director, Bike Cleveland
• SeMia Bray, Co-Director Black Environmental Leaders Association
• Elena Stachew, Northeast Ohio Strategy Consultant, Power a Clean Future Ohio
• Kirt Conrad, Chief Executive Director, Stark Area Regional Transit Authority
• Sarah E. O’Keeffe, Director, Sustainability and Climate Justice, Mayor’s Office of Sustainability, City of Cleveland
• Max Zandi, former young global professional, Atlantic Council Global Energy Center
• Grant Goodrich, executive director, Great Lakes Energy Institute, CWRU

This report was written and published in accordance with the Atlantic Council policy on intellectual independence. The authors are solely responsible for its analysis and recommendations. The Atlantic Council and its donors do not determine, nor do they necessarily endorse or advocate for, any of this report’s conclusions.

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Issue Brief

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The issue brief focuses on the decarbonization pathway of Valencia, Spain. Lessons learned from Valencia are likely to have great relevance for other cities looking to reduce emissions.

Energy & Environment Energy Transitions

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Common pillars for clean hydrogen—with different rules

In December 2023, the United States published draft guidance on hydrogen standards, used to determine eligibility for tax credits under the Inflation Reduction Act (IRA). The guidance, called 45V, is built around what is termed the “the three pillars” of hydrogen: temporal matching, additionality, and deliverability. These three general requirements are also tacked in the EU Delegated Act, which defines renewable hydrogen for compliance with EU targets as renewable fuels of non-biological origin (RFNBOs). While in the US framework, tax credits go toward clean hydrogen that is produced using any clean electricity source, including nuclear energy, and in the EU, compliance with EU RFNBO targets requires that hydrogen be generated with renewables only, the three pillars can be generally understood as: 

• Temporal matching: These rules aim to ensure hydrogen is produced when clean electricity is available. This means that any amount of electricity used in hydrogen production must be matched with the same amount of zero-carbon electricity produced within a given time period. Shorter time intervals reduce electrolyzer capacity factors, increasing the levelized cost of hydrogen but achieving greater emissions reductions. Temporal matching periods are typically conducted on an hourly, daily, monthly, or annual basis.

• Additionality/incrementality: Rules around this pillar aim to ensure hydrogen production goes hand in hand with new clean electricity generation capacity, making hydrogen producers add renewable electricity to the grid, rather than repurpose existing clean energy already on the grid.

• Deliverability: This set of rules aims to ensure hydrogen is produced using clean electricity in the same region where that electricity is produced. There must be a direct physical interconnection between the clean energy source and the electrolyzers producing green hydrogen.

The chart below features a comparison between the EU and the US approaches to hydrogen across the three pillars, as well as other key areas of clean hydrogen policy. While US regulations are a proposed draft, the EU framework is considered final despite tweaks that may take place during its scheduled revision period in 2028.

Table 1. US and EU approaches to green hydrogen

While certain elements of the US rules might suggest they are stricter than the EU approach, this would be an oversimplification, as each contains elements that could be considered stricter—or looser—than the other in certain areas. While both approaches ultimately mandate hourly temporal correlation and strict additionality rules, the EU does not switch to hourly correlation until 2030—whereas the United States switches in 2028. Also, the EU allows for grandfathering of additionality, which is not permitted in the US proposed guidelines. Nonetheless, the draft US framework allows for the use of subsidized clean electricity for hydrogen production, takes a technology-neutral approach to clean electricity, and accepts energy attribute certificates to comply with hydrogen rules, diverging from the EU framework and allowing for greater flexibility for hydrogen producers. Importantly, differences in approach mean qualifying for the US 45V credit does not automatically qualify a facility as producing EU RFNBO-compliant renewable hydrogen.

Beyond these significant technical variations, US and EU strategies for developing clean hydrogen markets differ in their economic approach: the United States follows a supply-incentive model, while the EU is predominantly relying on a market-pull mechanism. The United States incentivizes production of hydrogen with uncapped tax credits that give lower or higher support depending on emissions thresholds but does not mandate clean molecule uptake. In this sense, it rewards greater wholesale emissions reductions without requiring it. In contrast, the EU employs a demand-side mechanism: regulation imposes the consumption of renewable hydrogen (i.e., 42 percent of hydrogen used in industry must be renewable by 2030), and strictly defines which hydrogen (RFNBOs) is available to meet legally binding targets. This mechanism prioritizes the use, rather than production, of hydrogen, and thus the decarbonization of end users. While the EU has put in place a Hydrogen Bank to support production, support is capped and auction based, whereas the United States’ effort is uncapped and direct. The Hydrogen Bank’s results are yet to be seen.

To maximize clean hydrogen’s potential to contribute to energy security and decarbonization, the EU and the United States will need to balance environmental, economic, and security concerns—and they must coordinate these efforts together. While the two markets have different resource endowments, legal regimes, and more, the EU and the United States should ensure the maximal harmonization and interoperability of hydrogen regulatory frameworks, as this will simplify investment and trade. The two sides should also plan carefully to ensure that their respective approaches to hydrogen development reduce carbon emissions. The next Trade and Technology Council in Belgium is an opportunity for both sides to learn from each other’s best practices and develop common approaches to hydrogen development.

Joseph Webster is a senior fellow at the Atlantic Council Global Energy Center.

Pau Ruiz Guix is Officer on Trade and International Relations at Hydrogen Europe.

This article reflects their own personal opinions.

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The 2024 Global Energy Agenda

By Landon Derentz, Christine Suh, Paul Kielstra (Editors)

The fourth edition of the Global Energy Agenda kicks off with a collection of essays by energy leaders that are rolling out during COP28. Rounding out the Agenda in early 2024, the Atlantic Council Global Energy Center will release the results of its annual survey of experts that takes the pulse on the geopolitical risks affecting energy markets, the future of fossil fuels, and the transition to clean energy.

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Von der Leyen’s election and her development of a European Green Deal came on the eve of multiple crises that would shape not just Europe’s trajectory on decarbonization, but its strategic defenses as well. Mere months after her election, the European Union (EU) began to face the COVID-19 pandemic’s health and economic crises. After pandemic recovery plans were shifted toward clean energy-oriented growth under instruments such as NextGenerationEU in 2021, Russia launched a full-scale invasion of Ukraine and weaponized European gas supplies the following year. Russia’s aggression led to a severe energy crisis across the continent, with electricity prices soaring and observers worried that all these factors were combining into existential threats that Europe had not faced since 1945. Compounding matters, Europe was squeezed in an intensifying competition between the United States and China, with Washington passing the Inflation Reduction Act (IRA) in 2022 with potentially significant effects for European industry and competitiveness.

In this context of exponentially growing danger to Europe, the von der Leyen Commission achieved an impressive record for progress toward the clean energy transition. The European Green Deal is the first comprehensive plan to make an entire continental union achieve net-zero emissions by 2050. To achieve the transition to net-zero emissions, the European Green Deal pushed emission reduction targets, expanded Europe’s Emissions Trading System, and launched a series of clean technology programs, especially on hydrogen, offshore wind, and energy storage. The subsequent reorientation of NextGenerationEU funding from pandemic recovery to clean energy investments in 2021, as well as the concurrent (and ongoing) drafting of the Green Deal-linked Fit for 55 legislative package that introduced the Carbon Border Adjustment Mechanism, have already accelerated Europe’s emission reduction policies. After Russia launched its full-scale invasion of Ukraine, the Commission introduced the REPowerEU Plan to reduce European consumption of Russian fossil fuels, notably doubling solar capacity and heat pump installations and prioritizing other investments into renewable energy sources. By the metrics released by the Commission in mid-2023, there has already been at least a 20 percent reduction in energy consumption across the bloc because of increased energy efficiency and lowered demand (partly due to government intervention). There was an additional 39 percent of the energy produced in the EU coming from renewable sources as well.

Despite these achievements, significant work remains on reducing EU carbon emissions. For one, out of the seventy-five pieces of Fit for 55 legislation, only thirty-two have been adopted, with another sixteen in final negotiations. A further twenty-one are still up for debate in the European Parliament, with six not even tabled for discussion. Other projects have failed to take off entirely, such as the Sovereignty Fund that the Commission floated as one of several responses to the IRA. In fact, as net-zero policy becomes an increasingly competitive economic race, the EU has yet to fully define its stance toward China and the United States. So far, it is unclear how, where, and when Europe should protect its industries. 

Given such a record, if von der Leyen were to launch and win a re-election bid, Europeans should expect more of an emphasis on executing all these existing proposals, rather than the announcement of new ones or any U-turns. The European Climate Neutrality Observatory has argued that much of the new legislation and reforms the von der Leyen Commission introduced have created the institutional framework for vital climate action, but that their implementation remains far too slow, partially due to a lack of financial support for a larger-scale adoption of clean energy technologies. Von der Leyen herself seems aware of this shortcoming; in her September 2023 letter to the incoming European Commissioner for Climate Action Wopke Hoesktra, her primary instruction was clear: implement, implement, implement. Even the Green Deal, the first major proposal of the von der Leyen Commission, is far from being finalized, as the ongoing legislative processes attest. Recent agreements on electricity market reform, industrial emissions, and new rules for hydrogen investments are necessary steps in that direction. 

On trade and the protection of Europe’s industries, the European Commission will have to outline more specific plans beyond the recent probes into Chinese practices the Commission just announced. However, the Net-Zero Industry Act, one of Europe’s answers to the IRA, has yet to put any new funding on the table. 

The next Commission will have to navigate another momentous challenge: enlargement. As Ukraine and ten other countries vie for EU accession, Europe’s unity, resolve, and ability to see its decarbonization goals through could once again be challenged as new members join the fold, even though this enlargement will likely not happen before 2030. On top of that, the EU’s existing enforcement of climate targets and other key decarbonization deliverables is lacking as well, leading to inconsistent approaches between the existing EU members themselves.

The final, and possibly most difficult, predicament will be staying the course. Even as pressure continues to build on the European Commission to retain its momentum, policymakers should not underestimate the continued strength of climate-skeptic populist movements in European politics. The anxieties of continued economic decline and worries over increasing migration remain prevalent among significant parts of the European electorate, which could politically bolster the populists and threaten existing momentum on decarbonization and the energy transition.

Consequently, only two things can be said for certain about the next European Commission. The first is that it will have its work cut out for it, with these crises unlikely to dissipate within the next five years. The second is that whoever succeeds von der Leyen, whether it be in 2024 or in 2029, will have large shoes to fill when it comes to making progress toward reaching net-zero emissions.

Francis Shin is a research assistant in the Atlantic Council’s Europe Center.

Théophile Pouget-Abadie is a nonresident fellow with the Atlantic Council’s Europe Center and a policy fellow with the Jain Family Institute, focusing on decarbonization, the energy transition, and European policy.

The post Ursula von der Leyen has delivered major wins on decarbonization. What would she do with another term? appeared first on Atlantic Council.

The danger created by Houthi attacks

The Houthi movement, or Ansar Allah, is a Shia Islamist group that seeks to maintain control of critical territory in Yemen. It operates as a proxy group for Iranian influence, especially the Islamic Revolutionary Guard Corps. The Houthi movement has ramped up attacks on merchant vessels transiting the Red Sea since November 19, 2023, according to US Central Command. 

The United States’ response to the attacks, Operation Prosperity Guardian, concentrates naval assets and command-and-control bandwidth on the Bab el-Mandeb Strait, wedged between the Horn of Africa and the southwestern corner of the Arabian Peninsula. It is a key choke point for commercial traffic transiting between the Arabian Sea and Red Sea toward the Suez Canal—another choke point through which more oil is flowing than ever before.

Due to Russia’s invasion of Ukraine and the subsequent trade diversion, the Suez Canal is increasingly used for Middle East-to-Europe flows of energy, as well as Russia-to-India shipments. About 8.8 million barrels per day of oil and oil products utilized the Suez transit in the first half of 2023, or about 12 percent of maritime oil trade. 

Operation Prosperity Guardian has engaged Houthi drones, surface-to-ship ballistic missiles, small combatant vessels, and other arms in defense of merchant traffic and naval assets. However, the operation has thus far failed to deter further Houthi attacks and provide assurance of safe passage to commercial vessels transiting the Red Sea. 

In order to restore deterrence, the United States and the United Kingdom are conducting airstrikes against Houthi military infrastructure. These actions are not only necessary to restore the safety of trade through the Suez Canal, but to assure the principle that maritime trade cannot be disrupted by force. 

The waves rule energy trade

Freedom of navigation matters deeply for preserving the security and efficiency of global energy markets. Forty percent of maritime trade by weight consists of oil, coal, gas, or petrochemical products, per the United Nations Conference on Trade and Development.

Thus far, the Houthis have largely not targeted vessels engaged in energy trade, perhaps stemming from a desire to avoid an environmentally catastrophic oil spill along Yemeni shores, which was only narrowly avoided in August as the oil tanker FSO Safer, abandoned off of Yemeni shores, was successfully drained of its contents. 

The Houthis are also likely to avoid drawing Arabian Gulf states deeper into the conflict. Most Gulf economies are deeply dependent on maritime energy trade—hydrocarbon exports are responsible for 40 percent of Saudi and Qatari gross domestic product (GDP), and 50 percent of Kuwait’s GDP. 

Additionally, the Houthis’ Iranian patrons wish to avoid antagonizing major oil importers China and India, or partners such as Russia. Last week, a Houthi spokesman told a Russian news channel that Chinese and Russian cargoes would not be targeted. 

The prospect for escalation, and the potency of the threat which the Houthis have displayed, is substantial. Major oil traders such as BP, Shell, and Trafigura have now suspended shipments through the Red Sea completely. 

Although the United States conducts limited oil and liquefied natural gas trade through the Suez Canal, the risk of a supply disruption in this critical choke point matters to US economic security, as oil prices are set globally. Moreover, the United States must ensure that its European allies retain access to energy supplies amid Russia’s invasion of Ukraine. Regardless, it is the threat of escalation, in the Red Sea or other choke points such as the Strait of Hormuz, and the broken principle of freedom of navigation that most acutely threatens US interests. 

US energy trade rules the waves?

For the United States, free maritime commerce has long been central to its economic prosperity, from the nation’s founding as a merchant power to the modern era, when maritime vessels account for 40 percent of US international trade by value and 70 percent by weight. 

The United States’ rising oil exports underscore how its economic competitiveness is intertwined with the global maritime commons. The United States has emerged as the world’s leading producer of oil, as US exports of oil and oil products have consistently been above ten million barrels per day since early 2023, with seaborne exports often accounting for more than seven million barrels per day of this trade.

Global maritime trade of oil is estimated to be approximately forty-three million barrels per day, according to commodity services firm Kpler, and the US export share of maritime oil trade has expanded dramatically since the crude oil export ban was lifted in 2015. 

While the Red Sea is not a major transit point for US oil exports, which primarily traverse the Atlantic crossing or Panama Canal, it is not in the US national interest for any waters to be closed to energy trade. If energy vessels are required to reroute amid security threats and a fragmented global commons, shipping costs and energy prices will rise, lowering world economic growth. Secondly, although some US energy companies will benefit temporarily from rising prices, overall US energy and economic security suffers, as the US remains a large oil importer, typically receiving over six million barrels per day due to domestic refinery configurations. Moreover, disruptions to global supply chains would reverberate across other sectors of the US economy that rely on international trade.

It is in the economic interest of the United States to ensure that the global maritime commons remains free from disruption.  

Threats to freedom of navigation are also threats to net-zero emissions goals

Maritime security does not only affect fossil energy. If freedom of navigation is no longer secured—if merchant vessels can be disrupted or even sunk by armed groups—then the clean energy transition will face disruption. Shipping costs and insurance rates will rise sharply amid greater uncertainty. 

Additionally, the inputs for clean energy supply chains often transverse many different maritime nodes across the globe, from mine to factory to final installation. For instance, cobalt that is mined in the Democratic Republic of the Congo may be refined in Finland, assembled into a battery in Japan, and shipped to an electric vehicle factory in the United States. With maritime supply chains facing greater uncertainty, firms will require greater redundancy and inventory stockpiling. 

These dynamics will lower efficiency and increase inflation. The snarling of supply chains and resultant inflation will also necessitate higher interest rates, all things being equal. Higher interest rates, in turn, will pressure capital-intensive clean energy projects by raising financing costs. The global clean energy transition will be slowed considerably if freedom of navigation is no longer a reasonable assumption of seaborne trade. 

In sum, a world without freedom of navigation would represent a disaster for not only the world economy but also squash any aspiration of reaching net-zero emissions by 2050.

Will Tobin is an assistant director at the Global Energy Center.

Joseph Webster is a senior fellow at the Global Energy Center.

This article represents their own personal opinion.

The post Houthi attacks in the Red Sea hurt global trade and slow the energy transition appeared first on Atlantic Council.

The United States desperately needs to hasten the development of supply chains for critical minerals that don’t involve China and Chinese companies for both commercial and national security interests. Unfortunately, current policies, including regulations from the Inflation Reduction Act (IRA), are doing exactly the opposite. They are hurting demand for electric vehicles, the very products that will incentivize the development of these supply chains. Instead, Washington needs to unleash the power of the US market by removing barriers to accessing capital, fast-tracking manufacturing, providing high-level diplomatic support, and promoting domestic demand.

An issue of national security

The erosion of the US manufacturing industry and its outsourcing to factories in Asia is a well-known and well-studied phenomenon. The risks of completely outsourcing the production of key goods, such as antibiotics, have recently come to light. The US military could face similar situations with battery and semiconductor supplies, threatening the security and safety of US interests around the world.

The global lithium-ion battery industry is dominated by China. Chinese companies supply 80 percent of the world’s battery cells and account for nearly 60 percent of the EV battery market. Even some US companies that produce batteries rely on lithium-ion cell components produced by Chinese manufacturers.

But not all lithium-ion batteries are the same. The US military needs specialized batteries that are larger, of higher quality, greater power density, and packaged to withstand significantly more rough treatment than those needed for commercial purposes. Should the US military suddenly find itself in need of more specialized batteries, the Pentagon might not be able to obtain them because foreign lithium-ion cell producers have little incentive to stop producing lithium-ion batteries for their commercial customers and divert production to the specialized products that US military battery manufacturers need. If these suppliers are controlled by Chinese government interests, they may even be incentivized not to provide military products for the United States, even if offered financial incentives. These risks have been known for some time—in fact, an unclassified report by the Interagency Task Force in Fulfillment of Executive Order 13806 described these vulnerabilities in 2018.

China controls access to critical minerals

China’s supremacy over the lithium supply chain is no accident. China purposefully and through insidious methods engineered control over the global lithium supply chain. According to a 2021 White House Report, the Chinese government funneled $100 billion in subsidies, rebates, and tax exemptions to Chinese companies and Chinese consumers between 2009 and 2019 to dominate the global lithium refining industry, before global demand for lithium soared. China then used its position as the top consumer of unrefined lithium and top producer of refined lithium to keep others from entering the market. This included anti-competitive practices such as subsidizing production when demand was not high enough and dumping products at below-market prices onto the international market.

Chinese investments in lithium mines around the world also ensure that Chinese companies have primary access to this important element. Beijing has engaged in similar practices with other critical minerals, such as cobalt, graphite, and nickel. 

Electric vehicles and national security

According to a recent study by McKinsey, global demand for lithium-ion batteries is forecast to grow from about 700 gigawatt hours (GWh) in 2022 to 4,700 GWh by 2030. This is in large part due to clean-energy policies that promote the adoption of electric vehicles. The United States and Europe are expected to experience the highest rates of growth.

China is not only primed to make hundreds of billions of dollars in revenue, but it is also positioned to restrict access to lithium-ion batteries to certain countries or companies as it wishes. This puts the national security of the United States and its allies at risk. In the event of a war or sudden need to supply an ally or strategic partner with military aid, the United States could face severe shortages of key defense products, such as drones, F-35 fighter jets, surface-to-air missiles, and even radios.

Current policy impediments

There are alternatives to lithium-based batteries under development, but these are likely many years away from entering the market. A better solution is to develop new supply chains that don’t depend on China or Chinese companies for critical minerals, including lithium. Though the process seems daunting because China dominates the market now, it is possible if the United States makes it not just a matter of environmental or energy policy, but a national security priority, as well. It is vital to get the energy transition right, without threatening national security in the process. Unfortunately, current policy is doing the opposite. 

The IRA acknowledged the problems posed by China’s domination of critical minerals supply chains and tried to address it through tax incentives for electric vehicles. In order for vehicles to qualify for the full tax credit ($7,500) a certain percentage of the value of the battery component cannot originate in China and must be produced or manufactured in North America. Lawmakers hope that consumer demand for vehicles that qualify for the maximum tax credit will drive manufacturers to open supply chains for these components that do not involve China or Chinese companies. 

The problem is that these regulations take effect this year, with even more stringent regulations set to take effect in 2025. But critical mineral mining, refining, and battery manufacturing cannot be developed in this time frame while also adhering to the environmental, safety, labor, and financial regulations that US and European companies must respect.

As battery and automobile manufacturers struggle to source battery components from domestic and free-trade partner sources, consumer demand for electric vehicles is sitting on the precipice. Many electric or plug-in hybrid vehicles are, at the point of sale, more expensive than otherwise similar cars that run on gasoline. But a $7,500 federal tax credit provided at the time of purchase, especially when combined with some state tax credits, brings many more vehicles into the range of affordability. 

Now that many electric or plug-in hybrid models aren’t eligible for the full tax credit, consumer demand will fall. Without robust consumer demand, car manufacturers will quickly lose the incentive to produce and market EVs to American drivers. In fact, they are already seeing weakening demand and responding by slashing production. In December 2023, Ford said that it would reduce the production of its all-electric F-150 Lightning pickup in 2024 to half of its 2023 output, for example. The policy intended to incentivize new lithium-ion battery supply chains is now more likely to disincentivize it by wounding consumer electric vehicle demand.

How to supercharge a lithium industry

US policymakers need to respond quickly, because it is much easier for the market to cut the supply of EVs to match slowing demand than it is to build up new supply chains for critical minerals and build battery factories. Below are three steps to address this situation.

First, suspend implementation of the IRA EV battery regulations for battery components for 2024 and 2025. It is not feasible to offer tax credits that can only be applied to a handful of vehicles. The market for electric vehicles is already problematic as consumers realize that fully electric vehicles still suffer from range issues as batteries start to degrade, don’t perform at full range when subjected to extreme temperatures, and cannot always be reliably charged in reasonable amounts of time away from home.

Most consumers may continue to conclude that an EV just isn’t worthwhile for the price tag. But more consumers might be enticed with the full federal tax credit. If the federal government really wants to see new supply chains for lithium-ion batteries, it needs to give the market time to invest in them, and stimulating consumer demand is a key component.

Second, support lithium and other critical mineral refining in the United States. The United States is never going to be able to mine enough critical minerals to satisfy all of its demand. However, discoveries of deposits of important critical minerals in countries that China has not penetrated are growing. The problem is that China totally dominates the refining process. Even some critical minerals mined in the United States are sent to China for refining.

Government loans and grants are helpful for big, established companies, but the industry needs diversification. Smaller companies working on innovative refining processes face too many barriers to access the capital they need to build manufacturing facilities, both from the government and from private sources. The government should elevate the development of lithium refining businesses in the United States to a national security priority and eliminate barriers that prevent smaller entrepreneurial operations from accessing federal funds.

If the government wants lithium refining in the United States to succeed, private capital will also start to see it as an industry to invest in. The United States can and should become a hub for innovation in critical mineral refining because the applications go much farther than the rechargeable battery industry. Robust and diversified domestic lithium refining will ensure that the US military will always be able to procure the supplies it needs on the free market.

Third, support the development of mining, transportation, and refining of critical minerals and the manufacturing of products in friendly countries. The United States should work with its North American neighbors, Canada and Mexico, to support these supply chains. There are also several countries with significant lithium deposits in the Western Hemisphere, including Brazil, Chile, Argentina, and Canada.

Canada does not currently produce much lithium, but the potential there is significant. US trade initiatives could help establish a supply chain for lithium that exists entirely within North America. This would benefit both countries’ economic and national security endeavors.

In South America, US diplomats can help US companies negotiate rights to mine critical minerals in safe and environmentally secure ways, just as they worked to help US oil companies develop foreign oil supplies in the twentieth century. During the Cold War, this was considered a top national security priority. In the twenty-first century, critical mineral mining and refining should receive the same considerations from the US State Department.

Ellen R. Wald is a nonresident senior fellow with the Atlantic Council Global Energy Center and the co-founder of Washington Ivy Advisors.

The post The US wants to end its reliance on Chinese lithium. Its policies are doing the opposite. appeared first on Atlantic Council.

A report by the Adrienne Arsht Latin America Center in partnership with the US Department of State. This readout was informed by multi-stakeholder dialogues focused on facilitating greater, constructive exchange among multi-sectoral thought leaders and government leaders as they work to implement Summit commitments.

Executive summary

The main challenges that Latin American and the Caribbean (LAC) countries are facing include infrastructure issues (weak and insufficient transmission lines), and limited uptake of new solar photovoltaic (PV) and wind technologies. Despite these challenges, LAC is on track to capitalize on emerging clean energy technologies, including production and export of green hydrogen (GH2), as well as play a role in supplying the global energy system with critical minerals needed for the energy transition, such as lithium and copper.

LAC countries are facing major challenges in their ability to develop renewable energy projects, expand low-emission energy systems, and fill existing technical and financing gaps that hinder regional energy security. A key takeaway to come out of the Summit Implementation Roundtable was that the US-Caribbean Partnership to Address the Climate Crisis 2030 (PACC 2030) has the potential to advance clean energy goals in the Caribbean and become a blueprint to address similar challenges in Latin America.

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While the much-anticipated US-EU critical minerals agreement is still under negotiation, the Biden administration and von der Leyen commission have shown a willingness to move past the dispute over the Inflation Reduction Act. The EU and United States have already, for example, increased cooperation on critical minerals supply chains, such as the continued convening of the secure supply chains working group under the US-EU Trade and Technology Council, with a goal of addressing potential economic coercion by China. Yet with future unknowns bedeviling US-EU trade relations—namely elections and divergent approaches on open trade—as well as China’s dominance in critical minerals mining and processing, the EU needs to swing into action. With estimates showing the EU’s mining industry is fifteen years behind Beijing and a staggering 98 percent of Europe’s rare earth metals are imported from China, there is a lot of ground for the EU to make up. 

This isn’t to say the EU is sitting idle. When the US Congress passed the Inflation Reduction Act in 2022, the blow to the EU’s green tech sector became a catalyzing moment. In March 2023, the European Commission announced the Critical Raw Materials Act mandating that at least 10 percent of EU critical raw materials be mined and 40 percent processed in Europe by 2030. The legislation is expected to accelerate permitting procedures for new mines and alleviate some of Europe’s capacity issues (though implementation won’t be easy nor happen overnight). The EU is likewise pursuing new strategic partnerships on critical minerals in an effort to diversify its critical raw materials (CRM) supply chains. However, as the vast majority of EU imports of CRM are exempt from tariffs, new trade agreements alone offer little in terms of added benefits from new investments or economic incentives. The EU should pursue more ad hoc measures, particularly as Argentina throws a spanner in the EU-Mercosur trade pact and overall “fatigue” over stalled free trade negotiations in the EU sets in. 

One possibility for action is the EU’s forthcoming Critical Raw Materials Club for all like-minded countries, which seeks to strengthen the global CRM value chain in cooperation with allies and partners. At present, the Critical Raw Materials Club lacks structure, but it holds potential as a useful trade tool to pool investment into “resource rich” countries in the global value chain. As the EU faces an uncertain economic and geopolitical future ahead, it is important that the EU works quickly to link its CRM diversification efforts with others, especially with its largest trading partner, the United States.

EU should stand up the Critical Raw Materials Club

As it stands, the Critical Raw Materials Club aims to invite allies and partners to participate in what would primarily be a buyers’ cartel that would pool investment and facilitate coordination of market behavior among members in line with geopolitical and economic security concerns. The EU has already extended invitations to like-minded allies such as the United States, partly to prevent competition over the same resources.

However, the Club cannot be solely a buyers’ cartel, as that would put downstream pressure on critical mineral producers while the global market for them is volatile. And, although China has the existing advantage in terms of speed and scale for such partnerships, the EU can offer more reliable investments with ESG goals instead of greater potential risk of exploitation, which China has been accused of doing. Consequently, the Club should aim to place both the advanced economies of the EU and its allies on fairer footing with critical mineral exporters to prevent the former from unfairly exploiting the latter. This would ensure that critical mineral exporters should not have to choose between trade with the Club and their own economic development. 

EU should work with key allies including in the Indo-Pacific

Like the EU, the United States has been moving toward safeguarding its own supply chains. In May 2022, President Joe Biden announced the Indo-Pacific Economic framework (IPEF), a trade initiative meant to, among other priorities, strengthen supply chain resilience in the region. Taking it a step further, at the August 2023 Camp David Summit, the United States, Japan, and South Korea pledged to develop a pilot form of the IPEF supply chain Early Warning System (EWS) to share information on supply chain resiliency.  Notably, the trilateral declaration not only highlighted critical mineral supply chains as an area of interest, but also explicitly suggested linking the EWS to “complement” existing mechanisms with the European Union. 

As such, along with the United States, the EU should welcome Japan and South Korea into the Club during its establishment. Given their position in supply chains to China, Japan and South Korea will face the impact of Chinese-led disruptions faster than the United States and the European Union, making them strong economic bellwethers. This is especially true for critical mineral supply chains. As Europe has had increasingly close trade relations with Japan and South Korea, inviting them both would complement their similar goals of securing critical mineral supply chains and avoiding competition with their allies.

Discussions that are already happening on critical mineral supply chains at the Group of Seven (G7) summit and ministerial levels offer the opportunity for the EU to deepen cooperation. Although South Korea is not a formal member of the G7, it was represented at the G7 Hiroshima summit in May by South Korean President Yoon Suk Yeol—entrenching South Korea’s position in G7-level and adjacent discussions. 

Political challenges

Taken together, there is much that the EU should take stock in for its work in supply chain resiliency including in cooperation with the United States. All things considered, the outcome of next year’s US presidential election could inhibit cooperation on a number of transatlantic agenda items including on critical minerals. The EU should look to institutionalize the Critical Raw Materials Club, working with like-minded partners and allies, to anchor itself within the global CRM supply chain and do so ahead of next year’s elections to ensure better longevity.

Nicole Lawler is a program assistant in the Atlantic Council’s Europe Center.

Francis Shin is a research assistant in the Europe Center.

The post The EU needs a buyers’ club for critical minerals. Here’s why. appeared first on Atlantic Council.

