Transition toward a Low Carbon Society and the Globalization Process:

Perspectives from Developing Countries

Yacob MulugettaCentre for Environmental Strategy

University of Surrey

Outline

• Economic transformation in developing countries as a result of globalization?

• What are the effects on the energy sector?• Opportunities & challenges for low carbon development?

• Focus on Africa’s energy system?• The case of Ethiopia – if time allows!

Increasing interdependency

Different category of countries performing specific roles

World growth, 1960 ‐ 2008

Source: IMF, OECD, Bank Calculations

-2

0

2

4

6

8

10

12

1960 1970 1980 1990 2000

World OECD

Non-OECD

\

Real GDP, year on year percentage change

Note: GDP measured at market exchange rates

6

India‐China Comparative Scenario

Some effects

• The process of economic globalization has ushered in growth – with poverty reduction outcomes in some countries; and given rise to a new wave of consumers

• Rapid urbanization – ala Arthur Lewis– an exodus of migrant workers from rural agricultural regions to large cities. The percentage of the nation’s urban population rose from 18 per cent in 1978 to 52.6 per cent by 2012, with city dwellers for the first time outnumbering rural counterparts.

– It took Britain and USA over 100 years to accomplish this. 

World primary energy use

Source: BP Statistical Review

Note: Oil consumption is measured in million tonnes; other fuels in million tonnes of oil equivalent

Millions tonnes oil equivalent

0

1000

2000

3000

4000

5000

6000

7000

1965 1970 1975 1980 1985 1990 1995 2000 2005

OECD

Non OECD

• Effects of globalization and structural changes in developing countries has created a more intensified use of fossil fuels – China – 70% energy mix – coal;

• 75% of 1200+ new coal power stations in India and China 

• Production cannot meet consumption req.– Dependency on imports – 70‐80% oil (China, India);

• Energy security priorities:– Aggressive Energy efficiency programmes– Diversifying energy resources by developing 

alternative clean energy resources– Diversifying energy suppliers at the global level

Enter climate change

• CC is a global challenge, especially for developing countries– Dependence on climate‐sensitive sectors – Low adaptive capacity to respond effectively– Geographical location characterized by vulnerable areas (drought, flooding, sea level rise)

• Current trends ‐ leading to a 4+ degree C rise• Threat? YES….• New opportunity for mitigation actions? possibly

Over a third of the carbon dioxide emissions linked to good and services consumed in many European countries actually occurred elsewhere.

The United States is both a major importer and a major exporter of emissions embodied in trade. The net result is that the U.S. outsources about 11% of total consumption‐based emissions, primarily to the developing world.(Davis & Caldeira, 2010)

CO2 exports from China in Millions of tons

1200 coal power plants planned across 59 countries. 455 in India; 363 in China

Energy responsible for 75% of GHG emissions

• Countries – locked into a development pathway intended to correct the ‘injustices’ of underdevelopment and poverty. – So it seems there is a tension between climate action & development

• Thus, there is a tremendous momentum in decarbonizing the energy sector, not only for climate stabilization reasons alone!

• Furthermore, developing countries have the long‐term challenge of widening access to energy services

• The ‘clean’ route may offer possible win‐win solutions for energy security, energy access and GHG emissions reduction

RE costs have declined in the past and further declines can be expected in the future.

RE costs may be going down but are still higher than existing energy prices, but in various settings RE is already competitive.

African energy system transformation

• Alarming…but also plenty of opportunities• High growth: due to higher commodity prices, internal investment, FDI, starting from low base

• Economic transformation – essential for sustaining development.  

• Energy & infrastructure is central to that goal– Yet to be built!

Steinberger and Roberts, 2011

Level of energy access correlates with HDI

Average energy access in sub‐Saharan Africa = 31%; in rural Africa = 14%

EIA, 2011

EIA, 2011

Share of modern energy use

Household – over 60%Industry – 18%Transport – 15%Agriculture – 2%

Share of agriculture to Economy

Share of employment – 60 to 80%Share of GDP – over 25%

Tanzania

Biomass use - significant

- Up to $0.30/kWh in Mali, Niger, Senegal

- $25/kWh in Burkina, R. Congo,Benin

- Even higher for self-generation

- Under $0.05/kWh in Ethiopia, DRC, Malawi, Zambia

Africa’s power is expensive

AICD, 2008

Whatopportunitiesexist?

• Economicgrowthinrecentyears,economicdiversificationunderway

• Productivesectorcriticalforenergyaccess• Newthinkingandmodelsinregulationsandpractices

PolicyExperimentsinAfrica– REPolicies

CountryREGULATORPOLICIES FISCALINCENTIVES PUBLICFINANCING

Feed‐in

tariff

Biofuelsobligatio

n,mandate

Heatobligation,mandate

Tradablerenewableenergycredits

Capitalsubsidy,grantorrebate

Investment,productiontaxcredits

Reductionsinsales,energy,VATorother

taxes

Publicinvestment,loansorfinancing

Publiccompetitivebidding

Algeria XBotswana XEgypt X X X XEthiopia X X XGambia XGhana X XKenya X XMali XMozambique

X X

Morocco XRwanda X XSouthAfrica X X X X

Tanzania X X XTunisia X X XUganda X X XZambia X

Whatopportunitiesexist?

