Energy transitions are central to the G20 agenda. In 2023, during India’s presidency, the geopolitics and governance of energy have become immensely challenging, as the shift from fossil fuels to renewable energy, concerns about energy security and, in many cases, the pressure on keeping financial commitments made related to tackling climate change have become complicated.
The International Energy Agency counts 20 million more people worldwide without electricity now compared to 2021. Predictably, the worst-affected are in sub-Saharan Africa, which is back to its lowest rate of electrification since 2013. In Europe, the number of people experiencing inadequate energy supply has risen to 80 million from 34 million in 2021. Even middle-income countries in Africa, South America and Asia face fuel and electricity shortages and high levels of inflation. Reduced availability of energy is hurting economies as industries close, and is impacting public health as safe fuels such as cooking gas become expensive. A number of countries also face a balance of payments crisis, partly driven by high energy costs. “Energy poverty” is global and widespread, impacting technology implementation, industry and sustainable development goals — all of which are also G20 goals.
An independent task force initiated by Gateway House in October 2022 seeks urgently to find ways to provide energy access, security and affordability. This requires resolving the conflicts between short-and long-term energy targets, addressing energy disruptions caused by the Covid-19 pandemic and the Ukraine-Russia conflict, and using creative financing to accelerate the development and adaptation of renewable technologies and new business models utilising these technologies. The G20 has a key role to play in advancing solutions.
Three particularly significant recommendations, which can provide immediate runs on the board for India’s G20 presidency are: The G20 should focus on providing financial support for those most in need as a cornerstone of climate action and energy transition in the United Nations Framework Convention on Climate Change Protocol and as reinforced and enshrined in the Paris Agreement and successive COPs. This is a natural role for the G20 to play given the involvement of leading economies in it and its convening power. While financial support to developing countries has been increasing, it is nowhere near what will be required for a successful transition. The G20 can galvanise the pursuit of this agenda.
Public financing alone will not be enough for dealing with current energy challenges. Private finance is needed along with public finance. That means continued work is needed to align global financial flows with the Paris Agreement goals. Innovative approaches are needed to climate financing, such as blending finance with public and private capital so they work together, and key impediments like exchange rate risk for financing projects must be addressed. The G20 has a critical role to play in strengthening this global agenda, including by a continued step change on climate financing by multilateral banks.
A possible game-changer could be the creation of a Global Climate Finance Agency to better integrate and drive this global agenda, including at very practical levels. The agency could be mandated to lower hedging costs to mitigate a key risk faced by developers of green projects and to insure major clean energy projects from potential losses due to problems such as the failure of government utilities to meet supply and payment obligations — a persistent issue in developing countries, including India.
Finally, the G20 can harness the significant power of the public procurement system to accelerate energy transitions. There is abundant evidence that, done well, this can be a major driver of change, for instance, by ensuring funding and adaptation at scale. At the same time, the use of public procurement to drive such changes can help prevent the winner-takes-all effect that new technologies often create. Public procurement has a key role to play in accelerating the rollout of critical new technologies such as green hydrogen, electric vehicle transport systems connected to renewable power systems and small modular nuclear reactors, where the G20 can provide global impetus and inspiration.
Ultimately, these proposals will mean new business models and new technologies for energy transitions — new tracks for new trains. Financial centres of the G20 countries and their significant business communities, like Mumbai, have a critical role to play in creating this new economy. The G20 should encourage cooperation and collaboration between these centres, including through green financing and economy taxonomies as per the above recommendations, to accelerate climate transition and energy security for all.
Nadir Godrej is managing director, Godrej Industries and chairman, Godrej Agrovet.
Patrick Suckling is the former Australian Ambassador for the Environment.
They are co-chairs of the Gateway House’s independent G20 Energy Transition and Climate Finance Taskforce.