With the increase in size, COP’s center of gravity shifted away from the formal management structure of the convention. Instead, the focus was on disparate and scattered initiatives in which nonstate actors—including from the private sector—play a prominent role. There are several ways to interpret this conference: a holy pilgrimage for those who are devoutly green, a new Davos attended by executives of the same corporate giants who frequent the World Economic Forum gathering in Switzerland, a photocall of politicians from around the world, a theater with armies of lobbyists, a mix of consultants and media. “Inclusion” was an oft-repeated theme this year. And although it may seem provocative, the meeting’s most notable decision may have been to include the oil and gas sector, which had been previously sidelined—a decision that spotlighted a larger confrontation at COP28 between ideology and pragmatism.

A new energy era

Strategic ambitions have historically revolved around energy, a substantive battle in international relations. The nineteenth century can be understood as the era of coal, driving the development of the manufacturing industry and rail transportation. World War I marked the beginning of the era of oil. (Controversy surrounded Winston Churchill’s decision, as the civilian head of the British Royal Navy, to switch the fleet to this fuel in 1913.) The current century will witness an “energy transition” intended to move the world toward a sustainable future. However, as “green” ideologies have come to dominate public discourse, the concept of a “transition” is too often lost: specifically, the idea that it will extend over time and require overlap. Countries must invest in renewables while continuing to rely on fossil fuels, which currently represent around 80 percent of the global energy mix (a figure that has stubbornly persisted since the world began to monitor the consequences of anthropogenic greenhouse gases).

The expectation of continued growth in demand through 2050 further complicates the global trilemma—ensuring a reliable energy supply at an affordable price while also accounting for the environmental dimension. Considering today’s technological framework, any solution to the equation likely involves replacing coal with gas—along with the return of nuclear—which is the most effective way to reduce emissions in situations where alternative sources are not conducive. Provided, of course, that “inclusive” and “equitable” are not just formulaic terms, and that “leaving no one behind” is more than a stylistic clause. In other words, Europe and other wealthy countries can afford to do away with coal or nuclear, or even to bet completely on renewables. But in the rest of the world, if a choice needs to be made between prosperity and the environment, the former will likely win out.

Today there is growing awareness of the urgency of the climate crisis. Far from being a technical dialogue among scholars, the climate conversation has permeated society; ordinary citizens around the world feel involved. Education has become not only positive but essential. Given that development, it is necessary to review the messages being sent; to reconsider the apparent dichotomy between renewable energies (presented as unquestionably good) and coal, oil, natural gas, and nuclear. These have been collectively condemned without considering their different contributions to what should be our only goal: combating the accumulation of greenhouse gases in the atmosphere.

The challenge ahead

The historic language enshrined in the final—although nonbinding—deal of the summit urging countries toward “transitioning away from fossil fuels” reflects a collective commitment to the energy transition that is taking shape. At the same time, there was progress in efforts to align hydrocarbons, and particularly gas, with sustainability goals, in recognition of their continued importance. Two initiatives stand out: a push to abate methane emissions, in particular from venting, flaring, and leaks; and a sharpening focus on the capture, storage, and eventual use of carbon dioxide throughout the gas value chain, starting with extraction. 

Equally transformative is the return of interest in nuclear power, following a long period of rejection that occurred despite it being one of the most efficient and reliable energy sources (even with the challenge of waste from current reactors). The deal reached two weeks ago has opened a horizon that, a year ago, would have been unimaginable: Twenty-two countries have committed to tripling their nuclear capacity by 2050. US climate envoy John Kerry has even emphasized that the world cannot achieve net zero by 2050 without some nuclear energy.

An initiative announced by European Commission President Ursula von der Leyen is also worth mentioning: More than a hundred countries have joined the Global Commitment on Renewable Energy and Energy Efficiency. It sets two goals: tripling installed renewable capacity and doubling the rate of improvements in energy efficiency, both by 2030. This effort must be accompanied by widespread electrification, a transformation that will require the rare earths and other critical minerals that have become indispensable in new energy technologies. Their concentration in certain areas presents a series of challenges, as does the almost monopolistic control of China over their extraction and processing. Currently, there is an effort to replace these minerals with more common, more abundant elements—although the necessary technology is still being developed.

The challenge coming out of COP28 is to consolidate a pragmatic vision, a global objective that values all three components of the energy trilemma. The vision must take into account the heightened energy demand that will accompany the global population growth expected in the next thirty years—an anticipated increase of two billion people—and must understand that for now fossil fuels inevitably will continue to play a significant role in meeting that demand.

The most pressing challenges of our century are clear: The world needs to multiply installed renewable capacity and advance electrification, along with its corollary of a constant supply of necessary critical minerals and rare earths. What’s also needed are efforts to develop a natural gas that is increasingly less polluting. And finally, nuclear skeptics need to make peace with nuclear energy.

A version of this article originally appeared in El Mundo. It has been translated from Spanish by the staff of Palacio y Asociados and is reprinted here with the author’s and publisher’s permission.

Ana Palacio is a former minister of foreign affairs of Spain and former senior vice president and general counsel of the World Bank Group. She is also a visiting professor at the Edmund E. Walsh School of Foreign Service at Georgetown University and a member of the Atlantic Council’s Board of Directors.

The post The takeaway from COP28: Gas and nuclear are part of the energy transition appeared first on Atlantic Council.

This article explores the ambitious environmental targets set by Turkey and the Gulf Cooperation Council (GCC) nations. Transportation emissions are a significant concern, and both regions are focusing on renewable energy, electric vehicles (EV), and innovative technologies to drive sustainable practices. This article highlights the potential for collaboration between Turkey and the GCC in renewable energy and EV adoption, as well as the importance of energy storage and carbon-capture technologies. The focus lies in elucidating the significance and interconnectedness of these key components within the broader energy landscape, with the imperative role of EVs in the context of overall carbon-emission goals, renewable energy as a source of electricity to EVs and carbon capture where complete decarbonization is challenging, and energy-storage systems to enhance reliability of renewable resources. By analyzing and understanding these focal points, the article aims to provide valuable insights into the evolving energy paradigm and its implications for a more sustainable future for both regions.

Renewable energy and transportation emissions

In April 2023, Turkey unveiled an ambitious update to its Nationally Determined Contribution (NDC) targets, setting a commendable course for environmental action. It made a firm commitment to reduce its greenhouse-gas (GHG) emissions by a substantial 41 percent measured against the 2012 baseline, which was previously 21 percent, by 2030. This new emission-reduction target equates to 695 million tons of carbon dioxide (CO₂) in the year 2030, which would otherwise be 1,175 million tons. Moreover, Turkey is embracing a forward-looking vision by setting a target to attain net-zero emissions by the year 2053. The GCC nations have established ambitious environmental goals, aiming for zero emissions by 2050 in the cases of the United Arab Emirates (UAE) and Oman, and by 2060 for Saudi Arabia, Kuwait, and Bahrain. Qatar, while not currently committing to a zero-emission target, is focused on achieving a substantial 25-percent reduction in emissions by 2030.

The journey toward reduced emissions is a multifaceted one, and Turkey is taking significant steps to address its emissions profile. While the energy and industrial sectors are the major contributors to emissions, chiefly through coal utilization, it is noteworthy that the transportation sector plays a pivotal role, accounting for approximately 16.6 percent of the nation’s emissions as of 2021. Also, renewable energy is already a significant part of electric generation, with almost 52.8 percent of Turkey’s energy coming from solar, wind, hydropower, and geothermal, and with solar and wind covering 21.3 percent of installed capacity as of September 2023. Turkey has a target of supplying 64.7 percent of its installed electricity capacity from renewable resources by 2035.

GCC countries’ heavy reliance on oil and gas requires them to pursue a diversified energy strategy that incorporates clean-energy sources, natural gas, clean coal, and nuclear power. The UAE set a significant investment of $54 billion in renewables to reach net zero by 2050. Dubai’s renewable-energy expansion includes extensive solar initiatives such as Mohammed bin Rashid Al Maktoum Solar Park. Approximately 14 percent of its electricity comes from clean sources, and it aims to reach 25 percent by 2030. The forthcoming COP28 Conference in Dubai is expected to bring together key stakeholders, facilitating discussions and actions aimed at enhancing sustainability efforts in the region. Although Saudi Arabia has a limited presence in renewable resources, it is in the process of constructing the world’s largest solar facility, with an expected completion date in 2025, and aims for 50 percent of electricity to be sourced from renewables by 2030. In the UAE, transportation was the third-largest source of emissions, contributing to approximately 19 percent of the total. In Saudi Arabia, transportation was the second-largest source, responsible for 26 percent of emissions, while it ranked third in Qatar, making up 13 percent of emissions. In all three countries, electricity and heat remained the leading sectors of emissions.

As Turkey advances toward its emission-reduction targets and embraces cleaner transportation alternatives, the synergy between electric mobility and renewable energy will undoubtedly play a crucial role in shaping its sustainable future. Almost 95 percent of its transportation emissions come from road transportation—mainly diesel-powered vehicles. Similarly, in GCC countries, road transportation has produced a significant amount of transportation emissions—more than 90 percent on average—revealing the potential for improvement as alternative powertrain technologies evolve.

Adoption of alternative powertrain vehicles/electric vehicles

Turkey has been quickly adopting EVs despite global supply-chain issues that stem mainly from chip shortages, wire-harness supplies halted due to the Ukraine-Russia conflict, steep inflation that impacted vehicle prices, and interest rates that went beyond 40 percent for vehicle credit/loans as of 2023. Year-over-year growth in adoption of plug-in hybrid and electric-battery light vehicles was around 188 percent in 2022 and was expected to grow further in 2023.New models enter the market each year, including locally produced TOGG EVs that became commercially available in 2023. This shows a dedicated localization of lower-emission transportation, as Turkey is imposing an import tax of around 40 percent on imported vehicles and protects competition within the local market. Turkey is encouraging the adoption of EVs by offering reduced special consumption tax (SCT) between 10 to 60 percent, in contrast to the typically high SCT imposed on their internal combustion engine (ICE) counterparts that normally ranges between 45 to 200 percent. The charging infrastructure has been improving consistently, and the number of companies licensed to install and operate charging stations has increased to 124, with the total number of charging stations having reached 4,221 as of 2023. Alternative powertrain technologies are being explored, with a focus on hydrogen-powered vehicles to attain net-zero emissions. The limited availability of hydrogen-fueling infrastructure poses a challenge for the widespread adoption of hydrogen-powered light vehicles. However, buses operating on fixed routes are considered early adopters of this technology, as they can overcome the infrastructure limitations more effectively. Turkey is also partnering with international vehicle and parts makers, such as Ford and LG Chem, to locally manufacture batteries that will bring in EV technology capability.

GCC countries have initiated the adoption of EVs, beginning with government-driven purchases. Notably, the Dubai government has set a target to make 30 percent of its government fleet electric by 2030. Dubai has established a new manufacturing hub dedicated to the local production of EVs and is planning to export to Egypt, Tanzania, Senegal, Mali, and Kenya. Presently, just 1 percent of vehicles in the UAE run on batteries, but the country aims for 50 percent of vehicle sales to be EVs by 2050. In 2022, Saudi Arabia imported approximately fourteen thousand EVs due to the absence of local automotive manufacturing. Nevertheless, the country’s recently unveiled Vision 2030 plan seeks to reduce its dependence on oil. Meanwhile, Qatar is actively developing its local EV brand, EcoTranzit, with the goal of EVs constituting 10 percent of total vehicle sales by 2030. As EV adoption is dependent on infrastructure, green-hydrogen production is also being discussed in GCC countries, due to presence of valuable, renewable electricity-deployment potential from natural resources and low-carbon hydrogen from the vast amount of hydrocarbons.

Collaborative projects or partnerships between Turkey and GCC countries

Both Turkey and the GCC are committed to achieving significant reductions in emissions, which will have a profound impact on their economies. Collaboration between these regions will accelerate the transition toward an improved quality of life for their residents. This transition will necessitate substantial investments and the reallocation of resources from various sources, including public, private, and international funds. Key areas of focus for this collaboration include renewable-energy production and the adoption of EVs.

One noteworthy synergy between EVs and renewable energy is energy storage. The efficient utilization of installed solar and wind facilities can play a pivotal role in facilitating a broader adoption of energy from renewable resources. Turkey, for instance, has recently made energy storage a requirement for licensing solar and wind-energy production applications. However, due to limited financial incentives and rising costs, some companies interested in transitioning have postponed their installation plans. The demand for these licenses is exceptionally high, and numerous local companies are already manufacturing energy-storage systems ready to serve various sectors, including residential, commercial, and utility-scale applications. The GCC nations have the opportunity to maximize their investments by leveraging the growing expertise in Turkey. They can contribute to the advancement of Turkey’s energy system and play a pivotal role in enhancing the integration of EVs into the electricity grid. Furthermore, Turkey has long held substantial potential in the production and advancement of solar panels, and currently ranks fourth globally in solar-panel production capacity.

Carbon capture is another domain in which Turkey can gain valuable insights and technology from GCC countries, given the extensive industrial applications already in place. Turkey’s heavy industries constitute the second-largest source of carbon emissions, making carbon-capture technologies particularly relevant. The emerging clean-hydrogen industry in Turkey can benefit from the GCC countries’ abundant hydrogen resources and their applications of carbon capture in making hydrogen cleaner, facilitating a faster adoption of this technology.

Recent meetings between the leaders of Turkey and the GCC countries have resulted in agreements to collaborate in various renewable-energy sectors, including wind turbines and solar panels, with an estimated direct investment of approximately $30 billion from GCC countries. Furthermore, collaboration in areas such as carbon capture and energy-storage systems is on the agenda, marking a promising step toward a more sustainable and environmentally friendly future for both regions.

Conclusion

The commitment of both Turkey and the GCC countries to reduce emissions and embrace sustainable energy solutions is commendable. Their joint efforts in renewable energy, EV adoption, and knowledge sharing hold the promise of a more environmentally friendly and economically robust future. Recent agreements between these regions, coupled with a focus on carbon capture and hydrogen technology, underscore the collaborative approach to addressing climate change and advancing clean-energy practices. Through these partnerships and individual initiatives, they are on a path to achieving their ambitious environmental goals while promoting a more sustainable and prosperous future for their residents.

Melek Öztürk is a Principal Research Consultant at The Electric Vehicle (EV) Exchange

The post EV adoption could drive collaboration for renewable energy in Turkey and GCC appeared first on Atlantic Council.

The Gulf Cooperation Council (GCC) and Turkey share mutual challenges posed by climate change while, at the same time, possessing important synergies in the energy sector that deserve further exploration from policymakers and the private sector.

With the shared goals of reducing carbon emissions, ensuring energy security, and stimulating economic growth in perspective, TRENDS Research & Advisory and the Atlantic Council in Turkey are proud to present our joint publication on Prospects for Cooperation in Energy Transition for a Sustainable Future: GCC, Turkey, and Regional Perspectives. We hope this publication will contribute to the important discussion of the need for international and regional cooperation to accelerate the adoption of clean energy and address climate change. Our joint publication represents a starting point and roadmap for future cooperation.

Diversifying the energy mix through clean energy enhances energy security for both regions. By reducing reliance on fossil fuels, the GCC and Turkey can shield themselves from geopolitical uncertainties and price fluctuations in the global oil and gas markets. By sharing knowledge and best practices, they can accelerate climate adaptation, making the transition more efficient and cost-effective. Collaboration in clean energy projects can also promote regional stability at this critical time of uncertainty by fostering economic ties and mutual interests.

The joint publication explores prospects for partnership between the GCC countries and Turkey to accelerate energy transition and clean-energy deployment. The goal is to diagnose the current state of renewables adoption in Turkey and the GCC, identify potential areas for cooperation in aligning their net-zero emissions targets, and produce a set of policy recommendations to accelerate the transition. The publication underscores the imperative of shared efforts, knowledge exchange, and sustainable initiatives to fortify regional stability and contribute to a resilient, low-carbon future.

May our joint efforts to address the challenges of climate change and foster clean-energy cooperation serve as a testament to the power of regional partnerships in shaping a more secure, resilient, and interconnected world.

In cooperation with

Public Event Sat, December 9, 2023 • 3:30 am ET

Prospects for cooperation in energy transition for a sustainable future: GCC, Türkiye, and regional perspectives

An in-person discussion and publication launch taking place at COP28, on Türkiye-GCC prospects for cooperation in energy transition.

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The Atlantic Council in Turkey, which is in charge of the Turkey program, aims to promote and strengthen transatlantic engagement with the region by providing a high-level forum and pursuing programming to address the most important issues on energy, economics, security, and defense.

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The world is at a critical juncture to address climate change. In accordance with Goal 13 of the United Nations (UN) Sustainable Development Goals, the 2015 UN Framework Convention on Climate Change (UNFCCC) COP21 summit in Paris set a cornerstone agreement in the global energy revolution, bringing 175 countries into a common cause to curb net carbon-dioxide (CO₂) emissions and limit global temperature rise to 2 degrees Celsius (°C).

This year, the United Arab Emirates (UAE) has the honor of hosting the COP28 summit and welcoming around two hundred nationalities to address today’s most important global challenge. To avert the worst impacts of climate change and preserve a livable planet, greenhouse-gas (GHG) emissions need to be reduced by 45 percent by 2030 and reach net zero by 2050. COP28 may be the last opportunity to turn national commitments into action and avoid risks of abrupt, unpredictable, and potentially irreversible changes in our habitat.

COP28’s success hinges on delivering stronger commitments to curb carbon emissions, expanding financial help to manage the green transition, and developing multilateral approaches on regional climate governance in the Middle East. However, observable exchanges between regions seldom happen; each country follows its own climate policies instead of creating much-needed cooperation. If current trends continue, many parts of the Middle East could become uninhabitable in this century. This report aims to break these silos and build on the momentum of growing economic ties between Turkey and the GCC that would bring collective gains in energy transition.

Achieving net-zero emissions requires all governments, especially the major emitters, to significantly enhance their Nationally Determined Contributions (NDCs) and take immediate, bold actions to reduce emissions. At a global level, the energy industry is the source of approximately 75 percent of GHG emissions and plays a crucial role in preventing the severe impacts of climate change.

Shifting away from coal, gas, and oil-based power and toward renewable sources such as wind or solar energy could significantly decrease carbon emissions. Despite the worldwide move toward cleaner energy, the Middle East is falling behind in its efforts to achieve net-zero emissions goals. Accelerating energy transition toward zero-carbon solutions is the key to building a more sustainable future in the region.

Technology diffusion is occurring at an unprecedented rate. Globalization helped to accelerate adoption of renewable-energy technologies at levels far higher than those of just ten years ago. The cost of solar power is now cheaper by 90 percent, and wind power by 60 percent. The International Energy Agency (IEA) estimates that 60 percent of energy investments globally in the next fifteen years will be in clean-energy sources. Annual clean-energy investment has risen at double the rate of investment in fossil fuels during 2021–2023. Although more than 90 percent of the increase in clean-energy investment has taken place in developed countries and China, the Gulf Cooperation Council (GCC) and Turkey are among the few bright spots in the Global South that placed special emphasis on renewables adoption.

Over time, the GCC countries demonstrated that it is economically, environmentally, and socially beneficial to invest in clean energy and other carbon-mitigation strategies, while Turkey fostered environmentally friendly, innovative policies to decarbonize energy through market liberalization, public-private partnerships, technology transfer, and financial assistance for green investments. Turkey and the GCC share significant opportunities for synergy in the adoption of clean energy, owing to their differences in energy resources and comparative advantages.

The GCC countries, with their vast financial capital, can invest in Turkey’s clean-energy projects. These investments can support the development of renewable infrastructure and technologies, fostering collaboration between the regions, while also diversifying the GCC’s portfolio of investments abroad. Turkey can share its technology know-how, adaptation roadmap, and energy-efficiency mechanisms with the GCC to advance the mutually beneficial partnership.

As TRENDS Research & Advisory and the Atlantic Council, it is our distinct pleasure to present this joint publication exploring prospects for deepening cooperation between Turkey and the GCC countries in pursuit of the clean-energy transition. This timely joint report delivers four articles from renowned experts in climate change, energy transition, and geopolitics of energy security that shed light on the most pressing challenges of our time.

In Cooperation in Energy Transition between the GCC and Turkey, Mouza Almarzooqi discusses how dedicating financial resources and efforts toward energy-efficient projects would lead to the adoption of carbon-free and green industries and infrastructure projects. In Turkish Energy Transition 3.0: Go Together!, Eser Özdil takes readers through a journey on Turkey’s energy transition and its approach to developing international cooperation in renewable investments. In Synergy Between Electric Mobility and Renewable Energy: Turkey’s Connection with GCC Nations, Melek Öztürk explores ambitious environmental targets set by Turkey and the GCC nations, and how they focus on renewable energy, electric vehicles (EV), and innovative technologies to drive sustainable practices. In Complementary Transitions: Turkey, GCC, and the Energy of Tomorrow, Karim Elgendy explores how Turkey and GCC countries can combine their unique expertise and resources to unlock greater energy security and sustainability for both regions.

We wish you enjoyable, enlightening reading!

Dr. Serhat S. Çubukçuoğlu

Senior Fellow in Strategic Studies

Trends Research & Advisory

The post An introduction to regional perspectives on climate change: Gulf Cooperation Council and Turkey appeared first on Atlantic Council.

Introduction

Since the mid-1980s, Turkey’s priority has been to meet the increasing energy demands caused by industrialization and population growth. On the one hand, Turkey is involved in many pipeline projects to supply oil and natural gas, especially from neighboring countries. On the other hand, it has focused as much as possible on electricity production from domestic and renewable resources. In this context, Turkish decision-makers gave high importance to bringing high hydroelectric potential to the economy and strongly encouraged the rapid construction of wind and solar power plants, with various purchase guarantees and support mechanisms for both since the 2000s.

While Turkey’s primary energy demand was 53 million tons oil equivalent (mtoe) per year in 1990, this figure increased to 147 mtoe by 2020. In the process, Turkey’s energy policies were shaped around two main axes. The first priority was supply security, while the secondary priority was to ensure the most reasonable prices possible for energy imports, as Turkey heavily depends on fossil fuels (natural gas, oil, and coal), which meet roughly 80 percent of Turkey’s primary energy demand. Just as the increase in global oil prices following the outbreak of the Iraq War in 2002 seriously affected Turkey, it was one of the countries most affected by the increase in oil and natural-gas prices during the Ukraine War. It should be noted that Turkey paid $97 billion for energy imports in 2022, breaking its all-time record.

Turkey will continue to face important challenges in the future. According to the National Energy Plan (NEP) published by the Ministry of Energy and Natural Resources (MENR) in 2022, Turkey’s primary energy demand will increase to 205 mtoe in 2035. While the installed power-plant capacity will increase from 105 gigawatts (GW) to 189.7 GW, the new capacity will consist largely of solar and wind-power plants. In this context, the challenge of managing energy transformation in line with global trends will be added to Turkey’s priorities of supply security and affordability. It is important to underline that Turkey’s concept of energy transformation is evolving toward a more liberal market structure with a smart transformation strategy, while transitioning to a carbon-neutral economy without increasing costs for the end consumer. This process will include many cooperation opportunities, especially for joint investments in renewable-energy facilities, electricity and gas distribution, grid modernization, optimization, digitalization technologies, hydrogen and ammonia production, and so forth.  

Turkish energy transition 1.0

Alparslan Bayraktar, Turkey’s minister of energy and natural resources (MENR), defined the country’s energy policies between 2002 and 2018 as Energy Transition 1.0 in an article he wrote for Turkish Policy Quarterly in 2018, when he served as the deputy minister. Bayraktar summarized the priority policy set for the sector, which attracted more than $60 billion of investment in this process, as part of the transition to a more transparent and competitive energy market. Indeed, after the AK Party first came to power in 2002, it launched broad privatization and liberalization policies for all segments of the energy sector. In this period, electricity-distribution companies and natural-gas utilities—with the exception of Istanbul’s gas-distribution firm İGDAŞ—were privatized. While some publicly owned power plants were privatized, the private sector’s share of electricity production increased to 80 percent. The most important point here is that most of these investments were carried out in line with liberalization and free-competition principles, without long-term guaranteed-purchase contracts. In addition, the market structure was strengthened by the unbundling of vertically integrated public companies.

Turkish energy transition 2.0

Bayraktar states that Turkey has moved to version 2.0 in energy transformation within the framework of the National Energy and Mining Policy (NEMP) published by MENR back in 2017. He explains NEMP’s three main pillars as “security of supply, localization, and predictability in the markets.”

In this context, Turkey’s infrastructure investments between 2017–2023 have almost permanently solved the supply security problem. By increasing the capacity of land-based liquefied-natural-gas (LNG) terminals and commissioning new floating storage regasification units (FSRU), Turkey’s daily LNG regasification capacity has exceeded 140 million cubic meters (mcm). In addition, with the increase in the capacity of the Silivri Underground Natural Gas Storage facility and the commissioning of the Tuz Gölü Natural Gas Storage facility, Turkey’s annual natural-gas storage capacity reached 6 billion cubic meters (bcm). With the commissioning of international natural-gas pipelines such as TurkStream and Trans-Anatolian Pipeline (TANAP), Turkey achieved resource and route diversity. With a gas entry capacity of more than 400 mcm per day, Turkey not only meets its domestic needs but has become a supplier to neighboring countries, with state-owned BOTAŞ signing gas-export agreements with Bulgaria, Romania, Hungary, and Moldova. The discovery of the Sakarya gas field in the Black Sea and the increase in oil production are also among the important developments during this period. There are also established oil, oil products, and gas import and trade relations between Turkey and Gulf Cooperation Council (GCC) countries. As Qatar emerges as one of Turkey’s most important LNG suppliers, Saudi Arabia supplies roughly 5 percent of Turkey’s crude-oil demand. Saudi Arabia and the United Arab Emirates (UAE) supply gasoline, diesel, and other relevant oil products to Turkey. Last but not least, BOTAŞ recently signed a 1.4-bcm LNG-offtake agreement with Oman LNG company.

Renewable-energy investments are also gaining momentum in the field of electricity generation. After triggering these investments through a feed-in, tariffs-based support mechanism (YEKDEM) elaborated in December 2010, the new strategy brought further investment opportunities to Turkey. This entailed a “renewable energy resource zone (RE-ZONE) competition mechanism,” which encouraged investors not only to build power plants but also to manufacture renewable-energy equipment in Turkey. This RE-ZONE model aims to both utilize renewable resources and reduce the country’s current-account deficit with locally manufactured equipment. Considering investments since the new approach was announced, installed wind capacity increased from 7 GW to almost 12 GW, and solar capacity increased from 5 GW to 10.1 GW.

There is still much to do in the market-liberalization sphere. Especially in the natural-gas market, BOTAŞ’ dominant position in both imports and the domestic market prevents the formation of a gas market with liquidity. In addition, subsidizing domestic-market sales prices from time to time also harms market predictability. This situation also negatively affects Turkey’s strategy to become a natural-gas hub, which is a widely discussed topic. Similarly, the pricing policy of the public company EÜAŞ also emerges as an important issue. For this reason, it is of great importance to eliminate interventions through public companies and generate healthy price signals.

 

If you want to go fast, go alone;

if you want to go far, go together!

 

African proverb

Energy transition 3.0: Go together

Transitioning to carbon-neutral economies has emerged as a must rather than a necessity. However, the threats faced by our planet and humanity, especially global climate change, clearly demonstrate that no country can overcome these challenges alone. The phenomena of decarbonization, decentralization, digitalization, and diversity (4D) force all countries to cooperate in this journey.

For this reason, Bayraktar argues that the energy transition should be smart, and he summarizes the main parameters of this smart transition as an energy transition that is inclusive, responsive, flexible, rational, and digital. The minister has explained: “What Turkey foresees is a smart energy transition, where decisions are made rationally, not emotionally, for the purpose of maintaining our supply security, diversifying our energy mix, and transforming Turkey into an energy hub, becoming a safe space for investors. In line with this objective, we will continue to increase our oil and natural gas production as well as build nuclear power plants to diversify our energy mix.”

At this point, NEP targets should be examined. Turkey, which plans to become a carbon-neutral economy by 2053, has set challenging targets for 2035. The most challenging is to increase the total installed power-plant capacity to 189.7 GW (it is currently 105 GW). To achieve these targets, it aims to invest mainly in wind and solar power plants and reach capacities of 52.9 GW and 29.6 GW, respectively. Another goal is that approximately 5 GW of the installed wind power will be offshore, and studies on this issue continue in close cooperation with the World Bank. Various companies are interested in investing in offshore wind projects in Turkey, and the UAE’s Masdar is also closely following developments there. A study published by the World Bank in 2019 stated that Turkey’s total offshore wind power-plant potential was around 75 GW. TÜREB states that Turkey’s total wind potential is around 150 GW. Similarly, GÜNDER  stated that Turkey’s total solar potential is more than 150 GW.

Another of Turkey’s priorities is to invest in base-load nuclear energy and battery facilities to manage the energy-transformation process in a healthy way. According to the NEP, Turkey aims to reach 7.2 GW of installed nuclear-power capacity by 2035. In addition to conventional nuclear-power plants, small-scale nuclear power plants (SMR) have become among Turkey’s priorities. Bayraktar recently announced in an interview with the Turkish television channel NTV that the ministry wants to reach a total SMR capacity of 5 GW. In the long term, Turkey plans to have a significant share of nuclear power in its electricity-generation portfolio.

In battery investments, Turkey aims to have an installed capacity of 7.5 GW in 2035. However, pre-license applications to the Energy Market Regulatory Authority (EMRA) have already exceeded 90 GW. Undoubtedly, most of these applications will not be implemented, but the interest in the sector suggests that investments realized in the coming period may be above the level planned by the ministry.

Another priority for Turkey will be green- and blue-hydrogen investments, especially for industrial use. According to the NEP, the target is 5 GW of electrolyzer capacity in 2035. Though hydrogen projects in both Turkey and GCC countries are at the early stage, Turkey and Saudi Arabia announced establishment of working groups on development of hydrogen-production technologies.  In the hydrogen strategy paper published by the ministry, the targeted capacity is 70 GW by 2053. Considering both its renewable-energy potential and its proximity to Europe, Turkey can be an important hydrogen producer and exporter.  While it’s very early to make sound forecasts about hydrogen production and demand, Europe has a clear strategy to increase hydrogen consumption to replace fossil fuels. The Gulf region and North Africa are emerging as the cheapest hydrogen-producing regions with high-efficiency, renewable-energy production as per International Energy Agency (IEA) data. Turkey is also a key country, considering its status as a transit option and its significant renewable-energy deployment. That’s why the future will see strong cooperation between Turkey and GCC countries.