• Considerablenaturalresource‐base• Regionalpowerpoolsasnewplayingfield

EnergyResourcePotentialofAfrica

EnergyType Reserves RegionalDistribution

Hydro 1,834TWh/yr CentralAfrica:57%EasternAfrica:32%OtherAfrica:11%

Biomass Woodybiomass:70billiontonnes

Allregions

Solar Solarinsolation:1800–2850kWh/m2.a

MostofAfrica

Wind Windspeeds:SouthernAfrica(6– m/s)NorthernAfrica(5– 8.5m/s)

MostattractivesitesintheNorthernandSoutherncoasts.

Geothermal 9,000MW EasternAfrica

Africaalsoaccountsfor: 9.5%ofprovencrudeoilreservesintheworld(132.1billionbarrels) 8%ofprovennaturalgasreservesintheworld(14.7trillionM3) 4%ofprovencoalreservesintheworld(31,696billiontonnes)

Africa is has a huge hydro‐power potential..

Power Export Potential

existing regional network

Missing links

Regional power pools

Africa Infrastructure Country Diagnostic, 2010

• Energy‐developmentdilemma

Abundance of Scarcity of

•Renewable energy resources•Increasing hydro-carbons

•Skills•Capital •Governance capacity

• Latecomeradvantagebutdelay(untilnewtechnologies,know‐howand/orfinanceisavailable)isexpensive,i.ehighsocialdiscount

• Countriescancapitalizeoncomparativeadvantage– RailinEthiopia

• Globalpartnershipcritical

Somesuggestionsforenergytransformation?• Anumberofactionsneedtocometogether• RecognizecountryspecificconditionsforLCD• Fitforpurposepolicies– lookbeyondstatementsandincluderealisticandachievabletargetswithmid‐termreviews(Ethiopia)– howpoliciesareformulatediscriticalandtheinvolvementofvariousactorsiscentral(policydialogueandbuildpolicycoalitions);

– Addressfragmentation;– Spaceforbothcentralizedanddecentralizedoptions;– Well‐targetedsubsidies;– Policycoherencebetweenaccess,securityandsustainability

• Buildrobust(butflexible)institutionallandscapeatdifferentlevelstoimplementpolicies– theenergyprobleminAfricaisnotonlyatnationallevelbutgoesdowntocommunitylevel

Somesuggestionsforenergytransformation?

• Strengthenknowledgeinstitutionstoprovideinputintonationalenergyactions(withappropriateincentives)‐ Brazil

• Dealwithfullenergychain,butunderstandentrypoint(s)(Senegal)

• Financeiscritical– whatworksiswhatmattersandnotwhatisideologicallyconvenient.– Howtounlockdomesticfinancethroughinnovativeregulatorysystems?

– Howtoworkwithinternationalpartners?• ‘Thinkboldandactfast’– lossesduetoinactionaresignificantbothintermsofeconomicandwellbeingmissedopportunities– Short‐termimperatives&longer‐termperspectives

• Greaterefforttointegratingwithglobalsystems,butstructuraleconomictransformationneedstohappen.

• I can think of three good reasons why green growth is and cannot but be an essential element of Africa’s structural economic transformation and none of them have much to do with what we as Africans can or should do to mitigate global warming.

• We cannot even think of structural economic transformation in Africa without transforming our agriculture. We need to improve the moisture retention capability of our soil, recharge our underground water resources and increase the flow of our rivers. If we are to promote irrigated agriculture to adapt to the changes we have to rehabilitate our degraded hills and mountains. We cannot hope to mitigate the impact of droughts and floods without a massive re‐afforestation of our hills and mountains.

• The second reason why we can and should embark on green development as part of our structural economic transformation is because we are richly endowed with green and renewable sources of energy. There cannot be any talk of structural economic transformation without massive increase in the electricity we generate. And if we are to embark on such a massive programme we have to generate the electricity from the resource that we have in abundance and whose opportunity cost is close to zero. If we generate most or all of our energy from renewable sources then we will have by design or default embarked on a green path of economic transformation.

• The third reason why we have to create a green economy has to do with global technological trends. It is true that International Negotiations on Climate Change have been stuck in a quagmire and are unlikely to get out of it any time soon. But this has not stopped those countries and companies that have the foresight and the resources from massive and concerted investment in green technologies. Structural economic transformation in Africa will require that we catch up technologically with the most advanced nations. If the future is in green technologies our strategy for catch up cannot be based on technologies that will be out of use by the time we catch up. 

Africa and other low income countries could try to do better in the pursuit of their developmentgoals

Low carbon options could deliver good outcomes with global and local benefits

Gao Xiqing of the China Investment Forum at World Economic Forum 2012, speaking to African leaders “Do not necessarily do what we did. Policies of “sheer economic growth” should be avoided. We now suffer pollution and an unequal distribution of wealth and opportunities… You have a clean sheet of paper here. Try to write something beautiful.”

39

Plenty of experimentation

and ambition