There are already predictions that 2024 will be the hottest year on record,1 and that the Paris goal of keeping global average temperatures below 1.5 degrees Celsius of warming is at critical risk of being breached,2 resulting in irreversible and adverse impacts across many ecosystems. The consequences of this are already being seen across the globe, with people in low- and middle-income countries most vulnerable3 to the dramatic changes in their climate, and female- headed households, children, and marginalised4 communities most threatened by the changing weather systems.
Climate science is very clear that urgent action is needed to accelerate the transition away from the climate damaging fossil fuel energy systems of the past,5, 6 and this will require a rapid ramp up of renewable energy systems across the globe.
To kick start this energy transition, the global stocktake7 of climate action at COP28 in Dubai, in December 2023, called for a tripling of renewable energy capacity globally by 2030 while transitioning away from fossil fuels in energy systems. COP28 called on the multilateral development banks (MDBs) and other public financial institutions to further scale up investments in climate action, and for a continued increase in effectiveness of and simplified access to climate finance. The global stocktake specifically called for finance in the form of grants and other highly concessional finance and non-debt instruments, and this remains critical to supporting developing countries, particularly as they transition in a just and equitable manner.
So far the agenda to triple renewable energy by 2030 has largely focused on the quantity of energy capacity and finance required, with the International Energy Agency (IEA) saying the world will now have to grow renewables capacity at a minimum of 16.4% annually through to 2030.8 In 2023, the G209 estimated that the world needs an annual investment of over $4tn for energy transition. However, low- and middle-income countries outside China account for only around 15% of global clean energy spending,10 with sub-Saharan Africa receiving less than 1.5% of the amount invested globally between 2000 and 2020.11 It will be essential to have a much more even spread of renewable energy finance for low- and middle-income countries to drive the global transition.
The G20 countries are looking to the MDBs to play an increasingly important role in financing the clean energy transition. It is anticipated that the MDBs will also be given a significant mandate to channel climate finance by the COP29 climate finance negotiations for a New Collective Quantified Goal (NCQG) for climate finance, along with the United Nations climate funds such as the Green Climate Fund.
It is important, however, that this urgent push for renewable energy does not create a rush for a green extractivism that replaces the damaging fossil fuel era with a new destructive energy expansion that leaves millions of people behind or exploited and damages the natural environment and biodiversity. It is worth noting that the G20 in India also called for “more effective Multilateral Development Banks to address global challenges to maximise developmental impact”.
The G20 set a mandate12 for MDBs to eliminate extreme poverty, boost shared prosperity, and contribute to global public goods including the health of the planet. This is echoed in the United Nations Pact for the Future13 that called for reform of the international financial architecture so that it can meet the urgent challenge of climate change and deliver the Sustainable Development Goals (SDGs). Article 2 of the Paris Agreement itself sets a dual objective for climate action, setting the aims to strengthen the global response to the threat of climate change, in the context of sustainable development and efforts to eradicate poverty.
It is timely therefore to ask what role public climate finance for renewable energy, including through the MDBs, should play in ensuring an inclusive and just energy transition to a renewable energy future.
The Banking on Renewables campaign presented in this report challenges the MDBs and other public finance institutions to not only focus on the scale of the transition and quantity of finance required, but on the legacy it will leave behind. It questions the credibility of the MDBs as a route for climate finance for renewable energy if they cannot yet also deliver on transformative energy transition, sustainable development, poverty reduction and the protection of people and planet.
Read and download the full report here: Banking-on-Renewables-criteria-for-public-investment-in-renewable-energy-for-climate-for-people-for-planet
This report was originally published in Recourse and can be read here.
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