At this point, Turkey’s main approach is to develop international cooperation. In this context, during President Recep Tayyip Erdoğan’s visits to the UAE, Qatar, and Saudi Arabia in July 2023, memoranda of understanding (MoUs) were signed regarding investments with a total size of $29.7 billion. These planned investments will be made in in renewable energy, including offshore wind, solar energy, clean hydrogen, and nuclear power, in line with Turkey’s future projections. Within the scope of the visit, an agreement was signed between Limak and Alpha Dabi to realize joint investments, including in the energy sector. The strategic-cooperation agreement signed between Abu Dhabi National Oil Company (ADNOC) and Türkiye Petrolleri Anonim Ortaklığı (TPAO) also stands out as important.

Similarly, Turkish and Saudi Arabian leaders decided to develop cooperation in energy fields, including renewable energy, electricity interconnection between the two countries, electricity exports from Turkey to Europe, energy efficiency, innovation and clean technologies for hydrocarbon resources, low-carbon fuels such as clean hydrogen, and nuclear energy. They expressed their desire to explore cooperation options regarding areas of peaceful use and the regulatory aspects of these areas.

Even before these trips, the interest of GCC companies in Turkey was remarkable. In 2022, International Energy Holding, a subsidiary of International Holding Company, acquired a 50-percent stake in Turkish renewable-energy company Kalyon Enerji for $490 million. As Bloomberg reported earlier, Masdar is interested in buying shares of Fiba Energy, an owner of wind farms in Turkey. Clearly, there is a convergence of priorities and policies between Turkey and GCC countries regarding the energy transition. Developing political relations will be further cemented by economic investments.

Conclusion

Both Turkey and GCC countries seem aligned in terms of green-energy transition strategies. While Turkey has large industrial production capacity, as well as substantial experience and know-how in renewable-energy power-plant installations, GCC countries have ample financial capacities and huge renewable-energy deployment potential thanks to long sunny seasons. On top of that, Gulf countries are also looking for lucrative investment opportunities around the world. Therefore, strategies and economic aspects of both sides seem to complement each other. Thanks to financial capabilities, Gulf countries can invest in Turkish companies and/or develop common projects in both Turkey and the Gulf region. Erdogan’s working trips to Gulf countries and signed MoUs are clear signals of future joint steps.

Eser Özdil is a Nonresident Fellow at the Atlantic Council IN TURKEY & founder of Glocal Group Consulting, Investment & Trade

The post How GCC and Turkey can go together toward a sustainable future appeared first on Atlantic Council.

Recently, countries have reached a point at which energy transition coincides with climate goals, economic growth, national interests, and sustainability. In the Gulf Cooperation Council (GCC) region, no country can self-achieve energy transition; thus, nations should plan on how to join forces for diversifying energy sources and reducing carbon footprints in the region. The prospects for cooperation for a sustainable future between the GCC and Turkey center on increasing adoption of renewable energy, offshore wind, solar energy, nuclear power, and clean hydrogen in agriculture, manufacturing, and transportation.

Cooperation in energy transition

The GCC countries and Turkey have a chance to cooperate in energy transition for a sustainable future by promoting international agreements based on mutual interests, as well as the principle of and belief in a just energy transition for all. Turkey has been an energy-dependent country and enjoys a constantly growing market. On the other hand, GCC economies have benefited from oil and gas exports for the past fifty years. There is an opportunity for these regional actors to work together, spearhead the region’s transition to clean energy, and make joint efforts toward meeting their climate goals. Nevertheless, each country in the region has unique challenges and opportunities. There is an opportunity to ensure an energy transition that is inclusive, responsive, flexible, rational, and digital. The aim here is for nations to reduce their reliance on fossil fuels and combat the adverse effects of climate change. These countries understand and appreciate the importance of adopting renewable energy, and they can do that by coming together to invest in feasible, productive projects.

Climate change and agriculture are another opportunity for cooperation between the GCC and Turkey in terms of the energy transition. Notably, the UAE and Turkey have embarked on multiple recent collaborations to address climate change and foster environmental sustainability. In February 2022, the two nations signed multiple agreements and memoranda of understanding (MoUs) aimed at promoting their cooperation and collaboration on climate and environmental issues. Such agreements demonstrate that the two nations have decided to work together to support the global transition to climate neutrality. Specifically, GCC countries and other actors should have a common vision of international cooperation in terms of sharing best practices in the energy transition and addressing their unique challenges to ensure a sustainable future. Cooperation can take many forms, one of which is a joint investment in research facilities and sharing scientific knowledge sources and collaborative projects that aim to improve existing technologies in the energy transition field. Also, promoting the exchange of experts and professionals that would enable knowledge-sharing and capacity building. Training programs can be established to facilitate the transfer of expertise with the focus on energy policy and efficiency.

Joint climate action in the GCC and Turkey

The Middle East is among the world’s most vulnerable regions to the accelerating impacts of human-caused climate change, due to effects ranging from heat waves to rising in sea levels and water scarcity. The Gulf nations face depleted freshwater resources within the next 50 years, while average temperatures are soaring at a rate that is two-to-seven times faster than the global average – it is no surprise that the region is home to 12 of the world’s 17 most “water stressed countries”. There is a huge opening for them to come together and adopt clean-energy sources that can signal a transition from fossil fuels to clean sources of energy.

Climate change has also adversely affected the countries’ economies and political stability. There is an enormous chance for the GCC, Turkey, and related actors to collaborate on future joint actions to address climate-change issues—including water and air pollution, sandstorms, and flooding—with the goal of preserving the nations’ economic stability and social resilience. Such countries should be driven by their strong commitment and goodwill toward ensuring economic diversification and phasing out of fossil fuels in order to ensure the preservation of stability and the attraction of foreign direct investment. For instance, Turkey and countries in the GCC—including the UAE, Bahrain, Qatar, Kuwait, and Oman—have a chance to use cooperation on climate action and the energy transition as the chief drivers for regional reconciliation.

GCC nations and Turkey can pledge to work jointly to implement lucrative projects in renewable energy. For instance, the UAE, Qatar, Saudi Arabia, and Turkey recently signed a strategic partnership and framework agreement in the area of green and natural resources. The “Zero Waste Blue Project,” aimed at keeping gas and water resources free from waste, is an area of prospective cooperation in the Middle East. Furthermore, the Arab-China Business Conference that was conducted in Riyadh concluded that $10 billion should be used in the construction of energy-transition projects in the GCC such as electrification of transport. Additionally, leading Emirati corporations have invested in projects that benefit both the GCC and Turkey, with AED1.8 billion ($490 million) committed toward the energy transition. Other collaborations in the GCC to mitigate climate change and its adverse consequences should take place in the areas of transport, commerce, and manufacturing such as expansion of smart buildings and paperless trading through digitization. These initiatives, when explored, would lead to the construction of carbon-free airports and green railway stations powered by wind and solar energy, and car factories powered using green initiatives.

Looking ahead for a just and sustainable transition

The GCC and Turkey have the opportunity to come together and dedicate resources to diversify energy sources and transition from the use of fossil fuels to the use of clean energy. In the field of agriculture, the Middle East region should cooperate to mitigate adverse effects of climate change, such as droughts, sandstorms, and floods that affect the growth and maturity of food crops. Moreover, in the areas of green and renewable resources, these nations can commit to dedicating financial resources and efforts toward energy-efficient projects that would lead to the adoption of carbon-free and green industries and infrastructural projects.

Mouza Almarzooqi is the Head of Economic Studies section at TRENDS Research and Advisory

The post Forging a collaborative energy transition between GCC and Turkey appeared first on Atlantic Council.

The eastern Mediterranean and the Arabian Peninsula share sunny skies and unique geopolitical locations. Their largest economic powerhouses, the Gulf Cooperation Council (GCC) and Turkey, share progressive plans to decarbonize their economies by the middle of the century. However, their energy-transition pathways are propelled by distinct forces.

As Turkey’s appetite for energy rapidly grew, its reliance on imported natural gas left it critically vulnerable to supply shocks, price volatility, and geopolitical pressures. Thus, Ankara views investing in renewables, nuclear power, and hydrogen as crucial to enhancing its energy security. In contrast, the hydrocarbon-exporting Gulf nations are seeking to future-proof their economies in a decarbonizing world by proactively diversifying into solar, wind, and hydrogen production. While their motivations differ, Turkey and the GCC both understand that their energy systems must evolve for economic reasons.

Securing supply through diversification

Turkey’s energy demand has increased in recent decades due to population growth, industrialization, economic development, and rising living standards. This has made it heavily reliant on imported fossil fuels, especially natural gas, which has a roughly 30-percent share in its energy mix. To enhance energy security and meet rising electricity demand, it has focused on diversifying its power-generation portfolio.

Hydroelectric dams have long been Turkey’s main renewable-electricity source. But installed capacity of solar and wind power expanded rapidly since 2014, more than doubling renewables’ share of total generation to 42 percent by 2022. Turkey’s mountainous geography provides substantial potential for additional hydropower, while its western and southern regions have favorable wind and solar resources.

Under its 2053 net-zero emissions pledge, Turkey aims to double electricity capacity by 2035, with renewables providing nearly 65 percent of power. Wind and solar capacity are slated to scale up dramatically. Turkey has strong project pipelines, with wind projects largely on track. However, solar growth has lagged targets so far. Beyond renewables, nuclear power from new plants will provide 11 percent of Turkey’s electricity by 2035.

While pushing renewables, Turkey seeks greater fossil-fuel production and supply diversification to ensure energy security during the transition period. Turkey is planning expansion of its coal and gas electricity-generation capacity by 3 and 10 gigawatts (GW), respectively, but both are expected to fall after 2030. Expanding natural-gas exploration resulted in major discoveries in the Black Sea, which could provide up to 30 percent of Turkey’s gas demand. But regional disputes have hindered Turkey’s ambitions to become an Eastern Mediterranean gas hub.

Alongside its renewable-energy plans, Turkey also plans major deployment of battery storage and green-hydrogen production to provide grid flexibility. Hydrogen output could reach 0.75 million tons annually by 2035 and 10.5 million tons annually by 2053, most of which would be available for export to Europe. Blending hydrogen into gas networks is also envisioned.

Preparing for a post-oil era in the Gulf

Like Turkey, the GCC states have witnessed substantial energy-demand growth in recent decades, driven by population growth and rising living standards. This rising domestic demand initially increased reliance on oil and gas before GCC states took measures to manage demand, diversify their energy mix, and free up more oil and gas for export.

Solar-power capacity has expanded rapidly in Saudi Arabia, Qatar, Oman, and the United Arab Emirates (UAE), where it now represents 8 percent of electricity generation. Under its 2060 net-zero pledge, Saudi Arabia aims to add 59 GW of solar and wind capacity by 2030 and source 50 percent of its electricity from renewables. The UAE has similarly ambitious targets, aiming for 30-percent clean power by 2031, which includes both renewables and nuclear power. The UAE is the only GCC country with a functional nuclear plant.

While adding renewables, the GCC still seeks to maximize oil and gas output for export. The bloc is expanding upstream investments to increase capacity. Saudi Aramco and UAE’s ADNOC, the national oil companies, are planning massive oil and gas investments. Meanwhile, Qatar’s North Field expansion will significantly boost its natural-gas exports.

Capitalizing on their energy expertise and cheap solar energy, GCC states are also well positioned to enter the low-carbon hydrogen market. This includes production of both green hydrogen from renewable sources and blue hydrogen from natural gas with carbon capture. With most of the planned production slated for export, the GCC aims to meet growing global demand for hydrogen in hard-to-decarbonize sectors.

The UAE, which delivered the region’s first hydrogen shipment to Germany, has set a goal of becoming a leading global producer of green and blue hydrogen by 2031. It plans to capture 25 percent of global trade with production of 1.4 million tons annually, rising to 15 million tons by 2050. Saudi Arabia is building the world’s largest green-hydrogen plant at NEOM, targeting 2.9 million tons by 2030 and 4 million tons by 2035. Similarly, Oman aims to produce at least 1 million tons of green hydrogen by 2030 and up to 8.5 million tons by 2050.

Turning geopolitical challenges into energy collaboration

Though their motivations for energy transition differ, Turkey and the GCC still have much to gain from collaboration that plays to their respective strengths. In solar power, Turkey could benefit from the GCC nations’ extensive expertise from developing mega-scale projects in the Gulf’s sun-drenched deserts. Investments in Turkey by GCC companies, such as the UAE’s Masdar and Saudi Arabia’s ACWA Power could leverage the GCC’s financing and experience, while helping Ankara scale up photovoltaics rapidly. The GCC region could also benefit from Turkey’s wind-power expertise, as was demonstrated in Masdar’s attempts to purchase Turkish renewable-energy company Fiba.

Connecting the electricity grids between the GCC and Turkey would also help manage supply and demand fluctuations from renewable sources. Saudi Arabia already plans to link its grid with Iraq’s, which could potentially be expanded to Turkey.

For both sides, joint development of green-hydrogen production facilities offers substantial synergies. With plentiful wind resources and local industries that can be powered by green hydrogen, Turkey could learn from the Emirati, Saudi, and Omani green-hydrogen experiences and benefit from their investments. The GCC, in turn, could benefit from lower transportation costs for consumers and possible pipeline connectivity to the European hydrogen backbone. Channeling complementary strengths, such partnerships could help unlock their ambitions to be major hydrogen suppliers to Europe.

Turkey also has much to gain from the GCC’s know-how in nuclear energy as it powers up the Akkuyu plant, which is operated by Russia’s Rosatom. The UAE’s Barakah project, the first Arab nuclear-power station, could provide a model for future reactors in Turkey.

While Eastern Mediterranean natural-gas collaboration faces geopolitical complexities, increased Qatari exports via the North Field expansion would benefit Turkey. Importing oil from the GCC countries could also help reduce Turkey’s dependence on Russia, and diversify and create new markets for expanded GCC production capacity.

Finally, technical partnerships in renewable-energy research and development (R&D) between GCC and Turkish universities and companies would further strengthen these emerging energy ties. Planned research centers, such as the UAE’s green-hydrogen R&D center, could present a basis for technical collaboration.

As Turkey and the GCC charge ahead with their respective energy transitions, it is clear they have much to gain from increased collaboration. By combining their unique expertise and resources, they can unlock greater energy security and sustainability. Such cooperation demonstrates the potential for these regions to fully incorporate energy in their economic partnership in pursuit of a better future for all.

Karim Elgendy is an urban sustainability and climate expert based in London. He is an associate director at Buro Happold, an associate fellow at Chatham House, and a nonresident scholar at the Middle East Institute in Washington. Elgendy is also the founder and coordinator of Carboun, an advocacy initiative promoting sustainability in cities of the Middle East and North Africa through research and communication.

The post Charting energy transitions in the Eastern Mediterranean and Arabian Peninsula appeared first on Atlantic Council.

“The stark contrast to me is that energy companies are actually here, and two COPs ago at Glasgow, there were CEOs of oil companies who were told they were not permitted to attend,” said HIF Global Executive Director Meg Gentle, adding that energy company executives’ voices are sorely needed in these conversations about fighting climate change.

“It’s getting better, but policymakers don’t really listen to industry leaders,” said Gentle, whose company makes synthetic fuels from renewable energy. “And they underestimate how long it takes to build these projects. We’re futzing around with getting things perfect, rather than getting things moving.”

That urgency was felt across the panel. Gentle was joined by Jon Mitchell, chief sustainability officer at Canadian energy company Suncor; Naser Al Hajri, deputy chief operating officer of Abu Dhabi-based Mubadala Energy; and Fareed Yasseen, climate envoy and advisor to the prime minister of the Republic of Iraq.

See more highlights below from their discussion, which was moderated by Cody Combs, future editor for the National.

Energy innovation at work

• Gentle said that e-fuels, which are made from green fuel and recycled molecules of carbon dioxide, already have significant promise in addressing the climate challenge. While they are still more expensive than producing fossil fuels, they are chemically identical to what’s being put in car and jet fuel: “What we need to do is create the policy and the market mechanisms that can extend and accept e-fuels into the market and use it in existing infrastructure,” she said, describing it as a public policy and economic challenge more than a technological one.
  
• In Chile, HIF Global is producing an e-methanol that can be used for the shipping sector and synthesized into gasoline. Chile can start reducing fossil fuel dependence by blending that e-methanol with other fuels, which adds only “a couple cents’ increase in the cost,” Gentle said, proving that the world can start creating “different market mechanisms where pricing can be spread over large markets.”

• Mitchell said that Suncor has started taking more of a focus on the demand side of the energy technology equation. “We’re in a situation where we need significantly more energy with significantly less emissions. And so how are we going to do that?” Mitchell said. “Demand’s been a bit absent from the conversation. And I think we need to spend a little bit more time on that.”
  
• There are numerous questions about whether noncombustible uses of fossil fuels and hydrocarbons can provide an alternative product mix for energy companies. Al Hajri gave the example of a geothermal project that Mubadala Energy recently conducted with Chevron to provide sustainable energy to a town in Indonesia. “All forms of energy will be required,” he said.
  
• Yasseen argued that nuclear technology needs to get more attention. “We can’t have just one arrow in our quiver. We really have to broaden what we do,” he said. “There are significant developments that make nuclear reasonable and achievable and safe within our lifetimes,” he added. Those developments include novel ways to yield nuclear ashes with one hundred-year lifetimes instead of one thousand-year ones, making it possible to solve the challenge of nuclear waste, and fusion advances that have made commercial solutions a possibility by 2035 or 2040.

Changing the clean energy conversation

• Many on the panel observed a marked shift in the conversations at COP28 compared to past years. “For years we’ve been pushing a rock up a hill trying to get people to understand, notice, pay attention to this issue,” Mitchell said. “It feels to me like we’ve crested that hill. The rock is now rolling down the other side, and now we have to harness the momentum on where we want to take it,” he said, noting that there were almost one hundred thousand people in attendance this year, more than double last year’s attendance. “I think COP28 can do, for the energy sector, what Glasgow did for the financial sector,” he said.
  
• In order to reach 2030 sustainable development goals, the multi-year projects required to build novel energy technology facilities need to get started now, Naser argued. “In my industry, it can take five, six, seven years sometimes to get the projects ongoing,” he said. “Everyone is talking about the long target, but I think what we need is a short-term and medium target.”
  
• Gentle described an e-fuels facility HIF Global is building in Texas, where the construction process will take at least four years.“ So the longer we wait on policy to allow these projects to start,” she said, “the lower probability we have of delivering solutions before 2030.”

New technologies confront new realities

• Yasseen said that taking action should put ethics first. “The driver to everything that we do should be equity,” he said. “You can’t, for example, force people to switch to new technologies if it’s very costly to them. You have to take circumstances into account,” he said. “So the focus now, for example, in Iraq, is not on carbon capture and storage, but on stopping flaring.” It’s not about hydrogen, he said, “but it’s about taking account of methane.”
  
• Asked about whether Iraq had the political will to resolve some of these issues, Yasseen said that the prime minister recently told a friend in a private conversation that the biggest thing that kept him up at night was flaring. “In Iraq, it is a health hazard to people,” he said. “Frankly, it’s money that we’re wasting, huge amounts. And it’s bad for the planet.”
  
• The Global Methane Pledge, Al Hajri said, will “provide us a dynamic to work with vendors, to work with partners, operators, different sectors, and to try to see what kind of technology that we can implement in our facilities.” Globally, there are lots of opportunities to use existing facilities to help in the long term too, Mitchell added, noting that the same storage infrastructure used to decarbonize oil production can be used to store carbon dioxide with carbon capture and storage technologies as they advance.

Nick Fouriezos is a writer with more than a decade of journalism experience around the globe.

Note: Mubadala Energy and HIF Global are sponsors of the Atlantic Council’s Global Energy Forum. More information on Forum sponsors can be found here.

Watch the full event

The post Technology leaders warn that 2030 climate aims are at risk without accelerated support for innovation appeared first on Atlantic Council.

According to Caribbean Development Bank President Hyginus Leon, who spoke at the Atlantic Council’s Global Energy Forum in Dubai on Thursday, the Global North has long benefitted from being the destination for flows of goods, money, and people from the south. “Now,” he explained, “you need a reversal” to “generate equity” and “allow the Global South to grow.”

Herbert Krapa, Ghana’s deputy minister of energy, explained that despite African countries being the source of both fossil fuels and vast critical mineral deposits—both crucial for meeting energy demand—the continent hasn’t been able to leverage them for its own development. “A just transition,” he explained, will require “taking advantage of these resources.”

But for the sake of the climate, he added, it will also require “significant financing” for renewable energy.

Ultimately, Leon explained, the Global South must have a larger voice on the world stage. Otherwise “we are not going to make progress” toward climate goals.

Fahad al-Dhubaib of the Saudi national oil company Aramco argued that Global North countries pinning their hopes on keeping global warming below 1.5 degrees Celsius should focus on the Global South now: “This is our opportunity [to curtail] the potential growth and emissions we could be seeing going forward.”

Below are more highlights from the conversation on energy security among leaders from the Global South, moderated by Jason Marczak, vice president and senior director of the Atlantic Council’s Adrienne Arsht Latin America Center.

A secure energy future

• “The energy transition needs to go as fast as it can,” said Pietro Sampaio Mendes, Brazil’s secretary for oil, natural gas, and biofuels. However, he added, “we will not stop the production of gas . . . we are increasing the production.” Krapa similarly said that while Ghana understands that it will need to transition, it is an expensive endeavor: “We have oil and gas in significant quantities, and will continue to explore that . . . side by side with our transition plan to move more to renewables.”
• Al-Dhubaib noted that the bulk of energy demand in the future will come from the Global South, where the gross domestic product per capita is just shy of seven thousand dollars. So “we shouldn’t take affordability and reliability lightly in the Global South,” he said. 
• He explained that since Russia invaded Ukraine in 2022, gas prices and coal demand have skyrocketed, making energy more expensive and less reliable. “Time is not working in our advantage,” he said. When it comes to energy supplies, he argued, “we need everything going forward.” Sampaio Mendes added that in the battle for the climate, “our enemy is the carbon; it is not any technology or the pathway.”
• And according to Marcelino Madrigal, head of the Inter-American Development Bank’s Energy Division, the question about the future of energy security is “more complex” than whether to pursue renewables or fossil fuels. For him, it is also about securing ample energy-production capacity that is accessible to all in the long run.

There will be costs

• Al-Dhubaib argued that as the world switches from oil and gas to renewables, energy “resilience will be quite challenged,” as renewable energy can’t be stored as long and renewable-energy technologies are more expensive upfront—with smaller returns.
• Leon asked: “What good is it to have a high return, and that high return means it only yields our ultimate death?” He continued, “We cannot be arguing that there’s a higher cost to financing something in the realm of renewable energy that saves the planet . . . and then say we cannot do it because the cost is too high.” Madrigal added that, while the energy transition will spread benefits, “there are also costs.”
• Madrigal noted that countries will also need to invest “a lot,” and not just money: In particular, he said that Latin America will need to invest in better rule of law, regulatory instruments, and institutions to create a better environment for private investment. The world’s mission to slow global warming is “a huge opportunity for Latin America,” he explained.

The Global South’s take on COP

• The speakers, all in Dubai for the United Nations climate change conference known as COP28, reflected on the breakthroughs they’ve seen come out of the convening thus far. Leon said that he sees COP as “a process” that leaders “advance as we go along each year,” achieving “pieces along the way.”
• Pointing to a new push to triple renewables and double energy efficiency, Leon cautioned that for that to happen, more finance is needed. While a new thirty-billion-dollar fund from the United Arab Emirates and the loss and damage fund are “welcome,” he said, “the actual investment need is . . . in the range of twenty trillion [dollars]. So there is a humungous gap that is still to be filled.”
• “Those are essentially seed funds,” Krapa added. “The amount of financing that needs to go into remodeling energy systems and energy infrastructure” across Africa is much higher, he warned, adding that the new funds amount to “a drop in the ocean.”
• Krapa said that he is keeping an eye on the global stocktake—an assessment of global climate progress (or lack thereof) that is expected to be completed at COP28. “I think we should be very clear in the outcomes of the stock,” he said, “in terms of the progress or the little progress that has been made . . . we should be bold to confront the truth that the pledges and commitments have not come through.”

Katherine Walla is an associate director on the editorial team at the Atlantic Council.

The post What the Global South needs for a just energy transition appeared first on Atlantic Council.

TRENDS Research and Advisory and the Atlantic Council’s Scowcroft Middle East Security Initiative hosted a two-day conference on “Sustainable security: The soft and hard implications of climate action,” streamed from the Green Zone at COP28.

This year’s conference on sustainable security explored how climate change is shaping the global orders of conflict and finance—all to elicit insights from practitioners and experts from the region and beyond to formulate recommendations for policymakers.

Day 1 was opened by Dr. Adnan Shihab-Eldin, senior visiting research fellow at the Oxford Institute for Energy, and member of the Board of Directors of Kearney Energy Transition Institute (Nederland) and Gulf Bank, as well as former Director General of the Kuwait Foundation for the Advancement of Sciences (2011-2021) and former Acting Secretary General and Director of Research at OPEC.

Day 2 was opened by Anne Witkowsky, Assistant Secretary for the Bureau of Conflict and Stabilization Operations for the United Stated Department of State, formerly serving as Deputy Assistant Secretary of Defense for Stability and Humanitarian Affairs (2014-2016).

Livestreams

DAY 1 – December 4, 2023

DAY 2 – December 5, 2023

Topics discussed

Topic one

Over two days, the conference covered five topics. The first topic, “political and strategic issues challenging international climate action,” addressed how geopolitical competition and transnational cooperation over resources are often at odds within the domestic priorities of nations, and by extension international forums:

• How Great Power Competition shapes the energy transition – Erin Sikorsky, Director of the Center for Climate and Security and the International Military Council on Climate and Security
• COP 28, COP 27’s loss and damage fund, and COP15’s climate finance to date – Osama Al Gohary, Assistant to the Prime Minister of Egypt and IDSC Chairman
• The UAE’s role in unifying and mobilizing international efforts aimed at dealing with climate change – Ahmed Ali Murad, Associate Provost for Research, UAE University

Topic two

The second topic, “The effects of climate change on political conflict,” discussed how the increasing stress of extreme climate conditions directly amplifies existing tensions over resources both domestically and across land and maritime borders:

• Climate change and supply chain competition – Francis R. Fannon, nonresident senior fellow with the Atlantic Council’s Global Energy Center; managing director of Fannon Global Advisors; former Assistant Secretary of State for Energy Resources
• The impact of climate change on existing and future transboundary water issues – Sherri Goodman, Chair of the Board, Secretary General, International Military Council on Climate & Security
• Ecological threats and the potential for conflict – Serge Stroobants, Director Europe & MENA at the Institute for Economics and Peace

Topic three

The third topic, “How climate change shapes the nature of security,” illuminated how a changing environment naturally shapes the theatre of security and warfare:

• How the US addresses coastal resilience, rising sea-levels, and their impact on naval forces in the context of climate change and national security – Meredith Berger, Assistant Secretary of the Navy for Energy, Installations & Environment
• The nexus of conflict, humanitarian response and climate hazards – Elsa Barron, Research Fellow at the Center for Climate and Security (CCS); Co-Chair of the Young Professionals Interest Group at the Environmental Peacebuilding Association
• UAE perspective on climate change and security – Dr. Khawla Al Hattawi, Assistant Professor, Rabdan Academy

Topic four

The fourth, “Green economy and the future of climate-financing,” explained interventions and metrics that help bridge the climate-finance gap and reach economies of scale for renewable energy:

• Policies to encourage green finance – Ariel Ezrahi, nonresident senior fellow with the Atlantic Council’s Middle East Programs; director of climate strategy at NewVest
• Supply chains in the new climate economy, decarbonization and the resilience challenge – Stephen Scalet, Scientific Advisor, Trends Research & Advisory
• Green investment and the future climate economy – May Alhajeri, Strategic Partnerships Officer at Abu Dhabi Investment Office, and Former Youth Delegate to the UN

Topic five

The fifth topic, “The energy transition and net zero,” contextualized how public and private institutions are moving to meet global climate goals:

• How does US security perceive the challenges and opportunities connected to the energy transition – Iris Ferguson, Deputy Assistant Secretary of Defense for Arctic and Global Resilience
• How is the US partnering with other entities to advance and capitalize on the energy transition through energy efficiency and low-carbon technologies – Dr. Ravi I. Chaudhary, Assistant Secretary of the Air Force for Energy, Installations, and Environment
• The clean energy transition in the private sector and government entities, and the road to Net Zero 2050 – Faisal Ali Rashid PMP, Senior Director, Demand Side Management, The Dubai Supreme Council of Energy, Chairman, Advancing Net Zero Volunteering Team

IN PARTNERSHIP WITH

The Scowcroft Middle East Security Initiative (SMESI) provides policymakers fresh insights into core US national security interests by leveraging its expertise, networks, and on-the-ground programs to develop unique and holistic assessments on the future of the most pressing strategic, political, and security challenges and opportunities in the Middle East. 

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The post TRENDS – Atlantic Council 3rd annual conference on sustainable security: The soft and hard implications of climate action appeared first on Atlantic Council.

Flagship Event Tue, December 5, 2023 • 5:00 am ET

Global Energy Forum at COP28

The eighth Forum will be held in Dubai as energy and climate decision-makers converge for COP28.

Energy & Environment Energy Markets & Governance Energy Transitions Geopolitics & Energy Security

Event transcript

Uncorrected transcript: Check against delivery

Speaker

Amos Hochstein
Senior Advisor to the President for Energy and Investment
Executive Office of the President

Moderator

Frederick Kempe
President and CEO, Atlantic Council

FREDERICK KEMPE: So it is such a pleasure to have this conversation with Amos, senior advisor to the president of the United States for energy and investment. I had to read it here because you’ve had so many titles since you came—and so many titles in your career, so many titles. You’re a person who’s worn a lot of hats in your—you’re one of the most impressive, resourceful, and capable public servants I know. And we’ve known each other a long time, Amos—a personal friend and former board member of the Atlantic Council.

We’ve got a packed house. People are always interested in hearing what you have to say. So I think we’ll get started.

Like a lot of people of great capability and capacity, you keep taking on more tasks and you keep—and so let’s start by talking about your relatively new job and about the importance of global connectivity for economic growth and enabling the transition to clean energy. I talked to Amos about what we could talk about and he says, well, you can ask whatever you want to ask, but I’m going to answer whatever I want to answer. And so this will be an interesting conversation. 

But he’s been involved in the situation with Israel in Gaza. He was involved in the situation in Ukraine, particularly the energy elements of this, where Vladimir Putin has done a lot of harm to the world but one of the things he did was accelerate the energy transition of Europe.

But let’s get started with, first of all, talking about your role. It seems to have evolved from a focus on the security of energy and supply management toward a more holistic approach which is inclusive of energy infrastructure and economic interconnectivity. So, first of all, has this sort of job ever existed in the White House before? A little bit of history on how it came about and what you see as your primary priorities, and then we’ll get into some of the—some of the details.

AMOS HOCHSTEIN: Yeah. First, Fred, thank you, and for taking our private conversation before and broadcasting it. But—so I’ll talk about something completely different. 

Look, I think I should start by the—it’s amazing to me, Landon, you said this is the eighth. It feels to me like it’s the—it’s the, you know, fifteenth. There’s just so much going on that the Atlantic Council has done, and the partnership of doing it here in UAE, in Abu Dhabi and now in Dubai, has really transformed what this event has always been. But it’s—and I’m glad that you took a minute to recognize Ambassador Dick Morningstar’s extremely productive contribution to the concept of energy security in the context of American government and diplomacy, and bringing energy into diplomacy and national security, which is not a given. And it’s flourished since then, but in—just about fifteen years ago nobody thought there should be a conversation of energy in the national security space in Washington. The rest of the world figured it out about thirty years earlier, but—and Washington didn’t get it. So I’m really grateful that you, first of all, named something after Dick Morningstar and recognized him here. I think this is probably one of the first ones that he has not attended, so I’m really grateful for you for doing that.

Look, this role, no, it has not existed before in the White House, and it demonstrates what the president—how much the president is emphasizing the holistic approach to the focus on what is our work on climate change and responding to a climate emergency. And I’ll take a minute just to say what I think that—in my mind, what I think that means.

When we want to look at—we’re here at COP, where we originally talked about things—about COP in the context of what is it communicating and what are the NDCs, what are countries agreeing to as far as what are the—setting the longer-term goal and then setting some milestones on the way to that goal so that we don’t just talk about 2050 without saying, OK, but what’s going to happen in 2030, and then 2035, and 2040. If you just leave it at 2050, it becomes a little bit pointless.

So that really was the main aspect of what COP’s about. And what it’s transformed into is looking at COP is really how do we get to that kind of a world where, now that we see that it’s possible to reach net-zero but it also suddenly dawn on us, we caught the bus, right, as far as convincing the world that this is what we have to do. Now it’s really, how do you do it? And the energy system is a really complicated system—global system that it’s not so simple to just simply unplug from one system and just say, oh, it’ll take twenty years. We’ll just—it’ll take twenty years.

It actually is really complicated. And one of the things that makes it really difficult is how do you do it across the board regardless of income level? And it’s one thing that you can do things in the United States, in the UAE, in Germany, in Denmark, in China. It’s another to do it in countries that can’t afford to do the same thing. So how do we have a holistic approach to say that the work we have to do, one, has to be across the board, two, it doesn’t have to be just focusing on deployment of renewable energy and storage? 

But, rather, what are the other pieces of infrastructure that need to be built in order to enable that kind of investment? Because if you don’t have the rail, and the transmission, and the ports, and dry ports, and how to connect the cities to the rural areas—all those things have to be connected. And, by the way, if you don’t have the connectivity, the 5G, and have the telecommunication side of it so that you can use and utilize the advancement in technology that the new energy system has, if you can’t implement that in places that don’t have the digital connectivity, then you’re not going to be able to reach that goal.

So how do you look at all these pieces? And what the president has asked me to do is to say, OK, how do we bring a holistic approach? How do we bring our G7 partners together, which is where we launched a lot of this new kind of effort, and then bring more and more partners as we go along? And I think it culminates in what the UAE announced here on Friday, which is Alterra. Which is, I think, OK, we got to put the money towards this goal of net zero, but it has to be invested in a broader—to a broader set of locations. And it has to have a cost of capital that enables the investment in countries where right now the cost of capital is what prohibits the investment itself.

So these are all the—a lot of different pieces. And if we’re going to be successful, the thought was that we would have—that I would try to see if I can bring the different parts of the US government, the different agencies that are all doing great work, and to all coordinate towards one goal, while doing the same thing with our friends and allies around the world.

FREDERICK KEMPE: And I guess two things. In this effort, what do you think success will look like? And over what period of time will we see it? And in that context, how does this COP28 fit in? You’ve seen the various media controversies about this. Some have called it a divisive COP because of the issue of fossil fuels and climate. Others have called it an inclusive COP, that you can’t get to the solutions we want to get unless you bring all of these actors together. So two things, what does—in your own role what does success look like over time? And then, secondarily, how do you think this COP28 will be remembered, if you don’t think it’s too early to talk about that?

AMOS HOCHSTEIN: Think what success looks like, is if we took—you know, this is the stocktake COP. If we have a stocktake that doesn’t have to be announced as a stock but we keep taking stock as we should, and then as we move forward we see that the percentage of invested dollars are distributed more equally around the world, one; two, that we’re actually building infrastructure that will enable investment, whether that’s hard infrastructure or it’s the deployment of actual energy infrastructure; and if we’ve been able to do those two things over the next few years, then I think that will be—for me that will be seen as success. 

If we—if as a result of that we’re actually narrowing the gap between developed and developing economies on both deployment and viewpoint and a feel that everybody is in this together so I think that will—for me that will be the success. 

I’ll add one aspect to that that I haven’t mentioned before, and that is Landon talks—and, Fred, you really started this at the Atlantic Council on energy security. And it used to be—a few years ago somebody said to me, well, energy security is the—is code word for fossil fuels. So there’s the climate world of energy and there’s the energy security. 

To me, if we’re still doing that today that’s not a success. That’s a failure, because energy security is as true in the era of climate change and battling climate change as it was in the era of fossil fuels and security of supply and making sure that it is available, affordable, and diversified is not something that we only talk about in the context of Russia and Europe on gas. It has to be the same for EVs and lithium and panels and—solar panels and turbines.

And so the entire supply chain can’t be dominated by one country. It has to be—or—and I’m saying not China and not the United States. It has to have a diversified set of investment into the infrastructure that’s necessary from mining to processing to manufacturing and distribution. All of that has—we have to—we can’t have single points of failure and the world has to have competition in this world so that prices can continue to come down. 

As far as this COP, look, I think there’s a lot we’ll have to judge. You know, you can only judge certain things in the middle. You’ll have to wait to the end to see how things turned out. But I think Dr. Sultan has done a very good job, and the team around UAE, of putting together, one, a beautiful COP and efficient and effective from a facilities and location and it’s really run very smoothly. 

I think we’ve had some very important successes that before COP we talked about were going to be the failure points potentially and that is the loss and damage, whether we would be able to get something on an agreement of the fossil fuel companies on methane leakage and reducing methane. 

So we’ve had already some successes of bringing people together. I think there are some things that are always difficult to achieve at COP because they require such broad consensus or, rather, consensus from such a broad and diverse viewpoint around the world and that’s what makes it so difficult and that—we’ll see how that develops. 

Some of those never get agreed to early and we’ll have to see where we get to. But I think—I want to just respond to one thing that you said, which is, is this going to be an inclusion COP or is this a divisive?

The thing that bothers me the most in this debate not just here at COP is that we push worlds into their corners and we create echo chambers, and I can name the conferences that I would go to where they’re all 90/10, right. Ninety percent is fossil fuel companies and fossil fuel financiers and you get a certain view of what 2050 really will look like in reality—a certain skeptical view—and then you come to COP or you go to a different conference and it’s, you know, we can do it tomorrow and there’s a 90/10 in the other direction. 

That’s not going to get us there and I think what the—what we’re trying to do here, what I think the government of the UAE is doing and the presidency here, is bringing everybody together. And I think it’s OK to have disagreements. I don’t think that we should expect that if somebody came here and didn’t agree then that’s a failure. 

I think that’s a success that we’re having the conversation. We should let people views change, and the only way to change that is by having everybody there together because this is, again, the energy system. If you really want to change the energy system, you really want this to be a net zero world, you can’t do it by just wishing and willing. 

You have to bring everybody together and say, here’s the reasons why we can create a market-based—working with market-based solutions, government, MDBs, philanthropies, of how do you bring everybody together to make this investable and then maybe the fossil fuel companies will say, OK, I need to start investing more into this part of it because that’s not just investing in my disruption but it’s investing in where the future is going to be. 

And that’s where—that’s when we get to success, when everybody’s going—rowing in the same direction. We won’t get there right away. I think that’s OK. But I think bringing everybody together to have the hard conversation is better than separate echo chambers.

FREDERICK KEMPE: That’s just a terrific answer and I’m really proud also over the eight years of this forum that we have never been 90/10 in either direction. We’ve always had the full conversation and I’m really proud of that. 

So CIA Director Bill Burns talks about climate as the problem without borders. But then he talks about what’s going on in the rest of the world which is the problem that has borders which is a war in Ukraine, a terrorist attack on Israel, Hamas—the war in Gaza that’s followed.

How did October 7 change your job? You’ve been playing a lot of—you’ve been spending a lot of time on that issue as well. And I think a lot of people in this audience know this but if you don’t, Amos was instrumental in bringing about the Israel-Lebanon maritime deal and in that context is—you know, that deal would be almost impossible to do right now, at a guess. 

But how does something like that stand up? So the problems that are going on right now in Israel and the Middle East how does this affect your job and what you’re trying to do and what you’ve already achieved with Israel and Lebanon?

AMOS HOCHSTEIN: I think October 7 affected the whole world and waking up to the really horrific attack—and the more time goes by the more we learn about how horrific that day was—and now we find ourselves in a place where nobody, I think, wanted to be in. Nobody in this room and no one in the civilized world wanted to see this war in Gaza and where so many innocent people and children from every—from across both sides are suffering. 

And Israel has the right to defend itself. We want to be able to see what—a stable and peaceful existence. But nobody wants to be here. This is a horrific place for all of us regardless of where you fall and how you see it. There is—this is—everything changed on October 7 and it was not in a good direction. 

I think that where, as you said, we negotiated the—we helped the sides negotiate a maritime agreement that for the very first time exactly a year ago we got a real boundary between Israel and Lebanon.

Israel and Lebanon have never had an agreement on any kind of boundary ever and the idea that these two neighbors since their independence have never agreed but finally agreed, yes, it was in the maritime so there were certain things that made it easier but it was still fairly difficult, and it was fourteen years of multiple envoys from different countries trying to get there and we finally got there. 

I think my success was based on the fact that I was one of those failed attempts in the past. So sometimes when you fail something you come back and you learn from that. But I think that we’re—we have to learn—what we’re trying to do is learn from what went right there and the countries—Lebanon did not—

FREDERICK KEMPE: Could you talk about that? What did go right there?

AMOS HOCHSTEIN: Well, I think there were wins for both sides. The idea was not—when you walk into these negotiations oftentimes is a zero-sum game of—the first conversation I would have with both sides was, well, but what are they going to get, and I said, forget what they’re going to get or not get. Don’t worry about that. Tell me, what do you want out of this? What’s in it for you? 

It sounds simple in this room but I promise you that over several years we could not get the answer to that. Neither side can actually answer that question. It was much more important to delineate and describe what the other side should get or should not get or what was fair or what happened twenty years ago and fifty years ago.

Once we can get past that part of the conversation and say—I can—we were able to show and see that what they actually want their number-one priorities did not clash. There was no—it suddenly wasn’t a zero-sum game. Both sides can get their number one, two, and three most important piece that they needed—economic security, physical security, et cetera. So I think that and sort of making—understanding what the red lines were, both sides, was enabled.

I think that what we have wanted since October 7, since that morning, was to make sure that, as bad as the situation is in Gaza, in this war, that we can keep it contained there, that it does not—we do not want to see this war expand across other borders. Now, it has to some degree. There has been an exchange of fire on almost a daily basis, except for the pause, between Israel and Hezbollah and some of other Palestinian armed groups—terrorist groups in—housed in Lebanon. But keeping it at a certain level of violence, but—which is—again, stating the obvious, that is not an acceptable situation, but it’s a—it’s a reality. But trying to lower the flame there, trying to get to a much more peaceful existence, and to see what is it that we can do to get to a solution that provides more security for people in Israel who live in the north at the border and for people in Lebanon to live peacefully in the south and to have economic prosperity.

The thing that I learned the most from what we did in the maritime agreement and other agreements around the world that I’ve been involved in is there is a key element of economic prosperity that we—that we have to integrate. And I’m a believer not just in energy security being part of national security, but economic prosperity has to be part of national security, because the more there’s physical interconnection and integration, the more there is a codependency and the more that there is what to lose. And I think that there—it’s important as much to have what to win for, what to look forward to, and to know what you lose when you walk away from it.

And so I think that as we hopefully get to the other side of this conflict as soon as humanly possible, and while achieving what is necessary to secure the future, we have to look at something that’s viable for the Lebanese state to get stronger, to return to economic growth, and to have a security along the border or along the line—the Blue Line between Israel and Lebanon.

FREDERICK KEMPE: Thank you for that. I think this is now working, so you can hang onto that microphone. Maybe yours is as well.

So you’ve been a champion in the White House for normalization with Israel through the Abraham Accords, something that the Atlantic Council has spent a lot of time on. In fact, the week of the terrorist attack we had to bring our team out of Israel. Ministers from the normalization states were on their way to Israel for a conference that we were holding that would have been focused on economic integration. President Netanyahu would have been part of it. Ministers from the region would have been part of it. So this—there are some real human victims, but this is also a victim of this. You know, and our Middle East Program, working with the Jeffrey Talpins Foundation, led by Will Wexner, has done a lot of work on this.

You were also involved in an effort for—that seemed to be growing closer with Israeli-Saudi normalization. You said you hope you get there. What is the path back to that? Is there a path back to that? How much damage has this situation done for all of that hope?

AMOS HOCHSTEIN: Look, we have had—we’ve had examples of what is positive momentum and the kind of future that this region can have. And I think that in the previous administration, the great work that was done on the Abraham Accords and the remarkable decisions that were made by the government here in the UAE and Bahrain and Morocco to take a step towards a different kind of future, and to understand that if we want to focus on the real existential crises of the day of climate change and economic disparities around the world, that’s what we should all work on together. And the vision that President Biden has insisted on since the day he came into office is to focus on a regional integration. It has to be the path, and strengthening what was done in the Abraham Accords and expanding, and looking at what other kind of agreements we can make.

I think that the United States has always wanted to see throughout multiple generations and administrations a normalization of relations between Saudi Arabia and Israel. It’s no secret that that’s something that President Biden has wanted to see. He’s talked about it a lot. His trip to Saudi came as a—part of a two-stop trip between, first, in Israel, and then to Saudi on a direct flight from Jerusalem to Saudi Arabia. And all the work that was done since then was to see and explore what is possible.

Clearly, we’re right now in a moment of conflict that we all have to focus on getting to the other side of. But I don’t think that we lose the hope, the vision, and we’re going to continue to work towards that. I think that not every road is a straight road, and sometimes it goes in—we have to go in different directions first. But the goal is still the same. And we remain as committed to that goal of regional integration. And it’s not just about Saudi Arabia and Israel. It’s as broad as—it has to be much broader than that. 

If we all can focus on those kinds of solutions that also use that momentum to then support what—how we can better the lives of Palestinians in the West Bank and Gaza, how do we use that momentum to create an atmosphere that is the opposite of where we’re going now, of increasing hate speech and increasing demonization of the other side, and get back to starting to talk about what brings us together, what unites us, and the same fears, hopes, and dreams that people on all sides of this region have, that are no different than they are in the United States, Europe, South America, or everywhere. We want to have a better life for our—for our families. 

And I think that all has to be together. So I don’t think that we have—we’re changing directions. I don’t think this conflict should do that. In fact, this conflict should be a doubling down on reminding us that if we don’t go towards regional integration, peace, and security, this is this—this is the alternative. These are the two options that the world is facing, and this region faces. And I think it’s an overwhelming choice to choose the path of integration, peace, security, and prosperity.

FREDERICK KEMPE: That’s a very powerful answer, thank you, Amos.

Let’s try to get a couple of questions in, in the time that we’ve got left. Let’s pivot back to energy. President Biden talks about inflection points quite a bit. And I wonder if you can talk about the energy inflection point we’re in, and the relationship between energy interconnectivity and energy security, and the emerging energy system. And how does it shape US energy security priorities moving forward? As you said, for a while energy security—that term almost went off our screens. And they came back pretty powerfully with the war in Ukraine—Putin’s war in Ukraine. And you’ve said in an interview that the US should learn from what we went through in the oil and gas energy space as we transition to an energy market. What do you mean by that?

AMOS HOCHSTEIN: Well, I think I had this conversation with Helima here in January. I got a little bit of trouble afterwards. But there’s a—so we’ll try to do that again. Look, I think that the lessons that—we have to—you can’t just say it’s a new world. You have to learn from how we got here. And I think that the twentieth century taught us a lot of lessons about energy security and security of supply. And it started in the 1970s with OPEC, and it—and then in—and then we saw what happened in Europe and the dependency on gas that for most people started—kind of came on the national—on the international media stage in—as the invasion into Ukraine happened.

But in reality, we were—this is what—the pipeline wars of the 1990s, the direction of where hydrocarbons were going to go, in which direction, they were all about geopolitics. And so we have to learn the lesson. The lesson is not—I’ve said this in Europe a lot—the lesson from the dependency on Russia is not I shouldn’t depend on Russia for all my gas. That’s the wrong lesson. The lesson is I shouldn’t depend all my energy on a single source, or majority of it, on a single source, and I shouldn’t have a single point of failure in my supply chain. And that was true on oil. And it was true on gas. And it is now true on renewables. And it’s true on nuclear fuel for a—I’m happy to see a new enthusiasm for nuclear power with new technology. But my nuclear fuel has to be in that conversation. And in my electric vehicles and my critical minerals and my—the entire supply chain.

The lesson from the twentieth century is, build a well-diversified world and economic structure. And I think we have such an amazing opportunity because you’re building something new. So why would we slip right into the same bad habits of, it’s a little bit cheaper to do this, and I’ll buy what’s cheaper, and I won’t invest in what may be a little bit more expensive, but it will actually be something that is more secure. And I think that’s where—that is good money to spend. The question becomes, who should spend that money? And I get that, because why should a company say to its shareholders, I’m going to spend more money and I can’t really articulate what the amortization is of that extra cost? And when I go to the investment committee, they’re going to say, no, that piece is cheaper. Buy the cheaper one we’ll let the government figure out the other stuff.

So we have to come together as governments and say, no, we’re on the ground floor. It may not feel that way, but we’re on the ground floor of the energy transition. And how do we come together, the wealthier countries together with MDBs and philanthropies and sovereign wealth funds, and say: This is our moment to make these investments. Together with the business community, put our money into the capital stack so that they are—so we de-risk these investments. And that we come out of it’s on the other side with a stronger, more diversified supply chain in the clean energy space, that will actually enable both growth and equity and security. And that’s the energy security—the concept of energy security of the future is in that space.

FREDERICK KEMPE: And I don’t think that answer will get you into any trouble. That was a brilliant answer. So we’re running out of time, we’ve run out of time. But I’d like to end this with a question that is always one of my favorite questions for someone like you, who has to deal with risks and opportunities. And that is, as you—as you look out at the world you’re dealing with day-to-day, what gives you the biggest concern? What keeps you up late at night? And, conversely, what do you see as the biggest opportunity? What gives you your biggest hope?

AMOS HOCHSTEIN: There’s so much that keeps me up at night these days. I don’t think I really get to sleep with what’s the last few months.

FREDERICK KEMPE: That’s the world we’re in right now.

AMOS HOCHSTEIN: And that’s the world we’re in. So, look, I think I would break it down. On the concern side is the physical security of people’s lives and their ability to protect their families in a world where we are in two active wars in Ukraine and here in the Middle East. So that keeps me up at night. The piece—the second piece is, how do you both bring them to a close in a way that’s not about just ending the war, that’s—it’s easy to say, just end it. But how do you end it in a way that actually defeats what started it, and making sure that the next phase is actually longer-term security? And so those are the things that really, how do you—how do you do that?

The next piece is really what keeps me up at night, but it also is what I feel is the best hope and opportunity, is the ability to rebuild and reshape a world. And what we’ve—what I’m grateful that President Biden has allowed me to do is to implement that vision. And to—so while I’m here in the Middle East, you know, I’ve been to Angola and DRC and Zambia, and the president of Angola was just in the White House last week. And that’s because there’s such an opportunity to do investment in a different way, that’s development is really important but it doesn’t replace investment. And that’s what we’ve done wrong. And so the idea that we can recognize we did that wrong, let’s do this better, and we can keep our development agenda and add into the component of actual investment, so that the infrastructure we build, we don’t come back to it ten years later and there was because it was just development without investment it meant that there was no money for maintenance, there was no money for running it efficiently, and now we have these big pieces of infrastructure that are not working.

But now we’ve actually cracked the code and been able to launch projects that the president talks about all the time. Even during these two wars, President Biden talks all the time about building a railroad from Angola to Tanzania, across all of Africa, and doing it in a commercial way. And why? Because that enables critical minerals and lowering corruption; because that enables food security, investment; because if you can have a landlocked country that has good water and good soil and good weather but it doesn’t have a connection to any market, then nobody’s going to invest in it, but now you can if you do that, and you can get fiber-optic connectivity so that small businesses can be there.

All of these things, connecting those dots is—it keeps me up at night that we’re not working fast enough, but the hope and opportunity, I can’t tell you how thrilling it is to work on these projects, or the one that we did with the United Arab Emirates and Saudi Arabia and the European Union and India of getting a logistics operation—IMEC—the corridor from India to the Middle East, through the Middle East to Europe that will be energy, electricity, hydrogen, fiber-optic cables, and lowering the cost of shipping products and materials across the world. These are the kinds of things, Fred, that we can actually do by working together with other countries that literally transform the world, and that is—that is the fun part about this job.

FREDERICK KEMPE: Amos, thank you so much for that. I don’t think in my lifetime I’ve ever seen a world where the risks are so pronounced and the opportunities are so pronounced, both at the same time. It makes me feel better that you’re in a position of responsibility during this really tricky time. So join me, please, in thanking Amos.

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Flagship Event Tue, December 5, 2023 • 5:00 am ET

Global Energy Forum at COP28

The eighth Forum will be held in Dubai as energy and climate decision-makers converge for COP28.

Energy & Environment Energy Markets & Governance Energy Transitions Geopolitics & Energy Security

US Special Presidential Envoy for Climate John Kerry on Tuesday announced a new strategy for international cooperation on the development of nuclear fusion, which he said would be—alongside other energy sources, such as wind, solar, and nuclear fission—”a critical piece of our energy future.” The strategy, Kerry explained at the Atlantic Council’s Global Energy Forum at COP28, focuses on research and development, supply-chain improvements, regulation, workforce development, and education.

If “all of our countries are threatened, and they are, [and if] all life is threatened, and it is, then we need to pull ourselves together with every strength we have,” Kerry said. “We cannot realize this grand ambition—perhaps not at all, but certainly not at the pace we need to—doing it alone.”

The need for alternative fuels such as fusion is apparent because “science clearly tells us, without any question whatsoever, that the cause of this crisis… [is] emissions. It’s the way we burn fossil fuels,” Kerry said.

Kerry noted that “we’ve had a little debate in the last few days about what the evidence shows or doesn’t show,” a reference to controversies during the United Nations Climate Change Conference in Dubai over what role oil and gas will play in the global energy future.

“We have two options,” Kerry explained. “Either capture the emissions or don’t burn [fossil fuels].”

Kerry explained that the evidence of warming across the planet makes it “clear” that the world needs to “move faster” to limit global temperature rise. “We need to figure out what we’re going to do at a critical pace,” Kerry warned.

Below are more highlights from Kerry’s remarks and the panel that followed, which touched upon the role fusion can play and how best to foster international collaboration on it.

The huge potential

• Kerry recounted having heard, as a senator for Massachusetts, that nuclear fusion—which joins two atoms together, producing energy—would be thirty years away, only to talk with scientists a decade later and be told that it was still thirty years away. But “the cadence of new and exciting fusion announcements has obviously increased over time,” he added.

• Now, he said, “there is potential in fusion to revolutionize our world and to change all of the options that are in front of us” for providing abundant clean energy to the world.

• Former US Secretary of Energy Ernest Moniz, who moderated the panel that followed Kerry’s remarks, said that “in this decade, there is a very high probability that… the conditions for sustained fusion will be demonstrated.” This, he added, “is truly a game changer—assuming this all comes to pass.”

• Designer Gabriela Hearst, former creative director of fashion house Chloé, noted the environmental impact caused by the garment industry. “We really need to focus on moving away from the fossil fuel addiction that we have,” she said. At Chloé, she explained, she had designed a collection inspired by visits to fusion labs. Fusion, she said, could help “the survival of our species.”

The accelerating pace

• Several speakers pointed out how new technologies and materials are helping realize the commercialization of fusion at a faster pace than expected. Bob Mumgaard, chief executive officer of the commercial startup Commonwealth Fusion Systems, explained that new technologies are “accelerating innovation.”

• “It’s just going faster and faster” with the help of technologies such as artificial intelligence and machine learning, Mumgaard explained. “In the last five years, it’s unrecognizable.”

• Six decades of government research and development has helped too, explained the White House’s Costa Samaras. “Now,” he added, “the challenge here is [that] energy technologies have long taken decades to get from the starting place to the market; and we do not have decades.”

• “International collaboration,” Samaras argued, will “supercharge” fusion energy development and quicken the pace toward establishing a commercial fusion plant. “That enables the advancement of fusion power… along the timeline that we need to deal with climate change.”

The remaining challenges

• Michelle Patron, senior director of global sustainability policy at Microsoft, noted that in order to meet growing energy demand, and to do it in a decarbonized way, “we need a multi-technology approach” that includes fusion and other renewable energy sources, including wind, solar, and geothermal. She added that electricity grids are local, so the mix of energy sources that countries deploy will depend on local political, economic, and social circumstances.

• Youth Survival Organization Chairman Humphrey Mrema, who is from Tanzania, said that if he were an African leader approached about supporting fusion development, he would “say no.” That’s because fusion is “hard to start” and “difficult to maintain” with the financial architecture across the continent, which has invested heavily in fossil fuels, he explained.

• In Africa, “we have to change the investment and channel it to renewables,” Mrema said. In addition, for Africa to pursue fusion, he explained, it will need technology, capacity building, and more financial resources.

• For Hearst, part of the challenge is awareness. “We live in a silo community,” she explained. “The science community has this information” about fusion’s potential, “but not the fashion community or other communities. So it’s time to cross-pollinate information to bring more hope.”

Katherine Walla is an assistant director on the editorial team at the Atlantic Council.

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Global Energy Forum at COP28

The eighth Forum will be held in Dubai as energy and climate decision-makers converge for COP28.

Energy & Environment Energy Markets & Governance Energy Transitions Geopolitics & Energy Security

A day after more than fifty oil and gas companies pledged to cut methane emissions to nearly zero by 2030, key leaders of the Net-Zero Producers Forum laid out a significant collaborative vision from some of the world’s largest energy exporters for making significant progress on the world’s sustainability goals.

“We have a lot of what we need to make the progress that is essential,” Rachel McCormick, director general of International and Intergovernmental Affairs at Natural Resources Canada, said at the Atlantic Council’s Global Energy Forum at COP28.

“My hope is that the next time we’re together on this stage, we’ll say that we’ve gotten where we want to go: to 75 percent reduction. That there is no question on whether or not we’re on that pathway [to net-zero emissions] by 2030.”

McCormick wasn’t alone in that belief. She was joined at the Global Energy Forum in Dubai by Andrew Light, assistant secretary of International Affairs at the US Department of Energy, and Khalid al-Mehaid, chief negotiator for the climate agreements for the Kingdom of Saudi Arabia.

Their nations, plus Norway, Qatar, and the United Arab Emirates, comprise the Net-Zero Producers Forum, a not-yet-three-year-old collaboration of six nations that collectively represent more than 40 percent of global oil and gas production. The group is designed to work together on pragmatic net-zero emission solutions—everything from methane abatement to clean-energy and carbon capture/storage technologies to advancing the circular carbon economy approach.

Their work is particularly meaningful in light of Monday’s launch of the COP28 Global Methane Pledge Ministerial, which announced more than one billion dollars in new grant funding for methane action (more than triple current levels of spending). plus new data tools and new membership that grew participation to 155 governments worldwide.

Read on for more highlights from their conversation with Angela Wilkinson, secretary general and chief executive officer of the World Energy Council.

The challenge and opportunity of tackling methane

• Light said that the pledges made at the ministerial wouldn’t have been possible without the relationships built through the Net-Zero Producers Forum, which forged unlikely partnership opportunities between the six energy-exporting nations. “Bringing our countries together was a necessary condition for something like that making it over the finish line just a few years later.”

• One of the key efforts of the Net-Zero Producers Forum, originally launched at US President Joe Biden’s first Climate Leaders Summit in April 2021, has been the creation of the Upstream Methane Abatement Toolbox. The toolbox provides information on measures taken so far, and lessons learned, in implementing methane-abatement technologies and policies, creating a roadmap for others to follow.

• Establishing a global framework around addressing methane emissions is particularly difficult. Past initiatives to curb extreme pollutants were plugged into ready-made global frameworks, such as the efforts to eliminate hydrofluorocarbons (HFCs): “There we were very lucky because we had the [1987] Montreal Protocol that was already tailor-made,” Light said. “Reducing methane is a way you can get near-term relief on global warming, but… we don’t have a working agreement, and so it’s much more difficult to take on from a global political perspective.”

Weighing economic competitiveness against net-zero goals

• The stakes around sustainable energy couldn’t be higher, Light said: “If we get it right, then we get a solution to the biggest problem that we all face today. We get the creation of hundreds of thousands, if not over a million, new jobs. We get a cleaner planet. We get a more sustainable future.” And if they get it wrong? “We lose everything we have gained. We lose all developmental gains we’ve had since World War II.”

• Particularly when it comes to major energy-exporting economies, it’s important to craft widely inclusive climate change strategies. “If it wasn’t for the way that the Paris Agreement was inclusive enough and wide enough for all of us to manage our national circumstances, we wouldn’t have been party to that dream,” al-Mehaid, the Saudi Arabian chief negotiator, said.

• Saudi Arabia and other oil-rich nations like it have adopted broad diversification strategies that innovate how oil and gas are used, including diverting those resources into noncombustion-focused products, such as replacements for cement and aluminum. “It gives you a long-term hedge,” al-Mehaid said, against the uncertain energy economy that a net-zero future could bring.

Other advances for fighting global warming

• Canada has passed tax credits and other financial incentives for companies willing to reduce their emissions, from a carbon price set across its entire economy to 65 percent expenditures returned for carbon-dioxide removal (CDR) efforts and 35 percent returned for energy-efficient transportation and other measures. “Carbon capture is really important because we know it works, we just need to scale it,” McCormick said.

• She added that it was important for the Net-Zero Producers Forum to consider its strengths when working together, rather than trying to tackle every climate-related challenge all at once. “There is a reason these countries came together. You don’t want to do everything. You want to do what is special to you. What are the results that can drive actions [and] send signals to the international market? The fact that we are all net exporters is important.”

• That mindset is one reason why all the countries in the Net-Zero Producers Forum have agreed to support direct air capture initiatives that extract CO2 from the atmosphere, but may not necessarily work together on proposing nature-based solutions, such as protecting forests or wetlands—particularly since the six nations have significant geographic and environmental differences. “Everything that comes together has to justify itself in this incredibly crowded landscape we see now on cooperation. The virtue here is that we have a similar approach,” Light said.

Nick Fouriezos is a writer with more than a decade of journalism experience around the globe.

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The post The world’s biggest energy exporters plot out the next steps toward net zero appeared first on Atlantic Council.

Scott Strazik is the CEO of GE Vernova. GE Vernova is a sponsor of the 2023 Atlantic Council Global Energy Forum. This essay is part of the Global Energy Agenda.

As the world gathers in Dubai for an impactful United Nations Climate Change Conference, we find ourselves at the cusp of unprecedented opportunities for action. The private sector must deliver, service, and innovate the technologies that help provide electricity reliably, affordably, and globally. Wind, natural gas, nuclear energy, and grid construction, connections, and upgrades are clear drivers for the future of a successful energy transition. We can fast track these efforts if we continue to see the growth of strong partnerships with public institutions. 

Across industries, the past few years have shown encouraging signs of support for this growth, such as an expansion in clean tech financing, increased investment throughout the private sector, more policy certainty around the globe, and new collaborations among companies and governments.

While these factors have contributed to moving the energy landscape in a positive direction, hurdles remain. For example, in the race to reduce carbon emissions, the demand for power is still outpacing the current supply—and this gap will persist. Global electricity demand has risen consistently at a clip of more than 2 percent since 2015, yet at the same time roughly 775 million people around the world still lack access to affordable, reliable, and sustainable energy.

Because of this, the role of the private sector—specifically around innovation and technology—has never been more crucial as we continue to electrify the world while simultaneously working to decarbonize it.

The good news is that while we confront these challenges, there are now new coordinated and deliberate efforts to address climate change at the scale and size it demands. The public and private sectors are working in tandem more than ever before. Innovative new technologies are being developed and deployed faster, and, importantly, across continents and throughout governments, there’s recognition that the energy transition must also help developing economies improve the quality of life for citizens. 

Recent advancements toward decarbonization have been driven in part by policies that are elevating the role of business to lead the development and deployment of critical technologies at scale. For example, the Inflation Reduction Act (IRA) in the United States has steered significant financing toward cleaner manufacturing and lower-carbon technologies, and implementation of the law has already helped spur job creation and investments by US-based manufacturers. By the August 2023 one-year mark after the IRA’s passage, more than 200 new clean energy projects had been publicly announced, representing more than $86 billion in investments and tens of thousands of new jobs.

The energy transition presents a clear opportunity for more partnerships like these among governments, industries, and communities. Innovative energy technologies, such as small modular reactors, are being deployed globally so that all regions can benefit from the jobs, supply chain, and training that come alongside a lower-carbon energy source. And countries including the COP28 host, the United Arab Emirates, are advancing ambitious goals like the Net Zero by 2050 Strategic Initiative that align with the goals of the Paris Agreement. 

We can do more. Ensuring greater access to electricity for populations currently in need while also addressing climate change is possible if we deploy diverse generating technologies today, and invest in the breakthrough innovations of tomorrow. This vision requires a diverse suite of the latest solutions in renewables, gas, nuclear, grid, and digital technologies. Through a combination of coal-to-gas switching, enhanced grid resiliency, and investments in infrastructure needed to deploy more renewables, we can balance reducing carbon emissions with power reliability to ensure communities can thrive and economies keep growing. 

As the private and public sectors look for more opportunities for partnerships throughout the energy transition, I’m confident we will see a force multiplier that accelerates the work to electrify the world while simultaneously decarbonizing it. This spirit and letter of partnership and cooperation is the thread that connects our efforts and determines their success. We must move forward and work to meet this moment together.

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The post Partner perspective: A catalyst for cleaner energy appeared first on Atlantic Council.

But will COP28 give Africa the attention it deserves on other climate needs? Our experts, some of whom are headed to Dubai, outline what is at stake for Africa.

1. What are African countries hoping to achieve at COP28?

First, there is a strong and well-accepted push among African countries for a change in narrative, recasting the continent from a recipient of climate aid to a full participant in climate solutions. Following the Summit for a New Global Financing Pact in June, the Africa Climate Summit in September, and the Annual International Monetary Fund-World Bank Meetings in October, Africans are hoping to secure a place for themselves to do more on adaptation and mitigation because—despite having the lowest greenhouse gas emissions in the world—they live in the continent that is the most affected by climate change.

Second, governments are grappling with debt sustainability, while balancing the need to address the climate crisis. Even though climate is a priority for leaders, they must balance their climate-related initiatives with poverty alleviation, health, education, and debt financing. Governments are starting to think creatively about how to bring more money into the system—climate finance is becoming an important part of the solution.

COP28 will offer the grounds to test, improve, and challenge innovative financing products such as debt-for-nature swaps (such as the $500 million debt-for-nature swap deal in Gabon), a variety of bonds focusing on social and environmental impact, carbon markets, blended finance, and more. A promising trend that will likely have impact on the ground in Dubai is the push for green banks, which can be seen in examples across the African continent, including in an initiative with the African Development Bank.

Finally, as a new push for innovative technology—in solar and wind energy, and in newer fields such as carbon capture and green hydrogen—is underway, African entrepreneurs are looking to carve a place for themselves as leaders in climate technology and will likely be looking for opportunities to scale their solutions at COP28.

—Jacqueline Musiitwa is a nonresident fellow with the Atlantic Council’s Africa Center

African countries are managing a delicate balancing act when it comes to the green transition.

On one hand, African countries are among those which suffer the worst from the negative impacts of climate change while having contributed the least to global warming. On the other hand, the African continent has the lowest energy access rates in the world, with more than six hundred million people lacking access to electricity.

There is considerable need for energy on the continent, and the private sector and public decision makers face dilemmas in deciding how to get that energy to people. Given the large economic development challenges, it may be tempting to prioritize short-term access to energy, whatever the source (especially oil and gas). African countries must reconcile economic development with the green transition—or, rather, ensure that the green transition is the faster route to economic development.

At COP28, African countries—with their widely differing energy access, natural resources, and green transitions—will seek the recognition of their unique circumstances and the need for tailored support. They will likely call for a differentiated approach to climate action, acknowledging that Africa’s priorities differ from those of developed countries and other regional groupings. They are likely to advocate for a fair transition and seek concrete and significant financial support for adaptation and mitigation measures—including financing to build better energy infrastructure.

In that respect, COP28 is an opportunity to show that the green transition boosts, rather than hinders, economic development by mobilizing and driving investment towards green energy infrastructure. Africa’s abundant renewable resources (including solar, wind, hydropower, and biomass) can help foster economic development by providing clean, affordable, and reliable energy while also meeting decarbonization and net-zero climate goals.

—Emilie Bel is a nonresident fellow with the Atlantic Council’s Africa Center

2. How will COP28 be different from previous years?

COP28 will likely unfold like its predecessors—African countries will call for the realization of promises made at past conferences, particularly pledges made by developed countries that have benefited from carbon-intensive growth. The cynical view would be that, by the end of the convening, COP28 probably will not be too different than UN climate conferences in the past. But given that COP28 will be in the United Arab Emirates (UAE), and Gulf countries have become major sources of global capital recently, there may be more announcements of new climate initiatives backed by Gulf governments focused on Africa. In September, the UAE committed $4.5 billion to finance climate projects in Africa, and in October, Saudi Arabia hosted the first Saudi-Africa summit. There seems to be a willingness by Gulf countries to partner and put forth financing offers—the question is how the projects will be structured.

—Aubrey Hruby is a nonresident senior fellow with the Atlantic Council’s Africa Center and leads the Africa Center’s work on climate and energy issues.

3. Which African issues related to finance, inclusion, and technology and innovation—COP28’s biggest themes—are likely to draw attention?

The question of climate justice is deeply tied to Africa’s development experience and will characterize discussions at COP28 as well. African countries have contributed the least to carbon emissions yet bear enormous costs. Without a sensitivity to the climate justice issues at play, it will be difficult to make meaningful progress.

In addition to discussions about the need to develop natural gas capacity, there will be discussions around how to ensure African countries and companies meaningfully participate in newly minted climate finance flows and green technologies. Expect discussions to prioritize three key technologies: green hydrogen, electrical vehicle batteries, and nuclear. Africa’s role in the critical minerals that are necessary for electric vehicles will certainly be highlighted in Dubai as the conference continues to unfold. Not many people are talking about Africa’s nuclear potential yet—though the world arguably should. Bangladesh has just inaugurated its first nuclear power plant, but it is yet to be seen how this fits into the African context.

With six hundred million people lacking reliable access to electricity on the continent, there is a dual imperative for African countries to go green and connect their populations to power resources. This must be recognized at COP28 to meaningfully make progress in Dubai.  

—Aubrey Hruby

4. Will the Nairobi Declaration, issued by African leaders following the Africa Climate Summit, affect negotiations at COP28?

Since COP27 in Sharm el-Sheikh, African stakeholders have been working to develop a unified African position that can meet the needs and challenges of the continent. The Africa Climate Summit helped African countries achieve consensus on key negotiation points such as global decarbonization and openness to green investment (summarized in the Nairobi Declaration) strengthening the continent’s negotiating position and supporting efforts to initiate a big push to help Africa green.

With the Nairobi Declaration having helped drive an African consensus, two subjects should dominate the African agenda as COP28 unfolds. The first topic is ensuring that Africa is not marginalized in the green industrial revolution, which can be achieved with a focus on technology appropriations and with Africa serving as a foundation of green value chains. Second, leaders should push to secure a climate-finance architecture capable of financing the continent’s greening needs. Attracting more private capital is paramount, but leaders should also place pressure on developed countries to meet the one-hundred-billion-dollar climate finance pledge, mobilize new resources, and implement key reforms—for example, initiatives to ensure Africa gets fair prices for its carbon credits.

—Jean-Paul Mvogo is a nonresident senior fellow with the Atlantic Council’s Africa Center and author of “Developing Green Banking Ecosystems: A Solution to Better Finance Green Challenges and Address Climate Change in Africa,” a new Africa Center report to be launched at COP28.

5. How are discussions around critical mineral extraction likely to play out?

This year has seen Africa’s importance in the green energy transition increase because of the number of critical minerals in Africa’s soil. 

There is an increased push by African countries to localize supply and production chains of critical minerals (such as lithium, cobalt, and copper) and other resources. For example, a new agreement between Botswana and De Beers Group commits the jeweler to move more of the value chain to Botswana, and a memorandum of understanding between Zambia and the Democratic Republic of the Congo (with support of the United States and European Union) sets them up for collaboration on the processing of copper and cobalt for electric vehicles locally. The trend will likely continue.

—Jacqueline Musiitwa

Developed countries’ increased focus on Africa’s critical mineral deposits, coupled with rising competition to access those resources, creates an opportunity for Africa and its trade partners to avoid repeating history—one in which partners lost out when mining and exporting raw or scarcely processed natural resources. New cooperation models should favor virtuous cycles—characterized by local, value-added transformation and ownership. By creating much-needed jobs and local added value, those new value chains could help offset the social consequences of climate change, reduce migratory pressures, and generate the resources to achieve the United Nations Sustainable Development Goals. Those value chains could be drivers of “glocal” prosperity and stability, if well structured.

—Jean-Paul Mvogo

6. COP28 participants include not only government leaders but also private-sector leaders. What is their role in supporting African countries?

Private sector funding has to play a massive role.

To achieve the green transition, mobilizing billions in investment for green energy infrastructure will be necessary. Today, African governments are the first source of infrastructure financing (33 percent of total commitments). The current financing gap is too large to be bridged by public funding alone. African countries therefore need to explore multiple financing sources, especially private funding.

In every discussion at COP28, officials will have to look at how the private sector, and especially international investors, can be leveraged. The current trend is a mix between public and private financial tools.

—Emilie Bel

7. Will the coalition of African countries likely see support from other regional groups?

Africa shares similar climate vulnerabilities and demands as many other developing countries in Latin America and small island developing states. Many of these countries face increased debt vulnerability, reduced fiscal space, pressing social issues, and high borrowing costs when seeking to implement climate change adaptation and mitigation programs. 

African negotiators, as peers of other developing regions, are also focused on ensuring that climate policies in developed countries do not harm development objectives in developing countries. By adopting policies, such as carbon trade measures, developed countries may inadvertently weaken key systemic sectors in developing countries without providing the adequate support to help those sectors transition to greener standards.

—Jean-Paul Mvogo

The post Africa’s priorities at COP28, from climate finance to a brand-new narrative appeared first on Atlantic Council.

Experts from across the Atlantic Council, from on the ground in Dubai and elsewhere around the world, analyzed how global leaders responded to climate change’s greatest challenges and offered expert insight on the biggest developments in everything from climate finance to the energy transition to the global stocktake.

Get a sense of whether negotiators have proven COP’s value, courtesy of our experts below.

Check out all our COP28 programming here.

• COP28’s legacy will be measured by emissions reduction, not ‘historic’ text

• The takeaway from COP28: Gas and nuclear are part of the energy transition

• The final report card for COP28

• Don’t chalk this conference’s success up to text alone

• COP28 gave nuclear power a seat at the table

• See day thirteen analysis

COP28’s legacy will be measured by emissions reduction, not ‘historic’ text

By Landon Derentz

The final declaration from COP28, “the UAE Consensus,” is transformational in its reflections on fossil energy’s role in contributing to climate change, but with time this climate conference won’t simply be remembered for “landmark” text. If all goes to plan, the COP28 Presidency’s efforts to foster an inclusive platform for promoting private and public actions that reduce global emissions will be its legacy.

The “success” of COP28 was never going to be measured by unrealistic expectations around “phasing out” fossil fuels—a benchmark promoted by the European Union and small island nations severely at risk of global temperature rise. Despite over $3.5 trillion in financing for renewable energy over the past decade, oil, gas, and coal remain stubbornly anchored in the global energy mix, representing around 80 percent of energy consumed. The high reliance on conventional energy resources for their economic growth and political stability unequivocally placed China, India, and Saudi Arabia at the vanguard of a block of countries opposed to any negotiated outcomes at COP28 that locked in a “phaseout” or “phasedown” of specific energy sources.

Behind the scenes, however, the feverish and ultimately successful push for a diplomatic compromise temporarily overshadowed what COP28 has already accomplished.

Read more

EnergySource

Dec 15, 2023

COP28’s legacy will be measured by emissions reduction, not ‘historic’ text

By Landon Derentz

The COP28 final declaration is transformational in its reflections on fossil energy’s role in climate change. The conference’s real legacy, however, will be the efforts undertaken to foster the inclusive platform necessary to promote private and public actions and reduce global emissions.

Climate Change & Climate Action Energy & Environment

The takeaway from COP28: Gas and nuclear are part of the energy transition

By Ana Palacio

Standing at the epicenter of the United Nations Climate Conference in Dubai, also known as COP28, it was clear that this year’s event was qualitatively different from previous ones. What started in Berlin in 1995—convened by Angela Merkel, then the German environmental minister, as a private meeting of experts seeking to draw the attention of leaders and the media to the increase in global average temperatures—has become a prominent and massive gathering. Over the course of two weeks, more than 150 heads of state and government walked the halls of Expo City Dubai, compared to 112 who attended COP27 last year in Sharm El Sheikh, Egypt. There were also reportedly more than 90,000 participants at COP28, compared to less than 50,000 at COP27.

With the increase in size, COP’s center of gravity shifted away from the formal management structure of the convention. Instead, the focus was on disparate and scattered initiatives in which nonstate actors—including from the private sector—play a prominent role. There are several ways to interpret this conference: a holy pilgrimage for those who are devoutly green, a new Davos attended by executives of the same corporate giants who frequent the World Economic Forum gathering in Switzerland, a photocall of politicians from around the world, a theater with armies of lobbyists, a mix of consultants and media. “Inclusion” was an oft-repeated theme this year. And although it may seem provocative, the meeting’s most notable decision may have been to include the oil and gas sector, which had been previously sidelined—a decision that spotlighted a larger confrontation at COP28 between ideology and pragmatism.

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New Atlanticist

Dec 15, 2023

The takeaway from COP28: Gas and nuclear are part of the energy transition

By Ana Palacio

The concept of a “transition” in the energy transition is too often lost: specifically, the idea that it will extend over time and require overlap.

Climate Change & Climate Action Energy & Environment

The final report card for COP28

After fourteen days in the desert, it ended with a “beginning.” On Wednesday, the 2023 United Nations Climate Conference in Dubai, also known as COP28, concluded with nearly two hundred countries agreeing to “transition” away from fossil fuels. UN Climate Change Executive Secretary Simon Stiell called the decision the “beginning of the end” of the fossil fuel era. But the agreement text was only one of many outcomes from the conference, including the activation of the loss and damage fund and pledges to abate methane emissions and triple renewable energy. Atlantic Council experts who were on the ground in Dubai share their insights on the agreement and the road ahead.

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Fast Thinking

Dec 13, 2023

The final report card for COP28

By Atlantic Council

Atlantic Council experts who were on the ground in Dubai share their insights on the agreement and the road ahead.

Africa Climate Change & Climate Action

Don’t chalk this conference’s success up to text alone

By Reed Blakemore

COP28 finally came to a (late) conclusion today, following a frenetic race to the finish. 

The final agreement managed to address nearly all of the key items on the COP28 agenda—the loss and damage fund, tripling renewable energy deployment, and global carbon markets with varying levels of strength. But debate over whether this COP was a success or failure will gravitate toward the agreement’s treatment of fossil fuels. 

Despite early optimism from the climate community earlier in the week that “phasedown” in some form or fashion might be an ultimate landing spot, the final text on Wednesday, settled on “transitioning away from fossil fuels in energy systems.” That language reveals not only how hard it is to find consensus on the oil and gas industry’s role in climate action; it also shows the complexity of interests that are often misunderstood by climate observers and played out over successive drafts leading up to the final agreement. On one hand, major oil-producing delegations at the COP have been unwilling to accept sweeping or overly broad language that undercuts their still-transitioning economies. Relatedly, many developing economies (particularly in Sub-Saharan Africa) see a phasedown or phase out, in the absence of financing for alternative energy sources, as an unfair deal. They make this point by criticizing how Western countries built their own economies by consuming fossil fuels for decades (and at the same time that many Western countries still produce and use fossil fuels themselves). Meanwhile, small island nations have been adamant that fossil fuels cannot be omitted from COP text, whether this one or in the future. 

The result is a bit of a word salad that may not meet the expectations many in the climate community brought to Dubai. But expecting the United Nations Framework Convention on Climate Change (UNFCCC) to address the tricky issue of fossil fuel emissions in one fell swoop may actually be unhelpful for efforts to drive multilateral climate action. 

Indeed, the treatment of fossil fuels and their role in global emissions is an urgent area of attention—and it will remain so for COPs to come. But when evaluating the success of this gathering in Dubai, don’t put too much faith in the power of the COP’s signaling abilities through its text. Unlike loss and damage funds or carbon market rules, for which multilateral structures or mechanisms are created through UNFCCC agreement, it’s harder to draw a straight line between strong phaseout language in the text and the drawdown of a resource that remains an intrinsic part of the global economy. This perhaps is what made the alternative phrasing to a “phase out” proposed over the weekend—which listed several options for countries to cut emissions including upping renewable energy capacity—an imperfect but more thoughtful way to use the signaling power of the COP. (This wording, for example, is similar to what was used in the Sunnylands agreement in November between the United States and China). The final COP28 agreement, though also imperfect, is an important starting point to build from.

Regardless, the increasing utility of the COP to build an inclusive ecosystem that effectively integrates industry, civil society, and policy is something to celebrate. Numerous accomplishments—from nuclear energy commitments to a new renewables fund—highlight COP’s value as a necessary platform to align action and commitment. 

Bringing the oil and gas industry into this platform is a tricky but necessary part of that process, and an area in which this COP will leave a legacy even outside of the official text. The United Arab Emirates’ (UAE) establishment of Global Decarbonization Accelerator and its Oil and Gas Decarbonization Charter provided that, and while it needs to both grow in participation and ambition, it can be a space where the UAE can push for shared action even once its COP presidency concludes. Holding the oil and gas industry accountable for their role in the climate crisis begins with bringing that industry into the fold, in order to hold it accountable for providing solutions rather than  for existing. This COP managed to do that.

What remains to be seen, however, are the tricky bits of climate action. Major tasks ahead for the UNFCCC include effectively de-risking private investment in clean energy projects; establishing clarity on how to allocate “shared pools” of funding for resiliency efforts, such as the loss and damage fund; and navigating the nuance of a trade system that is evolving rapidly in response to energy transition. Arguably, these are just as (if not more) “make or break” for the energy transition and climate action than the language chosen to articulate the future role of fossil fuels. 

The ink may still be drying on the final agreement, but much more work remains.

—Reed Blakemore is director for research and programs with the Atlantic Council Global Energy Center.

COP28 gave nuclear power a seat at the table

By Jennifer T. Gordon

From the start, it was clear that this COP could justifiably be called “the nuclear COP.” COP28 kicked off with the pledge of more than twenty countries to triple nuclear energy by 2050, which was soon followed by an industry pledge. Additionally, the US Export-Import Bank (EXIM) and the US Department of State announced a “suite of EXIM financial tools” to jump-start small modular reactor deployments around the world. The United States, Japan, Canada, France, and the UK pledged to mobilize at least $4.2 billion in government-led investments to “enhance uranium enrichment and conversion capacity over the next three years.”

Perhaps just as important as the specific announcements on nuclear energy at COP28 was the unprecedented centrality of nuclear energy in conversations at the conference. The International Atomic Energy Agency (IAEA) and the Nuclear Energy Institute hosted a pavilion in the Blue Zone called “Atoms4Climate,” while the Emirates Nuclear Energy Corporation and World Nuclear Association hosted Net Zero Nuclear pavilions in the Blue Zone and Green Zone, along with a two-day Net Zero Nuclear Summit in downtown Dubai. Nuclear energy was present in all these platforms, and conversations around nuclear energy took place in spaces that were dedicated to the energy transition writ large (for example, at the Global Decarbonization Accelerator Connect pavilion, run by the Atlantic Council). The United Nations Framework Convention on Climate Change’s Draft Decision on the Outcome of the Global Stocktake included nuclear energy in its list of “zero- and low-emission technologies,” a move that the IAEA praised for making history.

The importance of nuclear energy becoming part of the climate conversation goes far beyond rhetoric. As countries move to unlock financing for technologies that are considered green, the inclusion or exclusion of nuclear energy could determine whether the industry succeeds or fails. For example, Canada’s inclusion of nuclear energy in its Green Bonds framework is enabling greater funding for nuclear and faster deployment of nuclear technologies. As a zero-emission energy source, nuclear deserves a seat at the table at the world’s premier climate conference, and COP28 was a watershed moment for the inclusion of nuclear in the climate discussion.

—Jennifer T. Gordon is the director for the Nuclear Energy Policy Initiative at the Atlantic Council’s Global Energy Center.

Note: The Emirates Nuclear Energy Corporation is a sponsor of the Atlantic Council’s Global Energy Forum. More information on Forum sponsors can be found here.

• Watch how final negotiations balance energy opportunity with climate insecurity risks

• Will the findings of the global stocktake unite or divide the world?

• See day twelve analysis

Watch how final negotiations balance energy opportunity with climate insecurity risks

By Thammy Evans

As COP28 draws to a close, the usual frantic bargaining is taking place. This year’s conference has seen several innovations and firsts that show an evolving global and societal response to the climate crisis at hand. More than ever before, themes beyond climate change are attracting more focus, which was seen in announcements such as the launch of the Alliance of Champions For Food Systems Transformation. The day 11 Majlis organized by the United Arab Emirates aimed to bring a more inclusive feel to the negotiations, while the conference’s many official gatherings have earned this COP the name “Conference of Partners.” The findings of the global stocktake, although still not finalized and released, is a first attempt at a comprehensive, transparent inventory of climate action, but gaps remain.

A look at the themes of each COP across the years is a stocktake in itself that shows how negotiations have developed and the topics that have made it into negotiations over time. To date, much of the negotiations (on topics such as food, agriculture, oceans, tourism, health, finance, gender equality, indigenous peoples, youth, nature, land use, urbanization, fashion, adaptation, and loss and damage) have been attempts to make progress on climate mitigation via indirect sectors and to create a means to make it up to developing countries that are suffering the most from climate change. But much of the negotiations have also fallen short on the real elephant in the climate-mitigation room: fossil fuels.

This conference, however, marks the first time the term “fossil fuels” made it into the end-of-COP deal—or at least the draft text of it. Inclusion of the term “fossil fuels” is a sign of how much traction climate science has finally made. It is also recognition that discussions around climate security have adequately—and powerfully—conveyed the risks at stake. If the term “fossil fuels” remains in the final text, and depending on how it is mentioned, it could be a win for the COP28 president, Sultan al-Jaber, who has advocated for the need to have buy-in from all parties and partners, even (and especially) the oil industry.

Efforts to turn global focus toward turning the tap off for fossil fuels (i.e. a complete phase out), on ecosystem and economic regeneration and on a policy switch to regenerative capitalism (rather than merely mitigation, resilience, and adaptation) have not yet succeeded. Some sectors in many developed countries, with a sense of optimism for technological determinism, argue that technological innovations will somehow help achieve climate goals, just in time to keep hard-to-abate sectors alive for just that bit longer. But climate modeling simulators don’t show any scenario in which global warming can be kept to 1.5 degrees or even 2 degrees Celsius by keeping fossil fuels alive (by supporting fossil fuel infrastructure and production) while offsetting by innovation scale up, offsetting, or abatement by 2100, or even by 2050.

It is true that a gradual phase down will keep certain transition challenges more tolerable, especially for those countries whose economies have yet to put a realistic economic transition diversification plan in place. But the lack of a fast enough phase out plan will exacerbate physical climate insecurity risks for the 3.5 billion deemed already to live in climate hot spots. The resulting increased risk of violent conflict, forced migration, and death will raise humanitarian disasters to a level unseen, keeping government institutions, emergency services, and the option of last resort—the armed forces—ever more occupied with responses to climate hazards. As the COP28 negotiations draw to a close, watch this balance of energy opportunities and insecurity risks.

—Thammy Evans is a nonresident senior fellow of the GeoTech Center of the Atlantic Council. She is also a senior research fellow of the Climate Change & (In)Security Project, a collaboration between the Reuben College of Oxford University and the UK Army’s Centre for Historical Analysis and Conflict Research. Her co-authored chapter entitled Ecological Security: The New Military Operational Priority for Humanitarian and Disaster Response, was published in Climate Change, Conflict, and (In)Security: Hot War on December 1.

Will the findings of the global stocktake unite or divide the world?

By Lama El Hatow

One of the most pivotal items being discussed at COP28 is the global stocktake, a “report card” of the world’s progress on climate action and a key indicator of the implementation of the Paris Agreement.

Two years ago, countries began assessing their progress on climate targets, or nationally determined contributions (NDCs), and submitted their findings to the United Nations (UN) Framework Convention on Climate Change. According to the UN Environment Programme’s Emissions Gap report, with current NDCs and climate targets, the world has little chance of keeping below the 1.5-degree-Celsius warming limit and could see temperatures rise by 2.9 degrees Celsius above preindustrial levels by the end of the century.

Under a three-degree warming scenario, the Amazon rainforest could dry out and ice sheets would melt at exponential rates. To meet the 1.5-degree warming threshold, countries will need to cut their greenhouse gas emissions by at least 42 percent by 2030, the UN says. According to the World Meteorological Organization, the world is slated to reach 1.4 degrees Celsius of warming above preindustrial levels in what remains of this year, making it the hottest year on record. “Greenhouse gas levels are record high. Global temperatures are record high. Sea level rise is record high. Antarctic sea ice is record low,” the World Meteorological Organization’s secretary general warned. Scientists have said that next year could be worse, with an El Niño weather pattern that is expected to cause temperatures to rise.

COP28’s success depends on the global stocktake’s ability to push countries to implement three changes.

First, drastically cutting emissions and having countries increase the ambition of their NDCs, including by committing to reduce emissions by 43 percent by 2030 and by 60 percent by 2035, as recommended by the UN.

Second, a complete phaseout of unabated fossil fuels with a clear timeframe that keeps global warming below 1.5 degrees Celsius. Going forward, countries should set their ambitions even higher than this recommendation by phasing out all fossil fuel use: “abated” fossil fuel, achieved with the help of carbon capture and storage, can take away from the real action that needs to be done. All countries must also commit to triple renewables, double energy efficiency, and make clean energy available to all by 2030.

Third, increasing climate finance to ensure that the Global South doesn’t struggle to reach climate targets and that developing countries are not devastatingly impacted by climate-related disasters they did not cause or only minorly fueled. As negotiations on the way forward come to a close, it is important that countries are acutely aware of the consequences of their shortcomings and the need to ensure climate justice for all.

—Lama El Hatow is a nonresident fellow with the empowerME Initiative at the Atlantic Council’s Rafik Hariri Center for the Middle East. She is also a professor and program coordinator at Johns Hopkins University in the Environmental Science and Policy and Energy, Policy, and Climate departments.

• The Inflation Reduction Act set off waves still felt at COP28

• COP28 is talking about how to finance Africa’s green transition. Green banking is a big part of that.

• See analysis from day eleven

The Inflation Reduction Act set off waves still felt at COP28

By Charles Hendry

The introduction of the Inflation Reduction Act (IRA) in the United States has transformed European thinking about the industries Europe needs if it is to achieve net-zero emissions by the middle of the century.

Political leaders in Europe and elsewhere had long been encouraging the United States to do more to tackle climate change and bring forward the industries needed to do so. But when the IRA was announced, the initial reaction in European capitals was one of shock. The IRA was criticized as being unfair in subsiding companies to invest in the United States and making it more difficult for Europe to compete.

As time has progressed, harsh words have changed into measures that would also attract investment into the United Kingdom and the European Union. Governments realized that their only response was to raise their game and make Europe as attractive a place to invest in low-carbon industries as the United States. Game on!

The mistake in those early reactions was that it suggested that this is a battle between the United States and Europe. But the reality is that if both are to deliver the changes that are needed, and do so in the timeframe needed, then this needs to be the United States and Europe—and China and other countries across the world. This is not a zero-sum game in which if one country does well, then other countries have to do badly. It is one where we all need to win.

The same is true of Chinese dominance of supply chains. The West needs to secure more of those supply chains, as businesses want their supplies closer to them and as they look to have stricter control over manufacturing processes, environmental sustainability, and transparency. Sometimes that is seen as a threat to Chinese industries, but the reality is that China will need the output from those factories to supply its own fast-growing clean industries.

The mood of businesses present at COP28 has been one of realizing ambition, a sense that more can be done, that the necessary funding is there, that the right skills can be developed, and that companies can do all this faster than previously thought. In every panel I took part in, business representatives said that they are ready to deliver on the ambition.

There will be much debate about government policies to reach the United Nations Climate Change Conference commitments, but there has seemed to be little debate at COP28 about the enthusiasm of the business community to rise to the challenge. Sixteen months on from the signing of the IRA, the United States and Europe and countries around the world are starting to realize that they have to deliver together.

—Charles Hendry is a distinguished fellow of the Atlantic Council Global Energy Center. Previously, he was a Conservative member of the UK Parliament for Wealden from 2001 to 2015, the minister of state for energy from May 2010 to September 2012, and the Conservative Party’s spokesperson on energy issues from 2005 to 2010.

COP28 is talking about how to finance Africa’s green transition. Green banking is a big part of that.

By Jean-Paul Mvogo

On the ground at COP28, the issue of climate finance, particularly in Africa, has been a big topic of discussion. This is due in part to the magnitude and urgency of the issue. Even with the commitments made here in Dubai and earlier, the amount Africa needs to face climate change—three hundred billion dollars per year, at least—is around ten times the amount of disbursements and pledges made to African countries so far for this purpose.

Beyond the amount of financing needed, the discussions at COP28 have also focused on the topic of the green financial architecture—that is, the logistics to bring green financial services and products closer to African households, businesses, and communities. A major question is how to provide climate insurance to the millions of African farmers, including farmers in Sub-Saharan Africa, who could lose 5-17 percent of their crop yields by 2050 due to climate change and who live on the fringes of traditional financing circuits. Another concern is how to finance the upgrade of African businesses to greener standards, when today only 18 percent of their financing needs are covered. There is in addition the question of how to provide greener transport, energy, and housing solutions to the hundreds of millions of young, urban workers, who earn their living on a daily basis and do not have collateral.

If the need for deployment of climate finance for all is self-evident in countries with developed financial systems, these questions highlight the importance of green financial architecture for Africa to achieve a successful green and inclusive transition. Hence the decision of the Atlantic Council’s Africa Center to launch a reflection on that topic in a new report that I wrote and presented at COP28.

Report

Dec 5, 2023

How green banking can unlock climate solutions in Africa

By Jean-Paul Mvogo

In order to succeed in its transition to a green and inclusive economy, Africa must ramp up its green banking ecosystems and mobilize resources needed to finance climate mitigation and adaptation while also addressing deforestation, pollution and biodiversity loss.

Africa Economy & Business

This report explains how green financial systems can turn Africa into a champion of the green economy by mobilizing its ecosystems. Africa’s ecosystems are among the most efficient carbon sinks on the planet. African countries represent an exceptional renewable energy technical potential that accounts for a little less than half of worldwide capacity. And the continent contains large deposits of numerous critical minerals essential to the green revolution.

The report presents cooperative models for creating alliances of financial intermediaries able to mobilize their respective advantages to efficiently deliver green financial services to the “last mile”—to local communities and small businesses, for example. It also emphasizes issues that the international community must quickly address to resolutely engage Africa in the transition to a green and inclusive economy that would be a benefit to all as a source of stability.

To unblock the African green intermediation pipeline, the report advocates finding solutions to the difficulties faced by African financial actors when they wish to access international green funds. The dysfunctions of African carbon markets, which hinder the rise of pan-African green finance engineering initiatives, also call for resolute action. Finally, the report pleads for curbing the debt bottleneck that prevents African countries from devoting more resources to capacity building and training, which are needed to structure countries’ green ecosystems and attract more private investment. Indeed, private investment represents just 14 percent of green financing in Africa, highlighting a strong growth potential.

With the end of COP28 nearing, these issues, and the report’s twenty-one recommendations, deserve more attention. As COP28 attendee said to me, action, in addition to discussions, is needed to prevent the international community from heading toward “a climatic and societal hell” and allow the construction of a more desirable alternative.

Jean-Paul Mvogo is a nonresident senior fellow with the Atlantic Council’s Africa Center.

• For the global stocktake and beyond, accessible and trusted data are the foundations for progress

• Is carbon capture and storage a solution to emissions—or is it a ‘carbon bomb’?

• See analysis from day ten.

For the global stocktake and beyond, accessible and trusted data are the foundations for progress

By Lloyd Whitman and Raul Brens Jr.

Negotiations on the highly anticipated COP28 global stocktake have already started for the nearly two hundred countries gathered at the climate change conference. This stocktake, the first in a five-year cycle, will determine how far the world has come in trying to meet the goals of the Paris Agreement and where it has come up short. To quote the United Nations Framework Convention on Climate Change (UNFCC), “It means looking at everything related to where the world stands on climate action and support, identifying the gaps, and working together to agree on solutions pathways (to 2030 and beyond).”

During the first week of COP28, a theme heard again and again across discussions on climate science, mitigation, and adaptation is the importance of data and the challenges to making accurate, comprehensive, and trusted data easily accessible to all stakeholders. While the Enhanced Transparency Framework is the foundation for the UNFCC’s data collection and reporting, there is a rapidly growing array of public and private sector resources being devoted to data collection, sharing, and use, including artificial intelligence (AI)-enabled applications.

The power of data was vividly illustrated at COP28 in a presentation by former US Vice President Al Gore and Gavin McCormick, co-founder of the Climate TRACE coalition. They revealed how comprehensive data on sources of greenhouse gas (GHG) emissions can provide actionable insights into how to target emissions reductions more effectively. This global-scale monitoring system uses satellites and other remote sensing methods, combined with ground-truth measurements and AI, to provide an open and accessible global inventory of emissions.

The data from Climate TRACE also demonstrate the importance of space for providing critical climate-related data—the topic of a discussion at COP28 moderated by one of the authors. The panel was hosted in the Blue Zone by the World Green Economy Organization and titled “Space for Sustainability: Contribution of Space-Based Capabilities to Sustainability Research and Climate Science.” It featured Aarti Holla Maini, director of the UN Office of Outer Space Affairs; Salem Butti Salem Al Qubaisi, director general of the UAE Space Agency; Andrew Zolli, chief impact officer at Planet; and David Roth, director of international public policy at Amazon. This discussion made clear that whether looking inward at the Earth, outward at other planets and beyond, or providing global network connectivity, space should not be an afterthought and, instead, should be embedded into climate policy making.

These are just two of a multitude of conversations at COP28 on the importance of trusted and accessible data for the entire climate ecosystem. Some of the other data-related projects and resources discussed include:

• A partnership between UNFCCC and Microsoft to use AI and advanced data technology to track global carbon emissions and assess progress under the Paris Agreement.
• A partnership between the UAE Space Agency and Planet Labs to use satellite data to construct a loss and damage atlas to inform the Loss and Damage Fund first announced at COP27.
• A tool developed by Google to forecast life-threatening floods up to seven days in advance using publicly available data sources and AI.
• A centralized and open source private sector climate data repository co-developed by France and Bloomberg enabling investors and regulators to track and compare climate commitments for hundreds of companies.
• The full launch of the Methane Alert and Response System, a satellite detection and notification tool to accelerate data gathering and notification to countries of this potent GHG.
• The Global Renewals Watch, a longitudinal atlas observing solar and wind renewable resources on Earth and how they are growing to better inform the transition to clean energy.

A diverse set of data collection methods are important to accurately assess emissions across different sectors, but data sources also offer opportunities beyond tracking emissions. Data collection methods across different areas are crucial to our growing understanding of holistic impacts of climate change, including that of deforestation, biodiversity loss, and impact assessments of natural resources such as melting ice caps, oceans, and water systems. It is key to transparency in government and business commitments related to sustainability and to reveal “greenwashing.” To ensure a global benefit and ease of utility across data sets, it is important to underscore robust data and reporting standards. Data need to be trustworthy, accessible, and interoperable to ensure access and ultimately action. Standardized reporting can breathe transparency into a system mired with distrust, and it can facilitate global collaboration, allowing for an acceleration of insights and ideas on how to address climate change.

The effective use of climate-related data requires global collaboration and cross-sector engagement, even where geopolitical tensions hinder other bilateral activities. The democratization of data will be a requirement to ensure that data sets are not only available but also accessible in usable formats for those who need it the most across sectors and countries. The effort will require the involvement of governments, international organizations, the private sector, philanthropic foundations, and civil society. They must work together to build capacity for knowledge-sharing and facilitate the strategic deployment of resources necessary to optimize the use of cross-functional data. A multi-stakeholder approach is the best way to prioritize and implement the most effective and economical solutions.

As the negotiations for the global stocktake move closer to the finish line, it is important to highlight one thing everyone should agree on: Accessible and trusted data are the foundations for progress on decisive climate action and achieving a sustainable future.

—Lloyd Whitman is the senior director at the Atlantic Council’s GeoTech Center.

—Raul Brens Jr. is the deputy director and a senior fellow at the Atlantic Council’s GeoTech Center.

Note: Amazon is a sponsor of the Atlantic Council’s work at COP28.

Is carbon capture and storage a solution to emissions—or is it a ‘carbon bomb’?

By Lama El Hatow

To meet the Paris Agreement’s goal of limiting the global average temperature increase to 1.5 degrees Celsius, the world will need to cut fossil fuel production by an estimated 40 percent within this decade, according to the International Energy Agency. In an effort to reach the Paris Agreement goal, several countries—including Saudi Arabia, the United Arab Emirates, Canada, and the United States—have proposed the use of carbon capture and storage (CCS) technologies to abate carbon emissions from fossil fuels and heavy industry, and store them back in the ground, either offshore or on land. 

However, several groups have criticized the technology and its implications on the wider project of achieving climate goals. A report by the Center for International Environmental Law (CIEL), for example, states that the oceans are already plagued with ocean acidification and pollution from offshore oil and gas installations, and the seabed should hence not be turned into a storage site for carbon dioxide (CO2) waste. In addition, the CIEL report mentions that CCS projects have repeatedly fallen short of capture targets and encountered financial and technical hurdles, raising doubts about their feasibility and safety. Offshore CCS experience has been limited so far to only two projects in Norway, both of which encountered unpredicted problems, raising questions about the technology’s risks.  

Similarly, another report by Climate Analytics states that a reliance on CCS could be dangerous for the planet, since its impacts and ramifications are still not well known or studied. The report argues that for the world to achieve the Paris Agreement’s 1.5 degrees Celsius limit, a near-complete phaseout of fossil fuels is needed by the middle of the century. The Intergovernmental Panel on Climate Change, too, has stated that a fossil fuel phaseout is necessary to meet the 1.5 degrees Celsius limit target, but that a small amount of CCS can be utilized in this pathway with capture rates of 95 percent. The Climate Analytics report suggests, however, that if carbon capture rates only reach 50 percent rather than 95 percent, and upstream methane emissions are reduced to low levels, this outcome would pump 86 billion tons of greenhouse gas emissions into the atmosphere, equivalent to more than double the global CO2 emissions in 2023. The report calls this a “carbon bomb.”

Some scientists and climate experts have raised concerns that the use of CCS to abate fossil fuels would reduce pressure to completely phase them out, shifting the focus instead to “phasing down” their use. The concern is that, as a result of CCS, both emissions mitigation efforts and an energy transition to renewables would be slowed considerably, and that the technology would therefore in effect promote the expansion of oil and gas projects globally instead of limiting them. The Climate Analytics report, for example, states that CCS is “heavily promoted by the oil and gas industry to create the illusion we can keep expanding fossil fuels with dismal capture rates to count as climate action.” 

Here at COP28, as countries are reportedly discussing the wording of an “abated” versus “unabated” fossil fuel phaseout in the text, the consequences of allowing a technology with unknown risks to make its way into the calls for “climate action” remain a concern. 

—Lama El Hatow is a nonresident fellow with the empowerME Initiative at the Atlantic Council’s Rafik Hariri Center for the Middle East. She is also a professor and program coordinator at Johns Hopkins University in the Environmental Science and Policy and Energy, Policy, and Climate departments.

• Getting private capital off the sidelines for the Global South

• COP28 turns out the private sector to solve the climate crisis

• Ukraine’s path to victory and European integration is paved through war-insured decarbonization investments

• COP28 is different from every other COP. Here’s why.

• AI is generating a lot of attention at COP28—and predictions about the climate’s future

• See analysis from days eight and nine

Getting private capital off the sidelines for the Global South

By Racha Helwa and Hezha Barzani

Check out this untapped opportunity: Africa has 60 percent of the world’s best solar resources, but only 1 percent of installed solar capacity. That lack of commitment from the private sector is due to perceived and real investment risks, stemming from concerns about weaker institutions in these countries.

But for the world to meet its energy-transition objectives, the private sector must increase its investments fourfold, according to the Independent High-Level Expert Group on Climate Finance.

One mechanism available to help minimize those investment risks—whether real or not—is the global suite of multilateral development banks. These banks can take on this challenge by offering insurance or guarantees to investors, or through other means. But, as discussed in a GDA Connect event we hosted today, those de-risking instruments appear insufficient to many investors.

That’s why there’s so much chatter about sovereign wealth funds and green funds. They are equally crucial when it comes to attracting investments for renewables in Africa, parts of the Middle East, and other countries facing similar challenges. It could be argued that, out of the variety of funding initiatives and deals to take place here at COP28, the Alterra fund is the one most likely to have an immediate and significant impact on climate action.

At the GDA Connect event, UAE Minister of State for Foreign Trade Thani bin Ahmed Al Zeyoudi unpacked the new $30 billion climate-focused fund, highlighting that it aims to mobilize an additional $250 billion globally by 2030 and increase investment flows to the Global South. What’s important here is that the fund could radically alter the dynamics and pace of the energy transition in Africa and the Middle East, helping to sustain momentum over time.

But with much more financing needed—in the trillions, not the billions—it will take additional bold initiatives to push the energy transition in the Global South to where it needs to go.

—Racha Helwa is the director of the empowerME Initiative at the Atlantic Council’s Rafik Hariri Center for the Middle East.

—Hezha Barzani is an assistant director at the Atlantic Council’s empowerME Initiative.

COP28 turns out the private sector to solve the climate crisis

By Frederick Kempe

This entry is part of the “Inflection Points Today” newsletter. To receive more quick-hit insight on a world in transition, subscribe here.

There are different theories about how this city, the most populous in the United Arab Emirates, got its name. My favorite is that it came from an Arab proverb that says “Daba Dubai,” meaning, “They came with a lot of money.”

Dubai was established in the eighteenth century as a fishing village, where a good living could be made from trade and pearl diving. By the time the COP28 climate conference kicked off here, it had become one of the world’s richest cities, with the world’s tallest building and more five-star hotels than any city except London, the result of oil revenue, tourism, real estate, and sovereign investment.

Dubai was host to climate action over the past week, gathering almost one hundred thousand people from nearly two hundred countries. The public and private sectors drew closer than ever before to a consensus that addressing the perils of a warming planet was both a matter of urgency and business opportunity.

That does not fix the problem, but there is no solution without vast amounts of private-sector financing and investments in climate solutions from renewables to nuclear energy, and from decarbonization to green tech.

Many climate activists opposed opening the doors to industry, particularly those producing fossil fuels, but the result has been a flurry of unprecedented agreements that, if executed and sustained, have the potential for tens of billions of new dollars to address the climate crisis.

For example, there is the $700 million in loss and damage support for the Global South. There is also the $30 billion “Alterra” fund, launched by the United Arab Emirates—and with private-sector giants Blackrock, Brookfield, and TPG—whose aim is to generate $250 billion of capital by 2030 for climate investments in the Global South.

Some fifty oil and gas companies, including Saudi Aramco and twenty-nine national oil companies, agreed to reduce their emissions to zero by 2050 and to reduce methane emissions to zero by 2030. At other points of the convening, countries joined together in agreeing to triple renewables, also by 2030, and to triple emissions-free nuclear energy by 2050. Achieving both goals will require the participation of the private sector.

Negotiators are squabbling over the text of the final COP28 agreement. Politico reports that a draft it has seen has expanded to twenty-seven pages and includes five different options on how to manage disputes over “phasing down” or “phasing out” fossil fuels. The battle could get ugly before the conference closes Tuesday.

Whatever the outcome, veterans of the UN climate process believe this year’s sharply increased level of private-sector engagement could be the game changer to address challenges beyond the capacity of governments alone. Says Jorge Gastelumendi, a veteran of sixteen COPs who runs the Atlantic Council’s Adrienne Arsht-Rockefeller Foundation Resilience Center: “After twenty-eight COPs, we have finally seen the private sector arrive in the climate space with full force and commitment. Without them, we will not be able to solve the climate crisis.”

Ukraine’s path to victory and European integration is paved through war-insured decarbonization investments 

By Olga Khakova

Ukraine’s COP28 pavilion hosts sobering evidence that Russia’s full-scale invasion of the country has included an environmental assault on Ukraine’s nutrient-rich soil, interconnected watershed systems, and diverse wildlife, in addition to Russian forces’ attacks on civilians and their communities. But Ukraine’s COP28 pavilion is also a stage for showcasing the country’s resilience, innovation, and resolve to decarbonize, despite ongoing Russian attacks. Allies from around the world stopped by to demonstrate their support, including US climate envoy John Kerry and European Commissioner for Energy Kadri Simson. Victoria Hallum, New Zealand’s deputy secretary of multilateral and legal affairs, and Marco Vinicio Ochoa, Guatemala’s vice minister of natural resources and climate, also stopped by the site. Continued engagement from international partners will be critical to rebuilding the country and transforming its energy systems toward net-zero emissions. 

Ukraine is already making strides to cut carbon emissions and strengthen energy security, from local small-scale initiatives to record developments. One of the news-making announcements at the Ukrainian COP28 pavilion was the signing of a memorandum of understanding between DTEK, Ukraine’s biggest private energy company, and Vestas, a company with more than a hundred gigawatts of wind turbine installation and service under its belt. They agreed to expand the Mykolaiv wind farm in southern Ukraine into the biggest wind project in Eastern Europe. Cities across Ukraine are also doing their part to meet climate targets. In the North, Nizhyn (which was covered in a death blanket of Russian rockets at the onset of the Russia’s February 2022 invasion) is now installing photovoltaic cells and storage at local utilities and maternity wards, as well as ramping up heat pump integration ahead of the winter. 

But to reach momentum and scale, Ukraine will need war risk insurance for Ukrainian and foreign investors and project developers. Initial efforts are on the way through the World Bank’s Multilateral Investment Guarantee Agency; the US International Development Finance Corporation; and the European Bank for Reconstruction and Development; as well as national insurance solutions from Poland, Germany, and France for protecting exports and investments in Ukraine. However, a comprehensive war risk mechanism is missing for clean energy projects that could be accessible to global companies of all sizes seeking to invest in the transformation of Ukraine’s energy system. Such mechanisms could be partially funded through state guarantees combined with support by allied governments and bolstered by engagement from private sector insurance companies and reinsurance schemes. 

Ukraine is showcasing unwavering commitment to decarbonization even in the midst of war. Sufficient war risk insurance would unlock private sector investments in the clean energy economy. Moreover, these efforts will contribute to defeating Russia, to Ukraine’s economic development, and to closer integration with European energy systems.

—Olga Khakova is the deputy director for European energy security at the Atlantic Council’s Global Energy Center.

COP28 is different from every other COP. Here’s why.

By David L. Goldwyn 

After twenty-eight official gatherings, the Conference of the Parties to the UN Framework Convention on Climate Change has evolved to the Conference of the Partners. Whatever the result of the final communique, the more lasting contributions will come from what is happening outside the tent. The real tests of this COP boiled down to a handful of crux issues: whether meaningful reductions in methane emissions would be accomplished, whether real money would be committed to promote the energy transition in the Global South, and whether credible pathways to net-zero emissions would be charted given the dismal results of the global stocktake. The Emirati leadership of COP28 has largely met this test. 

First, the Oil and Gas Decarbonization Charter (OGDC) has done what governments could not: gotten 40 percent of global oil production committed to measurement and verification of their greenhouse gas emissions and near-zeroing of methane emissions, complete with public reporting and transparency guarantees. While the OGDC has not really deepened the commitments of the international oil companies that have signed on, it has greatly broadened these commitments to many more companies, especially national oil companies. If the OGDC proves a transformative effort, those companies that do not participate will miss out on the opportunity to have their environmental, social, and governance qualifications significantly improved. 

Second, the announcement of the United Arab Emirates’ Alterra Fund commits thirty billion dollars to hard-to-finance projects in the Global South. This is nowhere close to closing the universally acknowledged climate finance gap between the needs of developing countries and emerging markets to meet their climate goals and the current financing for these needs. Theoretically, the Alterra Fund could spur as much as $250 billion in investments by 2030 to close this gap—a force multiplier by any definition. Moreover, these funds are likely to be more flexible and credible than the commitments of governments and some other private institutions thus far, as well as more effective than the sclerotic Global Environment Fund. 

But the greatest legacy accomplishment may be to transform the COP process itself. For years, COPs have been caught within unrealistic and polarized debates, such as how fast net-zero emissions can be achieved, how fast renewables can be scaled up, and what role (if any) fossil fuels should play in a decarbonizing world. It seems that COP28 has, for the first time, brought a wide breadth of fuels and technology types to front-and-center roles: nuclear energy, various “colors” of hydrogen, carbon sequestration and carbon removal (as well as more ambitious renewables pledges). Even US climate envoy John Kerry is speaking positively for the first time about the need for carbon management—strongly implying that governments are recognizing that all of these strategies will play a role in reaching net-zero emissions. 

While some stakeholders will be understandably skeptical of this “all of the above—and more” approach, it is a welcome recognition of the heterogenous pathways most countries (especially emerging economies) will take to reach net-zero emissions. This historic presence of diverse investors, technology companies, and even oil and gas companies that will develop and deploy these tools is what makes this (and hopefully future COPs) a gathering for partners, not just a gathering for parties. All of this, to be sure, is just a first step—but it is a hopeful one.

—David L. Goldwyn served as special envoy for international energy under President Barack Obama and assistant secretary of energy for international relations under President Bill Clinton. He is chair of the Atlantic Council’s Energy Advisory Group and a nonresident senior fellow with the Council’s Global Energy Center.

AI is generating a lot of attention at COP28—and predictions about the climate’s future

By Lama El Hatow

Here on the ground, there’s been a lot of chatter about the role technology, including artificial intelligence (AI), plays in the climate crisis. One event at the Technology for Innovation Hub highlighted how 4 percent of global emissions come from the tech industry, which can be attributed mostly to data centers and devices (such as smartphones and computers). For countries to meet climate goals, tech leaders will need to find efficient ways to reduce these emissions.

But tech can also be used in various applications to assist in solving the climate crisis. AI could be especially useful, for example, for monitoring irrigation, offering insights into how to conserve water. AI could also help map the ocean environment and aquatic ecosystems to assess how warming seas are impacting aquatic life. 

There’s more: For example, a new chatbot called ChatNetZero can help determine whether decarbonization plans designed by corporations, governments, and other institutions are credible. Scientists have been calling for sustainability reporting and corporate transparency in climate data, which often has been met with opposition due to claims of privacy and security concerns—AI may offer a way to satisfy the needs for transparency and security. Google’s DeepMind, an AI research lab, has recently uncovered 380,000 new stable materials, which have the potential to be used to power electric-vehicle batteries, superconductors, and supercomputers. 

AI, with the help of data from sensors, can also help cities predict water leakages in city distribution networks in cities to avoid water losses, which account for an average of 20 percent of water losses globally in the networks. 

AI, with its predictive capabilities, could be a resourceful tool in fighting climate change. But the question is how to get it to everyone. As participants have been able to glean at the Technology for Innovation Hub, organized by the COP28 Presidency, there is an urgent need to strengthen the Global South’s climate-tech ecosystems, democratize access to knowledge and capacity building, and spur climate-tech innovation. There is hope: For example, showcased at the Hub, four Palestinian startups have overcome hurdles, such as lack of access to funding and support systems, even under the dire conditions of war.

—Lama El Hatow is a nonresident fellow with the empowerME Initiative at the Atlantic Council’s Rafik Hariri Center for the Middle East. She is also a professor and program coordinator at Johns Hopkins University in the Environmental Science and Policy and Energy, Policy, and Climate departments.

• What the Global South needs for a just energy transition

• The White House’s Amos Hochstein on ensuring energy security amid global crises

• Global consensus on climate action is harder amid geopolitical strife

• Faith at COP, or faith in COP?

• City-led solutions have power—but they need funding

• Fusion is the future (these energy experts mean it this time)

• See day seven analysis

What the Global South needs for a just energy transition

By Katherine Walla

Achieving a just energy transition for the Global South may require a complete reversal in the way the world has operated for centuries.

According to Caribbean Development Bank President Hyginus Leon, who spoke at the Atlantic Council’s Global Energy Forum in Dubai on Thursday, the Global North has long benefitted from being the destination for flows of goods, money, and people from the south. “Now,” he explained, “you need a reversal” to “generate equity” and “allow the Global South to grow.”

Herbert Krapa, Ghana’s deputy minister of energy, explained that despite African countries being the source of both fossil fuels and vast critical mineral deposits—both crucial for meeting energy demand—the continent hasn’t been able to leverage them for its own development. “A just transition,” he explained, will require “taking advantage of these resources.”

But for the sake of the climate, he added, it will also require “significant financing” for renewable energy.

Read more highlights from this discussion

New Atlanticist

Dec 8, 2023

What the Global South needs for a just energy transition

By Katherine Walla

Achieving a just energy transition for the Global South may require a complete reversal in the way the world has operated for centuries.

Africa Climate Change & Climate Action

The White House’s Amos Hochstein on ensuring energy security amid global crises

By Daniel Hojnacki

Energy security is “not just something we talk about in the context of Russia and Europe on gas,” said Amos Hochstein, senior advisor to the US president for energy and investment, on Thursday. Speaking at the Atlantic Council’s Global Energy Forum in Dubai, he explained that the priority of energy security “has to be the same when it comes to EVs [electric vehicles], lithium, solar panels, and wind turbines.”

Hochstein, who was formerly the US assistant secretary of state for energy resources, discussed the United States’ vision for the future of energy security, the importance of building supply chain resilience as part of the energy transition, and the path forward for regional integration in the Middle East.

Atlantic Council CEO and President Frederick Kempe asked Hochstein whether he thought the United Nations climate change conference known as COP28 in Dubai was divisive or inclusive for its large number of participants, including members of the oil and gas industries. “It’s okay to have disagreements,” Hochstein said. “I don’t think that we should expect that if somebody came here and didn’t agree, then that’s a failure. I think it’s a success that we’re having a conversation.”

Read more highlights from this discussion

New Atlanticist

Dec 7, 2023

The White House’s Amos Hochstein on ensuring energy security amid global crises

By Daniel Hojnacki

At the Atlantic Council Global Energy Forum in Dubai, Hochstein discussed the United States’ vision for the future of energy security.

Economy & Business Resilience & Society

Global consensus on climate action is harder amid geopolitical strife

By William Tobin

 At COP28, hundreds of countries have gathered to work together to address the climate crisis. Seeing them, here on the ground, one might momentarily forget about much of today’s geopolitical friction and global fragmentation.

But for the sake of the planet and humanity, we must not forget that reality: Meaningful progress on climate goals will only be feasible by accounting for our global context and important issues such as economic and national security.

To achieve the financial infrastructure, investment environment, and supply-chain resilience required to achieve net-zero emissions—all hard to come by with geopolitical friction—it will be important to quickly and widely deploy the full suite of decarbonization technologies that are available: from solar and wind to carbon capture, utilization, and storage. That was a big takeaway from the second day of our Global Energy Forum in Dubai today. On that stage, the White House’s Amos Hochstein argued that such a vast deployment will require both cooperation and economic competition—the latter achieved by better trade systems—ultimately lowering prices and fostering resilience.

There’s more to the context that must be considered, too. High interest rates and persistent inflation around the world are creating headwinds, slowing the deployment of (capital-intensive) clean energy tools. As financial experts and leaders from the Global South explained today at the Forum, counteracting those headwinds—and expanding access to affordable and reliable energy—will require more climate finance.  

There is reason for optimism. Every COP is rightly branded as a moment with existential consequences, and COP28 was widely anticipated as the last best chance for action in key areas such as reducing methane emissions, spurring political momentum for the deployment of carbon-management technologies, improving energy finance, and more. There has been progress across these areas, such as the UAE’s launch of a thirty-billion-dollar fund (which aims to, in part, incentivize further investment into the Global South) or through the launch of the Oil and Gas Decarbonization Charter, which has significant potential for emissions reduction (equal to that of the global aviation sector), but does not address emissions from fossil fuel end use.

With war in Ukraine, the Middle East, and Sudan, and with tense relations between countries such as the United States and China, it is clear that consensus among the 198 parties at COP will be elusive. Against this frayed backdrop, the urgency to employ inclusive, science-based climate solutions is higher than ever.

—William Tobin is an assistant director at the Atlantic Council Global Energy Center, where he focuses on international energy and climate policy.

Faith at COP, or faith in COP?

By Lama El Hatow

For the first time ever, the COP presidency launched a Faith Pavilion this year. This decision signals the responsibility of religious leaders to promote efforts to care for the environment through their faiths. Although absent from COP28 for health reasons, Pope Francis helped set the tone for the Faith Pavilion in a message inaugurating it, stating that “climate change is a religious problem.” Additionally, representatives from various faiths produced the “Interfaith Statement for COP28,” in November, which expressed their shared concern over escalating climate impacts, as well as a joint commitment to address the crisis.

The Faith Pavilion aims to bring together religious leaders, officials, and scientists to discuss the role of faith communities and religious institutions in addressing the climate crisis. Several side events in the Faith Pavilion have demonstrated how various religions, including Islam, Christianity, and Judaism, enforce the notion of being “stewards of the earth.” Other panels looking into faith-based communities globally, including into indigenous communities, spoke about the spiritual connections to nature as humans’ teacher, and humans as nature’s protector. These panels also expressed the idea that nature should have a voice, and that including nature as a stakeholder with legal and legitimate claims is imperative for equity.

The application of these beliefs can have practical consequences; several countries and their lower courts have passed laws ascribing legal rights to nature or individual lands and bodies of water, including Mexico, New Zealand, and India. Ecuador enshrined the rights of nature, or Pachamama (a goddess worshipped by indigenous peoples of the Andes) in its constitution. Other countries are calling for this to be done internationally. Giving nature legal rights internationally would open greater possibilities for holding actors responsible for devastating the environment through pollution from fossil fuels and suing perpetrators for ecocide and crimes against nature.

Religious leaders have also weighed in on some of the most important issues in ongoing climate negotiations. For instance, a group of Catholic nongovernmental organizations came together to create a joint statement calling on leaders of all faiths across the world to show their support for action on loss and damage. The statement stressed the moral case for action on loss damage, drawing on church teaching, scriptures, and ancient wisdom.

This first-ever inclusion of faith at COP in this way is a positive step toward inclusion of all impacted communities and helps provide a voice to the environment through faith and through the communities that aim to preserve it. However, one must pose the question: Have people turned to faith to save them, as they lose faith in the COP process and their governments to do so?

—Lama El Hatow is a nonresident fellow with the empowerME Initiative at the Atlantic Council’s Rafik Hariri Center for the Middle East. She is also a professor and program coordinator at Johns Hopkins University in the Environmental Science and Policy and Energy, Policy, and Climate departments.

City-led solutions have power—but they need funding

By Katherine Walla

Over the course of the first days of COP28, the Local Climate Action Summit took place and the leaders approved plans to operationalize the loss and damage fund—including a commitment to allocate some of the resources to subnational governments.

Those two events are exciting for cities; but they “will never be able to effectively tackle climate change without proper access to finance,” argued Mauricio Rodas, senior advisor for city diplomacy and heat at the Atlantic Council’s Adrienne Arsht-Rockefeller Foundation Resilience Center and former mayor of Quito, Ecuador.

“Now, we need to make sure that cities will be participating in the discussions and decisions about how to make the loss and damage fund operational,” Rodas said.

Get up to speed on the role of mayors and city leaders

—Katherine Walla is the associate director of editorial at the Atlantic Council.

Fusion is the future (these energy experts mean it this time)

By Frederick Kempe

This entry is part of the “Inflection Points Today” newsletter. To receive more quick-hit insight on a world in transition, subscribe here.

Charles de Gaulle is reported to have wryly said, “Brazil is the country of the future and always will be.” Energy tech geeks have long said the same about fusion—a miraculously clean and safe potential energy source whose breakthrough was always an unchanged thirty years in the future.

But here at the eighth annual Atlantic Council Global Energy Forum (at COP28 in Dubai this year), I witnessed that longstanding claim change in real time as John Kerry, the US special presidential envoy for climate, declared that fusion’s time had come, when the dangerously warming world needs it most.

He announced what he called a US International Engagement Plan for Fusion Energy, which he said would involve thirty-five nations and would focus on research and development, the supply chain and future marketplace, regulation, workforce issues, and public engagement.

“There is potential in fusion to revolutionize our world,” Kerry said, adding, “We are edging ever closer to a fusion-powered reality.” Though no one was willing to set an exact time frame for that, the panel of experts that followed Kerry’s remarks shared his optimism that the time for “the holy grail” of clean energy—as Commonwealth Fusion Systems CEO Bob Mumgaard called it—was growing closer.

As I understand it, fusion (the melding of two or more atomic nuclei to create energy) powers the sun and other stars, so the theory is that earthly scientists and investors ought to be able to replicate that with heat, pressure, lasers, and magnets, producing massive energy. “We are really entering a new era,” said Costas Samaras, who champions this work in the Biden White House; according to him, the private sector has spent six billion dollars trying to take fusion from the lab to the world.

One former fusion skeptic, former US Secretary of Energy Ernest Moniz, told the Global Energy Forum that he has been “blown away by the progress.” At the very least, he said smiling, “I believe the word ‘fusion’ was pronounced from a stage at COP for the first time.”

—Frederick Kempe is the president and chief executive officer of the Atlantic Council.

• Why COP28 is right to prioritize global methane and flaring reduction

• Climate change and national security can’t be disentangled

• Empowering women leaders can open a gateway to cooling solutions

• The loss and damage fund is a step forward, but far short of what climate justice demands

• John Kerry unveils a ‘critical’ new US strategy to expand fusion energy

• How countries are gearing up to cool the planet down

• The declaration on climate-smart agriculture is a crucial—but underfunded—step forward

• John Kerry unveils a ‘critical’ new US strategy to expand fusion energy

• See day six analysis

Why COP28 is right to prioritize global methane and flaring reduction

By William Tobin

COP28 has yielded major announcements on lowering methane emissions, particularly from the oil and gas sector. The attention placed on methane at this COP is prudent, because methane is a far more potent greenhouse gas than carbon dioxide, and abating it is cost-effective with current technologies and business models. There is a clear pathway and a necessity to take action now.

Listen below and here for more on methane, then read this recently published report.

—William Tobin is an assistant director at the Atlantic Council Global Energy Center, where he focuses on international energy and climate policy.

Climate change and national security can’t be disentangled

By Jonathan Panikoff

It was fitting that both COP27 last year—and now COP28—were hosted in the Middle East. The region is likely to be hit harder by climate change and its impacts than potentially any other across the world. Since 2000, on average, Middle East temperatures have risen by 1.5 degrees Celsius, twice the global increase of 0.7 degrees Celsius. And given the region’s initially hotter and drier climate, in parallel with dwindling water access and rising sea levels, that rise in temperature reflects that the mean global temperature increase of 1.5 degrees Celsius that COP has long highlighted and is fighting to avoid has already hit the Middle East.

Threats to security in the Middle East are often thought of first in the context of Iran or terrorists such as Hamas, Hezbollah, or Shia groups in Iraq and Syria. That is unlikely to change, yet climate change is also coming into the spotlight as a significant.

On Monday and Tuesday, the Atlantic Council’s Scowcroft Middle East Security Initiative joined with Abu Dhabi-based Trends Research and Advisory for our third annual conference, but this iteration was unique. Held in the Green Zone of COP28, this year’s conference was entitled “Sustainable Security: The Soft and Hard Implications of Climate.” The resounding theme that panelists kept coming back to was the fundamental link between climate and the future of US and allies’ national security.

Over the two days of panels and insights from keynote speakers, the impact of global warming on the military, war fighting, operational capabilities, and broader strategic national security was abundant. Sessions that started broad, by addressing political and strategic issues challenging international climate action, and those that delved into the future of climate-financing and the energy transition, all led back to the same result: a need to fundamentally recognize climate change as a broad strategic threat, not just an environmental one.

Changes in weather patterns that are creating stronger, more frequent, and more dangerous hurricanes and storms are a threat to both facilities and operations in the Middle East. The erosion of coastlines is a threat to both US and allied naval facilities. And climate change could drive changes to great power competition with China as Indo-Pacific tensions rise over potentially climate-related changes to fishing stocks, river basins shared by China and a variety of southeast Asian countries, and the requirement for greater humanitarian assistance due to increasing numbers of weather-related natural disasters; assistance that will be fiercely competed for and required by Middle East states as well.

As a result, while US national security is directly impacted by climate change, so too is the economic and national security of Middle East allies who will have to confront rising temperatures and, by extension, dwindling resources, such as storms and drought that create unstable food supply chains, something that Middle East leaders are quite cognizant from recent history can lead to political consequences and even revolutions.

The insights from our conference broadened our understanding of the impact of climate change on national security, but also enabled us to contribute to strengthening efforts aimed at elevating for policymakers the need for sustainable security.

—Jonathan Panikoff is the director of the Scowcroft Middle East Security Initiative at the Atlantic Council’s Middle East Program. 

Empowering women leaders can open a gateway to cooling solutions

By Katherine Walla

As countries and cities hurriedly search for cooling solutions to protect their populations amid extreme heat, North Dhaka, Bangladesh, is employing a tree planting program in neighborhoods of predominantly informal settlements.

Bushra Afreen, chief heat officer of North Dhaka at the Adrienne Arsht-Rockefeller Foundation Resilience Center, explained that these areas are densely populated, often hosting climate migrants. “These people are already very vulnerable; they have limited resources [and] limited access to shade, income, and trees.”

“Women,” Afreen continued, “are the most vulnerable in these communities; they are on the frontlines of their families when facing extreme heat because they are taking care of everybody else and then themselves.”

“So, I wanted to make them the front line of the solution,” Afreen said. North Dhaka worked with women, she explained, to decide which trees to plant and where to plant them—and to find ways to motivate the community to grow and protect the trees.”

“In doing so,” she said, “we opened a gateway to more cooling solutions and more strategies that will eventually be implemented.”

Dive into how North Dhaka is cooling its community.

—Katherine Walla is the associate director of editorial at the Atlantic Council.

The loss and damage fund is a step forward, but far short of what climate justice demands

By Lama El Hatow

On the first day of COP28, the parties agreed to operationalize a loss and damage fund, with initial pledged contributions reaching $725 million as of December 5. While the decision to operationalize the fund was historic, it remains to be seen whether this plan, hurriedly agreed to on the first day of the conference, will provide the necessary support to the affected communities it is meant to help. There is much to be done going forward, including holding polluters accountable and establishing a mechanism for reliable long-term funding that meets the scale of loss and damage that must be addressed.

Much of the language in the decision was watered down by developed countries to escape their responsibility for historical emissions. Going forward, it is essential that polluters be held accountable. There were no references to equity or to Common but Differentiated Responsibilities in the decision. The decision also places developed countries—those most responsible for the emissions changing the climate—in control of almost 50 percent of the fund’s board. Moreover, the pledges for developed countries’ contributions to the fund are “voluntary” rather than obligatory, as the fund only “urges” developed countries to contribute. This raises serious questions about how the fund will be replenished once the initial contributions are disbursed. 

Even if developed countries meet their voluntary commitments to the fund, however, it must be noted that the millions pledged for loss and damage so far are a mere drop in the bucket. Billions are needed globally to ensure climate justice to vulnerable communities facing the most severe loss and damage. A report from the International Institute for Environment and Development estimates that up to $580 billion will be needed to help countries facing extreme weather by 2030. Developing countries have argued that the new fund should provide at least one hundred billion dollars annually by 2030. To raise funds more commensurate with the scale of the problem and help ensure this financing can be replenished, Barbados Prime Minister Mia Mottley proposed taxing polluting industries as a source for the fund. She has estimated that her proposed tax rates would provide two hundred billion dollars from oil and gas profits, seventy billion dollars from the value of international shipping, and forty to billion dollars from the international air travel industry annually for the fund. She has also argued that a financial transaction tax could help build resilience in frontline communities.

The fund’s operationalization is a step toward progress, but still falls short of promoting climate justice and placing human rights at the forefront of the climate debate. 

—Lama El Hatow is a nonresident fellow with the empowerME Initiative at the Atlantic Council’s Rafik Hariri Center for the Middle East. She is also a professor and program coordinator at Johns Hopkins University in the Environmental Science and Policy and Energy, Policy, and Climate departments.

John Kerry unveils a ‘critical’ new US strategy to expand fusion energy

By Katherine Walla

US Special Presidential Envoy for Climate John Kerry on Tuesday announced a new strategy for international cooperation on the development of nuclear fusion, which he said would be—alongside other energy sources, such as wind, solar, and nuclear fission—”a critical piece of our energy future.” The strategy, Kerry explained at the Atlantic Council’s Global Energy Forum at COP28, focuses on research and development, supply-chain improvements, regulation, workforce development, and education.

If “all of our countries are threatened, and they are, [and if] all life is threatened, and it is, then we need to pull ourselves together with every strength we have,” Kerry said. “We cannot realize this grand ambition—perhaps not at all, but certainly not at the pace we need to—doing it alone.”

The need for alternative fuels such as fusion is apparent because “science clearly tells us, without any question whatsoever, that the cause of this crisis… [is] emissions. It’s the way we burn fossil fuels,” Kerry said.

Kerry noted that “we’ve had a little debate in the last few days about what the evidence shows or doesn’t show,” a reference to controversies during the United Nations Climate Change Conference in Dubai over what role oil and gas will play in the global energy future.

“We have two options,” Kerry explained. “Either capture the emissions or don’t burn [fossil fuels].”

Kerry explained that the evidence of warming across the planet makes it “clear” that the world needs to “move faster” to limit global temperature rise. “We need to figure out what we’re going to do at a critical pace,” Kerry warned.

Read more highlights from Kerry’s remarks

New Atlanticist

Dec 6, 2023

John Kerry unveils a ‘critical’ new US strategy to expand fusion energy

By Katherine Walla

“We need to pull ourselves together with every strength we have,” Kerry said on the first day of the Global Energy Forum.

Africa Climate Change & Climate Action

How countries are gearing up to cool the planet down

By Katherine Walla

On Tuesday, sixty-three countries signed a pledge to raise the level of ambition on cooling, as the planet’s temperature continues to rise, and heatwaves become more frequent.

The pledge commits countries to cutting cooling-related emissions and improving access to cooling for people across the globe.

“Cooling is not a luxury. It is a life-saving necessity,” explained Owen Gow, associate director of the Extreme Heat Initiative at the Atlantic Council’s Adrienne Arsht-Rockefeller Foundation Resilience Center. 

When expanding access to cooling, countries will need to ensure that it is “sustainable and efficient cooling,” Gow added. “If we increase access to cooling, we need to make sure that it doesn’t accelerate climate change at the same time.”

Eleni Myrivili, global chief heat officer with UN-Habitat and Arsht-Rock, noted that the pledge incorporates subnational governments as well “to make sure the type of cooling they do in their cities is sustainable and efficient.”

Get up to speed on the Global Cooling Pledge.

—Katherine Walla is the associate director of editorial at the Atlantic Council. 

The declaration on climate-smart agriculture is a crucial—but underfunded—step forward

By Raul Brens Jr.

While everyone was fixed on the loss and damage breakthrough, few headlines mentioned a global commitment, signed just a day later, to address global food systems and their impact on the climate. Over 130 world leaders signed the COP28 UAE Declaration on Sustainable Agriculture, Resilient Food Systems, and Climate Action; the leaders represent countries that, altogether, are responsible for 76 percent of global food systems emissions. Also announced: a $2.5 billion fund to support food security while the climate-change fight continues.

That there isn’t more attention on this declaration is surprising, considering that the agri-food system counts for a third of all human-induced greenhouse gas emissions. But it is worth noting: The declaration is only the latest sign that the topic of food systems, and the role they play in the climate crisis, is becoming more and more prominent at COPs.

In addition, the declaration has managed to unite countries despite geopolitical tensions today, showcasing global solidarity around the health of the planet and the wellbeing of future generations. For example, the United States and China are signatories—however, some key significant emitters, such as India, have not signed on, indicating that challenges remain in ensuring broader alignment.

Succeeding in the commitment to future-proof the food system will require countries to focus on climate-smart agriculture techniques that improve crop and land resilience and reduce greenhouse gas emissions from farming—all while increasing agricultural output. Climate-smart agriculture harnesses technologies ranging from Earth observation satellite systems (to monitor crop conditions) to genome editing tools that help develop resilient crop varieties.

Deploying these climate-smart technologies raises challenges around access and cost, especially for low- and middle-income countries. The signatories must work together to ensure that technology is shared and developed fairly and collaboratively. It is especially important that developed and developing nations join in this work, to achieve truly sustainable and resilient global food systems.

But the declaration may need to reassess one thing: its funding. While $2.5 billion is a noteworthy start, it doesn’t accurately match the scale of the challenge the world faces in reforming global food systems—especially if the sum winds up being spread over several years. In comparison, a United States and United Arab Emirates joint initiative called Agriculture Innovation Mission for Climate (AIM for Climate) has mobilized over eight billion dollars in investment across fifty-five partner countries.

The declaration represents a crucial step forward in global climate efforts. However, the journey ahead demands sustained commitments and increasing financial investment to truly realize the goals of the Paris Agreement.

—Raul Brens Jr. is the deputy director and a senior fellow at the Atlantic Council’s GeoTech Center.

• A familiar concern—but with new urgency

• See day five analysis

A familiar concern—but with new urgency

By Jorge Gastelumendi

COP28, with its many pledges and announcements, certainly has plenty that is new. But there’s also a sentiment here on the ground that is rather familiar: Concern about the fact that public finance is not even close to covering worldwide needs for adaptation funding.

Reaching the levels of financing necessary to do so will require “unlocking global capital markets.” Putting all those technical terms aside, what it really comes down to is having policies that support the development of adaptation and resilience markets and having policymakers and private finance leaders that talk to each other. Bringing together these actors will drive transformative collaboration.

Yesterday, with our partners, the Adrienne Arsht–Rockefeller Foundation Resilience Center launched the first-ever Call for Collaboration, calling upon policymakers and the banking, investment, and insurance sectors to work together to improve the investment environment and, in so doing, mobilize more private finance. It is backed by five governments from developed and developing countries; on top of that, leaders and thinkers from private finance, academia, and over thirty governments helped shape this call.

Like many issues related to the changing climate, adaptation and resilience funding requires all hands on deck. Fortunately, with all the momentum on this issue that I’ve seen here in Dubai, there has never been a better moment to collaborate and advance urgent action on this front.

And here’s a sneak peek at next year’s COP: We will mobilize even more players in the climate finance space—private finance actors, regulators, policymakers, and philanthropic organizations (who launched a Call to Action at this COP for accelerating climate adaptation). Their participation will be needed to create public policies that support adaptation finance and set much-needed standards.

—Jorge Gastelumendi is the interim director of the Atlantic Council’s Adrienne Arsht–Rockefeller Foundation Resilience Center.

Get up to speed on the Call for Collaboration

• Trade is starting to have its say in the COP process—at last

• A big idea to address the biggest killer of the climate crisis

• Solar is surprisingly out of the spotlight at COP28, as Saudi Arabia and China show

• See day four analysis

Trade is starting to have its say in the COP process—at last

By Reed Blakemore

If you want a “watch this space” recommendation coming out of COP28, look no further than Monday’s theme, “Trade Day”—the first time a COP thematic day has been devoted to the role of trade in the energy transition. Smatterings of urgently needed conversations on critical minerals and decarbonizing trade value chains have begun to find their place this year.

These “operating system” features of a Paris-aligned world are going to demand more attention. Yet outside of these issues being highlighted through panels and discussion (an important start), the inaugural Trade Day yielded few real action items.

It’s still the early days of the conference, but the trade space must be front and center, as World Trade Organization President Ngozi Okonjo-Iweala said on Saturday at COP28. Global trade is directly responsible for 20 to 30 percent of global CO2 emissions (strictly as a reflection of international freight), while embodied carbon in widely traded goods (specifically energy-intensive trade-exposed goods) remains a huge challenge for industry to curb. Reaching climate targets requires the development of a new resource base to build clean energy technologies, demanding that markets in which those resources are traded mature. International carbon markets, meanwhile, remain a long-awaited, but unfulfilled ambition of the Paris Agreement.

The challenge, however, is that the economic opportunities of the energy transition have overlaid a competitiveness agenda on top of the climate action imperative. Many in the United States and the European Union are wary of what China’s dominance in mineral supply chains means for economic and national security in a net-zero world. In the absence of global markets for carbon, countries are seeing carbon border adjustments (or similar mechanisms) as ways to nominally support low-carbon industries, but in doing so, they are throwing up barriers to trade. The opportunities inherent in the “global green economy” are creating a race for countries to lead in clean tech industries to seize both emerging labor and export markets, bringing an increasingly protectionist hue to energy policy.

Perhaps most critical is whether the lack of attention to these issues is complicating efforts of a “just and equitable energy transition.” Concerns that Europe’s Carbon Border Adjustment Mechanism, and the proliferation of other similar measures, might undercut the economic development of the Global South where many energy-intensive trade-exposed goods are manufactured, but decarbonization is still very much underway. Many mineral-rich nations are eager to shed the “resource-client” relationship with the Global North, yet they are concerned (if not frustrated) with the possibility that they will end up exporting cheap ores that are transformed and re-imported as expensive renewable energy technologies.

Simply put, whether the energy system is being transformed or built anew, geoeconomics matter. And even if it doesn’t take center stage at COPs to come, trade will have its say in the climate future.

—Reed Blakemore is director for research and programs at the Atlantic Council Global Energy Center, where he is responsible for the center’s research, strategy, and program development.

On Tuesday, December 5, at 2:00 pm in Dubai (GMT+4) (5:00 am ET) check out “Remaking trade for a clean energy future,” a discussion on this topic live from the Green Zone at COP28.

A big idea to address the biggest killer of the climate crisis

By Frederick Kempe

This entry is part of the “Inflection Points Today” newsletter. To receive more quick-hit insight on a world in transition, subscribe here.

Where former US Secretary of State Hillary Rodham Clinton goes in Dubai this week, she draws a crowd.

People from all corners of the world packed the room, and it was standing room only at our COP28 Resilience Hub, where she held court as the Atlantic Council’s Adrienne Arsht-Rockefeller Foundation Resilience Center (Arsht-Rock) ambassador for heat, health, and gender.

“Extreme heat has to be viewed as one of the most dangerous results of the changing climate,” she said, recounting a trip to India, where she saw the harm done to livelihoods, particularly those of women working outdoors as farmers, street vendors, waste collectors, and salt pan and construction workers. “This is not just a health issue,” Clinton warned. “It’s an economic issue, a social issue, [and] a political issue.”

Working with Clinton and with Reema Nanavaty, director of the nearly three-million-member Self-Employed Women’s Association, the Atlantic Council has been implementing a parametric insurance program as a part of Arsht-Rock’s Extreme Heat Protection Initiative. This program protects women working in India’s informal sector from having to make an impossible choice: pausing their work during heat waves (to protect their health) or continuing to work and earn money, while putting their wellbeing at risk.

What has been winning the headlines here so far at this twenty-eighth United Nations Climate Change Conference has been the announcement on the first day of a landmark, $400-milllion loss and damage fund, a mechanism that provides financial assistance to the countries most affected by, but often least responsible for, the climate crisis. There has also been media attention on the hydrocarbon companies that have come to this conference in greater numbers than ever before—many with concrete commitments and plans to reduce emissions. 

With over seventy thousand delegates and observers at COP28, actions that aim to improve lives—such as insurance programs to support workers in the informal economy, many of them women—deserve notice. For these workers especially, “their lives and livelihoods are at stake,” said Eleni Myrivili, the global chief heat officer for United Nations-Habitat and Arsht-Rock.

—Frederick Kempe is the president and chief executive officer of the Atlantic Council.

Solar is surprisingly out of the spotlight at COP28, as Saudi Arabia and China show

By Joseph Webster

Until recently a star at climate-focused conferences, solar energy is being upstaged at COP28 in Dubai by other decarbonizing technologies: namely, nuclear energy and methane abatement. Deploying more nuclear energy and cutting methane emissions will help reduce carbon emissions, but the world should not lose sight of solar’s transformative potential. The global glut of solar panels and the Middle East’s lack of solar deployment presents an enormous opportunity to quickly achieve huge climate benefits. While government leaders at COP28 pledged to triple the world’s renewable energy capacity by 2030, it will be very difficult to reach this target without Middle Eastern participation, especially from Saudi Arabia, the region’s largest economy. 

Saudi Arabia is arguably one of the world’s best places to build solar, given its abundant solar irradiance, deep financial reserves, and significant land mass. Yet the country has traditionally been a laggard at deploying the technology. 

Saudi Arabia generated only 0.8 terawatt hours of solar electricity in 2022, about as much as the US state of Iowa. Saudi Arabia will not even approach its modest 2023 renewables capacity target of 27.3 gigawatts (GW) (20 GW of solar photovoltaics and 7 GW of wind), according to S&P Global, as less than 3 GW of renewables capacity were operational in August 2023. 

The obstacles to Saudi solar deployment appear to be political, not technical. While deploying solar in the desert is not without challenges, including distance from demand centers, transmission siting, and dust storms, these obstacles have not prevented desert projects from taking shape across the world—including in China. Earlier this year, the first phase of a massive solar project in the Tengger Desert started generating power.

If Saudi Arabia turned to solar, the kingdom and the world could reap immense benefits. Solar farms tend to require little water after installation, especially compared to other resources; renewables don’t produce air pollutants; and some studies show that utility-scale solar in the desert can increase precipitation and vegetation coverage. Finally, Saudi Arabia’s failure to deploy solar harms its own economic interests, as it could allow fuel oil to be exported rather than burned for the domestic power market. Astonishingly, fuel oil accounted for 39 percent of Saudi Arabia’s power mix in 2021. At the Green Initiative Forum at COP28, the Saudi Minister of Energy identified carbon capture technology and renewables, apparently in that order, as the kingdom’s net-zero priorities.

There is some movement. For example, Saudi Arabia is launching more utility-scale solar and is in advanced talks to open a solar factory. Still, the kingdom’s solar ambitions remain very limited. The region’s dawdling pace of solar deployment comes at a huge cost—most of all for itself, but also for the world.

Even more surprising is that the lack of buzz around solar at COP28 extends to major solar producers. Despite its own dominant position in solar value chains, China doesn’t appear to be advertising its solar exports at COP28 in Dubai. China’s pavilion at COP features the China State Construction Engineering Corporation, which has weak ties to solar project development. The pavilion at COP doesn’t prominently showcase China’s solar suppliers, and so far, the author hasn’t seen Chinese solar companies represented (although the convening is very large).

—Joseph Webster is a senior fellow at the Atlantic Council’s Global Energy Center, where he leads the center’s efforts on Chinese energy security, offshore wind, and hydrogen.

• This is the biggest COP ever—for more reasons than one

• Fifty oil and gas companies just announced plans to cut methane emissions. Can they do it? 

• A plan to triple nuclear energy was just announced. Here’s what to know.

• Hillary Clinton, Reema Nanavaty, and Eleni Myrivili on gender-responsive solutions for extreme heat

• See day three analysis

This is the biggest COP ever—for more reasons than one

By Aubrey Hruby

On the fourth day of COP28, I can’t help but notice how big the convening has become. Over seventy thousand people (me included) have descended on Dubai for a week of meetings—official and unofficial—on climate and the future of finance. This is about a 40 percent increase from COP27 in Sharm el Sheikh, Egypt, and about an 80 percent increase from COP26 in Glasglow, Scotland. 

There’s some irony to the fact that so many people who gathered here to talk about global climate change and environmental damage arrived by plane (some even by private jet) and are now sitting in cars in heavy traffic and squinting through pollution in Dubai. On the ground, it has been suggested that countries—particularly big ones with large populations (and COP delegations)—should limit the number of representatives they bring so as to not overwhelm and disadvantage the smaller nations that cannot field such large teams. 

Another thing that is big about this COP: The United Arab Emirates’ (UAE) announcement yesterday of a thirty-billion-dollar fund that will invest in climate-resilient infrastructure projects with a focus on the Global South. This will likely help offset criticism the UAE received in the leadup to the convening for planning to use COP as a platform to discuss future oil deals. But, importantly, the new fund overshadows the smaller commitments made by developed countries to help developing countries address the loss and damage caused by climate disasters 

In addition, at this COP, the list of topics is bigger. For example, more than twenty countries committed to triple nuclear energy production, and discussions about the future of critical mineral supply chains are currently underway, highlighting the critical role that African countries play in ensuring that green-energy industries are more resilient and diversified globally. 

In global climate discussions, the issues of justice and hypocrisy are at the forefront as those countries that have emitted the least greenhouse gases historically—particularly African nations—are suffering the most from the carbon-intensive growth that fueled wealth accumulation in developed markets. Calls to completely phase out fossil fuels fail to recognize the economic and social realities of many developing countries that have a dual imperative: They must grow green while somehow simultaneously reducing poverty through job creation and increasing reliable access to electricity for hundreds of millions of people. It’s a complex challenge that requires respect, reframing, and massive resources.

—Aubrey Hruby is a nonresident senior fellow with the Atlantic Council’s Africa Center and leader of the Center’s work on climate and energy issues. 

Fifty oil and gas companies just announced plans to cut methane emissions. Can they do it? 

By William Tobin

At the opening of the COP28 conference, United Nations Framework Convention on Climate Change Executive Secretary Simon Stiell said this was the “most significant COP since Paris,” referring to COP21, where 196 parties signed a legally binding treaty to address climate change and keep global warming levels to below 2 degrees Celsius.  

In order to keep the vision of Paris alive and reach net-zero by the middle of the century, COP28 is being viewed by many here in Dubai as the absolute last opportunity available to tackle one of the most potent contributors to global warming: methane, particularly from the oil and gas sector.  

Methane is responsible for at least 30 percent of global warming in the past two hundred years, and perhaps more. Cutting methane emissions from all sectors—including oil and gas, agriculture, and waste—could avoid over 0.2 degrees Celsius of warming by 2050. This is because methane is a short-lived climate pollutant, meaning its shelf life in the atmosphere is rather brief, but its warming impact is more than eighty times that of carbon dioxide in a twenty-year time span.  

Thankfully, methane emissions from oil and gas can be brough to near-zero with available technologies and business models—in fact, around 40 percent of reductions can be achieved at no net cost. 

The opening weekend of COP28 presents a moment for celebration, as perhaps the most impactful initiative in years of pledges has been launched: the Oil and Gas Decarbonization Charter (OGDC).  

While the value of such a charter may be counterintuitive, remember that emissions from oil and gas operations account for 15 percent of all emissions—more than all emissions from cars globally, for example—roughly half of which is methane. The OGDC, through its fifty signatories, covers 40 percent of global oil production, offering a window to make substantial, tangible, and verifiable greenhouse gas emissions reductions. The OGDC commits signatories to end routine flaring (wasteful combustion of methane gas) and achieve near-zero upstream methane emissions by 2030. Achieving these emissions reductions from charter signatories would be approximately equivalent to zeroing out emissions from aviation worldwide. Furthermore, the OGDC signatories have committed to being transparent through monitoring, reporting, and independent verification of emissions.  

The OGDC is no less significant in the substance of its commitments, however, versus its reach. Critically, the group of fifty signatories includes twenty-nine national oil companies. These entities control more than half of global oil production and a higher proportion of methane emissions. Through signing this pledge, the national oil companies are articulating a desire to play a constructive role in emissions mitigation, several for the first time. Having these companies at the table is a significant expansion in ambition within the sector. It paves a way to constructive engagement and sharing of best practices to realize the goal of bringing methane emissions to near-zero, as is required to reach net-zero by the middle of the century.   

Achieving net-zero emissions will require the deployment of vast amounts of renewable and clean electricity generation, the electrification of end uses, reform of land use, rapid increase in carbon capture and removal, increases in energy efficiency, and much more. However, in the short term, slashing methane emissions from oil and gas is a highly constructive deliverable, and this announcement at COP28 has shown a reason to be optimistic. However, as is always the case with ambitious plans, implementation is what matters most.  

—William Tobin is an assistant director at the Atlantic Council Global Energy Center, where he focuses on international energy and climate policy. 

A plan to triple nuclear energy was just announced. Here’s what to know. 

By Jennifer T. Gordon

With energy demand projected to triple by 2050, the recent pledge at COP28 by the United States and more than twenty countries to triple nuclear energy is a welcome development in the fight against climate change. Although nuclear energy only accounts for 10 percent of global electricity generation, it provides 30 percent of global low-carbon electricity. The amount of nuclear energy generation will have to increase in order to meet increased energy demand through clean, baseload power. Looking beyond the grid, nuclear energy has a crucial role to play in decarbonizing so-called “hard-to-abate sectors”—areas such as hydrogen production, desalination, process heat, mining, and shipping—in which it is particularly difficult to reduce emissions. 

Furthermore, the significance of this announcement occurring at COP28 cannot be underestimated. Previous COP meetings have tended to leave nuclear energy on the sidelines, and an announcement of this magnitude in the early days of the world’s premier climate conference can be interpreted as recognition of nuclear energy’s tremendous decarbonization benefits. This international recognition could help gain support in various countries for technology-neutral policies that incentivize the use of zero-carbon energy, with nuclear energy continuing to be included in legislation such as the Inflation Reduction Act in the United States or the European Union’s Green Taxonomy. 

However, while the pledge to triple nuclear energy is a positive step, more needs to be done in order to deploy nuclear reactors globally and at scale. For example, the United States and like-minded countries will need to cooperate on financing to compete effectively against state-owned nuclear enterprises in Russia and China; regulatory collaboration is also key to minimizing time and costs. Ultimately, for the fight against climate change to succeed, more barriers to nuclear energy deployment must fall. 

—Jennifer T. Gordon is the director for the Nuclear Energy Policy Initiative at the Atlantic Council’s Global Energy Center. She was a co-director of the Atlantic Council Task Force on US Nuclear Energy Leadership, and she currently runs the Atlantic Council’s Women in Energy and Climate Fellowship.

Hillary Clinton, Reema Nanavaty, and Eleni Myrivili on gender-responsive solutions for extreme heat

By Daniel Hojnacki

“Extreme heat has to be viewed as one of the most dangerous results of the changing climate,” said former US Secretary of State Hillary Clinton on Sunday at a COP28 Resilience Hub discussion on the need for gender-responsive climate solutions to address extreme heat. The panel was hosted by the Atlantic Council’s Adrienne Arsht-Rockefeller Foundation Resilience Center (Arsht-Rock).

Clinton was joined by Reema Nanavaty, director of the Self-Employed Women’s Association (SEWA), a trade union promoting the rights of independently employed female workers in India. In February, the Clinton Global Initiative and SEWA, along with several other organizations, launched the Global Climate Resilience Fund to empower women to combat climate change and adapt to extreme heat. The panel was moderated by Eleni Myrivili, the global chief heat officer for United Nations-Habitat and Arsht-Rock.

Clinton said that as the world works to advance climate mitigation efforts, “we have to worry about what’s happening on the ground with so many people, in particular women.”

Read more highlights from this discussion

New Atlanticist

Dec 3, 2023

Hillary Clinton, Reema Nanavaty, and Eleni Myrivili on gender-responsive solutions for extreme heat

By Daniel Hojnacki

At an Atlantic Council event at COP28, the former US secretary of state discussed the importance of empowering women to develop innovations for extreme heat resilience.

Economy & Business Resilience & Society

• Africa’s priorities at COP28, from climate finance to a brand-new narrative

• A landmark thirty-billion-dollar fund for global climate solutions

• See day two analysis

Africa’s priorities at COP28, from climate finance to a brand-new narrative

By Africa Center experts

On the first day of the United Nations Climate Change Conference (also known as COP28) in Dubai, global leaders reached a deal on where to house and how to fund loss and damage costs for the countries most vulnerable to climate change. It’s an important development for African stakeholders, who are concerned about the escalating impact of climate change on the continent. As African heads of state and government wrote in their Nairobi Declaration—adopted at the Africa Climate Summit in September—the continent is warming faster than the rest of the world, despite it being responsible for a small fraction of global carbon emissions. These changes will gravely impact the continent’s economies and societies.

But will COP28 give Africa the attention it deserves on other climate needs? Our experts, some of whom are headed to Dubai, outline what is at stake for Africa.

Read our experts’ responses

AfricaSource

Dec 2, 2023

Africa’s priorities at COP28, from climate finance to a brand-new narrative

By the Africa Center

Our experts outline what is at stake for Africa at the UN Climate Change Conference in Dubai.

Africa Climate Change & Climate Action

A landmark thirty-billion-dollar fund for global climate solutions

By Mahmoud Abouelnaga

On Friday, COP28 host, the United Arab Emirates, launched a thirty-billion-dollar climate fund to bridge the climate finance gap globally and facilitate climate investment flows into the Global South. The new climate fund will aim to stimulate $250 billion by 2030.

This thirty-billion-dollar private investment fund, Alterra, is now the world’s largest private investment fund dedicated to addressing the climate crisis. For comparison, it took the United Nations’ Green Climate Fund (GCF) almost ten years to mobilize less funding through the initial resource mobilization in 2014, the first replenishment in 2019, and the second replenishment in 2023.

Alterra will be split into a large fund of twenty-five billion dollars that will deploy capital globally with the aim to accelerate the transition to a net-zero economy by scaling climate investments, and a smaller fund of five billion dollars that can remove barriers and incentivize investment flows into the Global South.

This announcement came after countries agreed on the operationalization of the loss and damage fund to help the adversely vulnerable developing countries cope with climate impacts. While the $420 million loss and damage pledges gave a good signal for progress, they are not commensurate with the scale of the costly climate disasters borne by poor countries. Unlike the loss and damage pledges, the new private investment commitments are proportional to the needed scale to address the climate crisis.

Going forward, the new climate fund will need a rigorous and transparent climate impact framework to ensure that these investments are deployed at the needed speed and scale to align with global climate targets. This framework should establish clear criteria for these investments (such as emissions reductions, impacts on local communities, deployment of large-scale projects, and the reducing of costs of innovative climate solutions) to align with global climate targets.

—Mahmoud Abouelnaga is a nonresident senior fellow at the GeoTech Center of the Atlantic Council and leads the carbon management portfolio at the Center for Climate and Energy Solutions (C2ES).

Note: This piece was edited to provide more detail on the author’s recommended framework.

• Why India could play a pivotal role as climate mediator

• Can climate leaders maintain the momentum?

• See day one analysis

Why India could play a pivotal role as climate mediator

By Rachel Rizzo and Théophile Pouget-Abadie

As Indian Prime Minister Narendra Modi prepared for a historic visit to Washington, DC this year, Apple CEO Tim Cook made a journey in the other direction: He flew to Mumbai to celebrate Apple’s twenty-five-year presence in the South Asian nation. “I really feel that India is at a tipping point,” Cook declared, joining the ranks of business leaders and economists who have spent the last three decades forecasting that the twenty-first century will belong to India.

If it’s true that this is the “Indian century,” it is not just because the country is now the most populous on Earth and on track to become the world’s largest economy; it is because India will play a central role in the global energy transition.

India’s success in this area will be measured by a few obvious targets: its ability to bring down emissions domestically, the example it sets for how other nations of the Global South can undergo their own successful energy transitions, and India’s ability to partner with other nations on climate solutions.

But there may be another just as important, but less obvious, role for India to play: an unofficial mediator between the United States and China to ensure global international decarbonization targets remain in reach amid intensifying competition. The United Nations (UN) Climate Change Conference, also known as COP28—taking place only months after India hosted the Group of Twenty (G20) Summit in New Delhi—is a good opportunity for India to begin to flex its climate muscles on the world stage.

Read more

New Atlanticist

Dec 1, 2023

Why India could play a pivotal role as climate mediator

By Rachel Rizzo, Théophile Pouget-Abadie

COP28 is a good opportunity for India to begin to flex its climate muscles on the world stage.

China Climate Change & Climate Action

Can climate leaders maintain the momentum?

By Landon Derentz

After a year of painstaking negotiations and debate, COP28 kicked off with a breakthrough.

That’s because on day one of COP28—and only one year since countries agreed at COP27 to establish a “loss and damage” fund—countries raked together more than $425 million to help developing economies cope with the adverse effects of climate change. The United Arab Emirates and Germany, most notably, each pledged $100 million.

The news of the funding signals that real progress remains possible within the confines of the formal negotiation process. Yet, the fund remains well short of the hundreds of billions—not millions—of dollars that the United Nations estimates will be necessary to address the fallout of inevitable near-term climate disasters. It’s a stark reminder of why it is important to pursue all pathways to keep the global temperature rise within 1.5 degrees Celsius.

With that breakthrough behind us, all eyes should now turn to December 2. Saturday’s announcements are likely to be big: Don’t be surprised to see declarations on tripling the deployment of nuclear and renewable energy, progress on the formation of a global methane fund, and momentum in the establishment of an Oil and Gas Decarbonization Charter. This charter will outline how over fifty oil and gas companies intend to spur climate action for the sector. It’s the best chance for the United Arab Emirates—which has faced skepticism about its ability to galvanize action to reduce the energy sector’s greenhouse gas emissions—to prove the veracity of its vision for COP28. That vision: Industry can breathe new life into the COP process by helping to catalyze action towards achieving national climate goals.

The next few days are an important litmus test for the United Arab Emirates’ credibility in hosting the climate conference.

—Landon Derentz is senior director and Morningstar Chair for Global Energy Security at the Atlantic Council Global Energy Center.

• An early deal brings signs of hope for COP28

• Long-term climate financing remains elusive. A NATO-style spending target could help.

• Kicking off with a bang on loss and damage

• COP28 is here. These are the Global South’s demands and expectations.

An early deal brings signs of hope for COP28

By Sabrina Nagel

The first day of COP28 has opened with a historical deal: The parties agreed on the implementation of the loss and damage fund that was first announced last year at COP27. While parties agreed at COP27 to create the fund, it was unclear where the fund would be located and how much money developed countries would commit to it.

Now, with this new announcement, countries are beginning to commit to the fund. The United Arab Emirates and Germany each committed one hundred million dollars, while the United States and Japan have also contributed. The fund is central to climate justice for the countries that have contributed the least to climate change but are the most vulnerable to its effects.

Only weeks ago, negotiators and world leaders expected COP28 to be a difficult climate conference with uncertainty and disagreements about how the fund should be implemented and operationalized. Nevertheless, this early deal on the loss and damage fund will set the scene for hopeful negotiations as the week continues.

—Sabrina Nagel is senior advisor for global policy and finance at the Adrienne Arsht-Rockefeller Foundation Resilience Center

Long-term climate financing remains elusive. A NATO-style spending target could help.

By Francis Shin and Théophile Pouget-Abadie

At the 2006 Riga summit, NATO leaders made a pledge to spend 2 percent of their gross domestic product (GDP) on defense. This moment marked a significant shift for the alliance, offering a way to both measure political will and ensure that existing and new members meaningfully contributed to the Alliance’s efforts. The target is remarkably simple: It essentially tracks members’ defense ministry budgets. Could the establishment of a spending target for the energy transition spark a similarly significant global shift?

Decarbonizing has emerged as one of most important tools for the European Union (EU) to ensure its long-term security and sovereignty: both to address the physical risks stemming from climate change and to reduce oil and gas dependencies, particularly on Russia. So far, European member states have committed insufficient funds to meet their decarbonization objectives. The European Commission estimates that an additional seven hundred billion euros of combined public and private investment is needed each year across the entire EU bloc to meet its energy transition targets and combat climate change.

Europe is currently far off track, with a spending gap equivalent to 0.73 percent of the EU’s GDP for non-transport investment and public spending, or about 101 billion euros. All but two EU countries (Lithuania and Czechia) have national spending gaps incapable of being filled by EU spending alone due to these members not having enough grants available to them. While the EU has set ambitious energy-transition goals through programs such as NextGenerationEU, the European Green Deal (and the associated Fit for 55 package), and the REPowerEU Plan, it now needs the means to finance them. 

To turn the tide, EU members and like-minded allies should set national-level climate spending targets, based on a percentage of their respective annual GDPs, to address these deficits. Within Europe, a climate spending target would put pressure on countries that have expressed reservations about joining in EU-level decarbonization goals. Poland, which retains the most reliance on coal for its energy needs, suggested that it would appeal against the Fit for 55 program, raising concern among other EU members on how staunchly committed Poland might be to cut carbon emissions.

Agora Energiewende and the European Commission concluded the overall annual GDP percentage investments required for hitting existing 2030 carbon emissions targets was 2.5 percent. That’s where discussions should start.

Of course, EU members’ needs will vary. Countries that haven’t spent as much on their energy transitions—or that are still reliant on fossil fuels—will need to spend more to address decarbonization deficits and improve electricity grids. And while some countries have already spent significant amounts and are closer to reaching their decarbonization goals, they should still seek to meet the 2.5 percent target, instead directing the funds to developing countries or international climate-change mitigation projects. This would express solidarity with fellow EU members as well as encourage decarbonization beyond Europe itself.

—Francis Shin is a research assistant at the Atlantic Council’s Europe Center. Théophile Pouget-Abadie is a nonresident fellow with the Atlantic Council’s Europe Center and a policy fellow with the Jain Family Institute

Kicking off with a bang on loss and damage

What should climate watchers take away from day one of COP28? “Movement and progress,” Jorge Gastelumendi, interim director of the Adrienne Arsht-Rockefeller Foundation Resilience Center, tells us from Dubai.

Before the first day closed, countries were able to reach a deal on a loss and damage startup fund, with both the United Arab Emirates and Germany pledging one hundred million dollars to offset disaster-induced costs in vulnerable countries.

It will also create an “open window” for insurance companies to support developing countries, Gastelumendi notes.

Watch more

COP28 is here. These are the Global South’s demands and expectations.

By Lama El Hatow

With the 2023 United Nations Climate Change Conference (also known as COP28) having started, the world is shifting its focus to the United Arab Emirates (UAE) to assess how it will deal with the climate crisis, but with particular attention on the COP presidency…

The COP28 negotiations will prove to be challenging given all the demands and expectations on the table. In order to ensure that the needs of the Global South are met, the global community needs to unite to swiftly implement the recommended actions and the host country and the Emirati COP presidency need to display strong ambitions to address the climate crisis.

Read more

MENASource

Nov 30, 2023

COP28 is here. These are the Global South’s demands and expectations.

By Lama El Hatow

The COP28 negotiations will prove to be challenging given all the demands and expectations on the table in this COP.

Civil Society Energy & Environment

The post Expert analysis: The successes and shortcomings in the fight against climate change at COP28 appeared first on Atlantic Council.

Advanced economies are not meeting their pledges or are lagging in their disbursements. They are directing large subsidies to their own domestic energy transitions; providing little in new pledges to the Global Green Climate Fund; and stalling payments into the loss and damage fund endorsed at COP27 last year.

To make matters worse, in the face of the continuing debt crisis in many low-income countries, borrowing costs for project finance have risen with higher interest rates, and banks have tightened their loan requirements.

This piece focuses on the need to improve the enabling environment, especially the policy, regulatory, and market frameworks, in emerging and developing economies to mobilize greater climate finance and investment and reduce actual and perceived risks to investors.

The following three propositions lay out what’s needed:

1. Financing from governments and international financial institutions is inadequate to meet investment needs, and emerging and developing economies must focus on attracting more private sector investment.
2. Advanced economies should adjust their assistance and financing priorities and give greater attention to partnering with emerging and developing economies to build policy, regulatory and institutional frameworks that are sustainable and can attract private investment.
3. Beyond partnering with advanced economies, emerging markets and developing countries must take additional steps to improve their investment climate for clean energy projects.

Debt and climate investment needs in emerging and developing economies

The investment needed to accelerate the energy transition in emerging markets and developing countries is large. The annual concessional funding for clean energy that these countries require will need to reach between $80-100 billion by the early 2030s, according to the International Energy Agency’s updated Roadmap to Net Zero Emissions by 2050.

Yet, emerging markets and developing countries, especially low-income countries, are struggling with high debt loads. The IMF Financial Stability Report recently concluded that 56 percent of low-income countries and 25 percent of emerging market countries are in or at high risk of debt distress.

Under increasing pressure, international financial institutions (IFIs) have made strides in increasing their climate finance pool. The World Bank Group reported a record $38.6 billion in climate finance for the year ending July 1, 2023, while overall multilateral development bank (MDB) climate finance increased from eighty-two billion dollars in 2021 to nearly hundred billion dollars in 2022, with about sixty billion dollars of that going to low- and middle-income countries. Finance for mitigation, much of it for clean energy, constituted 63 percent or thirty-eight billion dollars of the flows to low- and middle-income countries. Investment loans ($36.8 billion) and policy-based finance ($8.4 billion) were the largest types of financing in the overall MDB climate portfolio. Given the often-high investment risks, IFIs play an important role in catalyzing private investment through loans and guarantees; an estimated sixty-nine billion dollars in private climate finance were leveraged globally in 2022.

Assessing financing and investment risks

Development banks and private investors alike face an array of energy and climate investment risks in emerging markets and developing countries. Some of these risks are common political, regulatory, economic, and financial ones, while others vary depending on the specific characteristics of the technology or country involved.

The IEA World Energy Outlook 2023 presents a generic framework that identifies the risk level (high, medium, low) in three areas (policy and regulatory, supply chain, and financial) for nine clean energy technologies. Bloomberg New Energy Finance’s Climatescope review has long focused on key elements of the policy environment of countries and scores individual markets in terms of their overall attractiveness and progress in luring clean energy investment. It comparatively assesses the electric power markets of countries on whether they have in place the following six features: targets, auctions or tenders, import tariffs, net metering, feed-in-tariffs, and value-added tax reductions or exemptions.

A focus on the regulatory institutions and their effectiveness is a common dimension of risk assessment tools. RISE (Regulatory Indicators for Sustainable Development) is a robust scheme developed by the World Bank that tracks regulatory and financial incentives, network connection and use, carbon pricing and monitoring, counterparty risk, and credit worthiness of utilities among other indicators.

The RISE 2022 report sees uneven progress over the 2019-2021 period and backsliding in utility credit worthiness. A parallel World Bank effort called the Global Electricity Regulatory Index (GERI) is diving deeper into regulatory performance in considering regulatory governance and regulatory substance factors. 

Country surveys using the above frameworks all highlight the basic weaknesses in the clean energy investment environment in emerging and developing countries. BNEL’s Climatescope estimates that in 2021 renewable energy asset finance in emerging and developing counties other than China was about forty-nine billion dollars compared to over three hundred billion dollars globally. But this was highly concentrated, with over 80 percent in fifteen countries. Africa lags other regions and even its best performers—Tanzania, Malawi, Nigeria, South Africa, and Zimbabwe—were not in the top ten developing countries globally.

Enabling environment reform priorities

The response to these internal developing country market constraints has seen new proposals for global climate funding and investment guarantee and enhanced political and economic risk insurance mechanisms such as the US Energy Transition Accelerator and the World Bank’s Scaling Climate Action by Lowering Emissions. These de-risking structures from the advanced countries and IFIs have their place. However, there is too little focus on building the regulatory and institutional capacity in recipient countries that can ensure that project investments are sustainable, efficient, and attractive to private investors.

To address this challenge, the three-pronged approach presented by International Monetary Fund Deputy Managing Director Bo Li in this February blog is useful. This framework includes:

1. Smarter regulation, price signals, and well–targeted subsidies adapted to each country’s unique fiscal and macro-financial characteristics.

2. Strengthened public financial management and public investment management, building the capacity to identify, appraise, and select good quality projects, including fiscal risk mitigation.

3. A revamped financial architecture to include flexible national and regional programmatic as well as project approaches to risk-mitigation and mobilizing private investment.

One approach, the Just Energy Transition Partnerships (JETP), is beginning as a collaborative effort among the United States, Germany, and other advanced countries together with the IFIs to engage with key coal-dominant developing countries, such as South Africa, Indonesia, and Vietnam, in mobilizing investment and overcoming key obstacles. Policy and program approaches to support regional grids and energy trading approaches with groups of nations such as the Association of Southeast Asian Nations or sub-regions in Africa are also prospective.

COP28 outcomes

As nations take stock of national and global efforts to address climate change and finance the clean energy transition at COP28, the dialogue should elevate the issue of how to improve the enabling environments in emerging markets and developing countries. A greater onus should be placed on these countries, as well as the advanced nations in their financing commitments, to make progress in improving the governance of economies and energy systems in recipient countries.

Although greater capital and technical assistance resources (both public and private) from developed countries are essential, a reorientation of some of this funding to augment enabling environment reform efforts is needed. The IMF’s new Resilience and Sustainability Trust, with its packaging of policy reforms, capacity development, and financing arrangements, represents an important step in this direction.

For the United States, the Biden administration has tried to increase international climate funding and achieve the president’s 2021 pledge of $11.4 billion by 2024. The administration’s FY24 request for international climate programs was $4.3 billion, a substantial increase over the $2.5 billion requested for FY23. But Congress has not gone along, appropriating only one billion dollars for FY23. And the prospects for increasing FY24 appropriations are not promising.

US government departments and agencies are working hard to play a leadership role in tacking the global climate crisis and in COP28. It is essential that Congress approve funding levels reflecting this imperative, including the requested $1.1 billion for clean energy that would provide the State Department and the US Agency for International Development with the resources needed to work with emerging and developing economies in improving their enabling environments.

Robert F. Ichord, Jr. is a nonresident senior fellow at the Atlantic Council Global Energy Center

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The post Mobilizing climate finance at COP28: Improving enabling environments in emerging and developing countries appeared first on Atlantic Council.

Mafalda Duarte is the executive director of the Green Climate Fund. This essay is part of the Global Energy Agenda.

Financing climate action, particularly in the developing world, is a crucial investment in humanity’s shared future. We know, and the science confirms, that the world has a rapidly narrowing window to speed up and scale up investments in solutions that developing countries need for the future we all deserve. 

But no one can solve today’s problems with yesterday’s thinking. This challenge demands twenty-first century approaches and partnerships. Equally important, the public and private sectors must work in tandem to meet the moment.

Governments and businesses alike should understand that investing in developing countries is a practical imperative. With rapidly expanding populations, the largest real gross domestic product (GDP) growth percentages, and rising demand for energy, developing countries are defining our collective prosperity and well-being. 

These facts sum it up quite well. Our climate crisis originates from roughly forty wealthy economies’ industrial transitions. Meanwhile, 150 emerging economies, home to 97 percent of projected population growth, have not even begun or completed their own transitions. 

Governments and businesses alike should understand that investing in developing countries is a practical imperative.

Low- and middle-income countries have the duty to meet the needs of their people, and it is the world’s collective obligation and interest to help them do so in harmony with our climate goals. Without international support to make greener investments, their development may rely longer than the science says it should on legacy energy sources and other investments that lock in unsustainable, carbon-intensive growth and cause a spike in carbon-dioxide (CO₂) emissions. 

Private financiers have a compelling economic motive to drive climate action. To reach net zero by 2050, the United Nations (UN) estimates that the world will need $90 trillion in infrastructure investments—a golden opportunity for companies around the world. Clean energy spending is moving accordingly, set to surpass $2 billion this year and overtake fossil fuel investment for the first time ever. Additionally, more and more communities are funding measures to build resilience to climate impacts.

While private capital flows for low-carbon and resilient investments are climbing, they are still woefully inadequate. Private investment in climate reached a recent high of $250 billion, less than 0.5 percent of the $90 trillion referenced earlier. Public sector entities like governments and multilateral institutions are deploying more—some $850 billion in 2021—but, taken together, this is still a drop in the ocean relative to scale of the challenge.

Additionally, most of these investments are still concentrated in developed countries. For instance, despite a clean energy finance gap of around $1.7 trillion annually, developing countries only attracted $544 billion in 2022, according to a UN report. The adaptation finance gap is even more alarming, recently estimated to be at least ten to eighteen times greater than current international finance flows.

The status quo is increasingly setting us off track. Financial institutions oversee some $510 trillion in financial assets. Institutional investors, like sovereign wealth funds and pension funds, hold an estimated $110 trillion under management. Unlocking even a fraction of those resources for climate investments would go a long way toward reducing emissions and safeguarding communities against climate change impacts.

How can we attract more private investment where it counts the most? Private financiers are often deterred by barriers such as sovereign and currency risks or limited data and track records. These are serious obstacles, but they are not insurmountable with strategic partnerships and innovative finance mechanisms.

I lead the Green Climate Fund (GCF), the largest multilateral climate fund primed and uniquely positioned to steer private finance toward climate investments. GCF’s flexible, patient, risk-sharing, concessional capital enables private companies to enter new markets and new sectors, and to reap the benefits of investments they wouldn’t otherwise consider.

We mitigate perceived and real risks by sharing risk with private sector partners when entering new or incipient markets.

Our efforts are paying off. Private sector commitments comprise 36 percent of our portfolio, with $5 billion in direct GCF financing, which is enabling $22 billion in total investment from the private sector. Even better, 60 percent of these target the least developed countries, small island developing states, and vulnerable nations.

Our private partners span from Fiji Development Bank to Macquarie, Acumen, and Credit Agricole. In Kenya, for example, we’re working with Acumen to help thousands of farmers and local ventures access tailor-made financial resources, technical know-how, and new market opportunities. The result has been impressive. In Kenya, beneficiary farmers now sell about 400 tons of produce every month despite the challenges facing Kenya’s climate-sensitive agricultural sector, which contributes 20 percent to national GDP.

During a recent visit, I met Josephine, a coffee farmer, near Nairobi. With a solar-powered irrigation pump, she transformed her farmland, built a home, and now contributes significantly to her community. Funds like GCF bring the world community together to create millions of stories like Josephine’s, while safeguarding a future that belongs to all of us.

To win the race against the climate crisis, we need trillions of dollars in investments—and all eight billion of us working as one to get there. We do not have a moment to waste. 

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Sebastian Kind is the founder of RELP.NGO, and its CEO and chairman since 2020. He has served as the chairman of the International Renewable Energy Agency (Council 2017–2018), and the under secretary of state for renewable energy in Argentina (2016–2019). This essay is part of the Global Energy Agenda.

Renewable energy resources have the potential to reduce significantly and economically the greenhouse gas emissions from fossil fuel-based electricity generation. They have matured into commercially competitive and technologically advanced sources of clean electricity. The world must rapidly expand renewable capacity to meet the carbon-cutting ambitions mandated internationally by the Paris Agreement. However, achieving mass deployment in emerging markets and developing economies (EMDEs) requires more than technological maturity and competitive pricing.

Statistics from reputable sources illustrate the pivotal role of renewable energy in accelerating the energy transition. In 2022, global investment in the low-carbon energy transition totaled $1.1 trillion, a substantial increase from the $267 billion recorded in 2011. These investments encompassed a wide range of projects, the majority of which were in renewable energy and electrified transport but also included energy storage, hydrogen production, nuclear energy, recycling initiatives, and carbon capture and storage (CCS) projects. In this active investment climate, renewable energy attracted the largest slice of the pie: $495 billion in commitments. Meanwhile, global spending on electric cars exceeded $466 billion in 2022, up 54 percent relative to 2021. Growing electrification highlights that developing renewable energy isn’t solely a means of enhancing sustainability within the power sector, which accounts for less than 25 percent of overall energy consumption, but also of transforming the entire energy landscape

A renewable energy program is not going to solve a country’s macro issues…there is no one-size-fits-all solution.

In the world’s rapid pursuit of a modern clean energy economy, renewable energy capacity expansion from 2022 to 2027 is estimated at 2.4 terawatts, representing over 90 percent of global electricity capacity expansion. This marks an 85 percent acceleration compared to the preceding five years, and is nearly 30 percent higher than the 2021 International Energy Agency report forecasted. This surge is primarily driven by China, the European Union, the United States, and India. Consequently, renewables are poised to become the world’s primary energy source, contributing 40 percent to global electricity generation by early 2025, surpassing coal. It is the only electricity generation source that the International Energy Agency (IEA) expects to grow, while coal, natural gas, nuclear, and oil generation shares are expected to decline.

To foster this growth, countries are employing various frameworks, including targets, renewable portfolio standards, feed-in policies (tariffs and premiums), auctions, tenders, renewable energy certificates, net metering, and other policies that encourage electricity consumers to produce and consume renewable energy onsite. Additionally, fiscal and financial incentives such as grants, rebates, and tax credits play a pivotal role in incentivizing business-development decisions and encouraging consumer behavioral change. It’s worth noting that these mechanisms have facilitated substantial clean electricity project deployment in developed countries, China, and India, but many developing regions lag behind due to more challenging regulatory, legal, and political environments. The challenges these countries face create both actual and perceived risks that deter investors from entering the market.

The renewable energy sector requires substantial upfront capital investment, often provided in foreign currencies that can cause volatility with local currency revenue streams. The cost of electricity from renewable sources is significantly influenced by the consequent cost of capital. EMDEs face inherent weaknesses, contending with higher capital costs, shorter debt tenures, elevated interest rates, and greater equity return requirements. Moreover, access to international capital markets is limited or simply null. 

EMDEs interested in surmounting these challenges and enabling a rapid and sustainable expansion of renewable energy must cultivate a favorable environment for long-term international investors. A renewable energy program is not going to solve a country’s macro issues, but it can be sufficiently shielded to generate the necessary investor confidence. This entails establishing clear and comprehensive regulatory frameworks, transparent competitive procurement processes, and effective guarantee schemes. However, there is no one-size-fits-all solution, as countries encounter diverse challenges rooted in political, economic, technical, and institutional barriers, which will make the energy transition happen at different speeds and costs.

Still, EMDEs can take concrete steps to enhance their investment environment. Here are some critical measures.

1. Re-evaluate the electricity regulatory framework to identify necessary amendments for the integration of renewable energy.
2. Clearly define and identify the public agencies responsible for overseeing different aspects of renewable energy project development.
3. Streamline permitting procedures to expedite implementation timelines.
4. Conduct a comprehensive risk assessment to identify and quantify the likelihood and potential impact of key risks affecting renewable energy projects.
5. Define the renewable energy auction format and prepare the requisite documents and contracts.
6. Implement a periodic (annual or biannual) schedule of renewable energy auctions.
7. Devise effective de-risking mechanisms to bolster project bankability.

Of all of these factors, project bankability is often the hardest to pin down. A successful de-risking approach to promote clean infrastructure investments should include two essential elements. The first is to design bankable power purchase agreements featuring robust components such as a twenty-year tenure, hard currency payments, protection against certain main country risks, lender step-in rights, investors’ protection termination clauses, and efficient dispute resolution mechanisms. The second is to implement a robust guarantee scheme to mitigate investment risks, foster competition, reduce financing costs, and lower energy prices. Ideally, this scheme should include an energy payment guarantee (liquidity guarantee) to ensure timely offtaker payments and cover any payment delays, along with an early termination guarantee to mitigate political and regulatory risks. This guarantee scheme should be integrated into the procurement program, allowing bidders to price in the offers the de-risking benefits.

Renewable energy resources are technologically and economically advanced and well poised to accelerate the energy transition. However, to supercharge renewable energy deployment in all markets, especially in EMDEs, improved contractual frameworks, regulatory reform, and innovative financial instruments are essential.

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