How to create a framework for achieving an inclusive energy transition

• The global energy transition has plateaued and while broad progress has been made, there are several emerging challenges.Making meaningful progress will require an inclusive approach that provides energy security, while also facilitating economic growth.Here we outline a framework, based on five dimensions, for creating an inclusive approach to the energy transition.

After a decade of progress, the global energy transition has plateaued amid the worldwide energy crisis and geopolitical volatility, according to the World Economic Forum’s 2023 report, Fostering Effective Energy Transition. The Energy Transition Index, which benchmarks 120 countries on their current energy system performance, finds that while there has been broad progress on cleaner, sustainable energy, there are emerging challenges to the equity of the transition — just, affordable access to energy and sustained economic development.The World Economic Forum defines an effective energy transition as “a timely transition towards a more inclusive, sustainable, affordable and secure energy system that provides solutions to global energy‑related challenges, while creating value for business and society, without compromising the balance of the energy triangle”.

Although many energy transition narratives are mainly driven by environmental and sustainability concerns, meaningful progress will only be achieved by taking an inclusive approach that simultaneously provides energy security and access, while also facilitating economic growth and development. Here we introduce a new framework for creating an inclusive approach to the energy transition, based on five dimensions. These are:

1. Geo-inclusivity

Although there is one common goal, there are many approaches. Geo-inclusivity recognizes there will be multiple transition pathways, and different regions of the world are starting at different points within the energy triangle — equity, security and sustainability. For example, regions like the Global South, where energy security is increasingly being equated with food security, have very different vantage points than much of the developed nations in the Organisation for Economic Co-operation and Development (OECD), and their starting points and approaches will also be different.

Support for the Global South to facilitate the energy transition, including financing and technical assistance, and to support economic growth while raising the living standards of all, should be a part of any inclusive approach. New supply chains will be required for reaching the world’s net-zero ambitions. For example, new supply chains for critical minerals, metals and materials will be required to manufacture and produce new low-emission, energy technologies which will span multiple geographies where greater collaboration must be fostered.

2. Society and people inclusivity

Within each region, there should be inclusivity within each country as well. For the lower-income population, especially in the Global South, energy affordability will be extremely important. Job creation and reskilling for those affected by energy transition as well as development for regions affected by energy transition will be important. Recognizing the needs and contributions of people and society at a local level will be essential to realizing a smooth and realistic transition

There should be multiple stages, including ensuring market stability throughout the transition — with stable investment and financing to support each of the multiple stages and pathways that balance access, affordability and sustainability for all.According to the Asian Development Bank, a billion people in Asia were still living on less than the purchasing power of $3.20 per day in 2017 and another 940 million still lack reliable access to power.

3. Industrial inclusivity

Industry takes people and capital investments and organizes them to solve problems and create scalable, affordable solutions for society. Tackling the climate challenge will be one of the largest and most expensive endeavours in human history. According to Goldman Sachs, about $4 trillion per year of extra global investment will be required between 2021 and 2050 to reach net zero. Cumulatively, that will equates to over $100 trillion in the coming decades and multiple transition pathways where industry will play a vital role.

A new framework for creating an inclusive approach to the energy transition. Image: Saudi Aramco

We must recognize the energy transition is resource intensive. Industry will be needed to develop these resources and create new value chains for utilizing them to manufacture the lower emission energy technologies like wind turbines, solar panels, storage devices and all modes of transportation and infrastructure. The scale of any transition pathway is enormous and will require industry to accelerate cost for efficient progress and momentum.For example, existing industry know-how, infrastructure, assets and major regional ports can be used to accelerate the transition, especially for the hydrogen economy and the materials required for all energy technologies.

4. Technical inclusivity

Tackling climate change will require an all-technologies approach which fosters research and development, and the innovation and collaboration required for achieving breakthroughs. Including diversity in options across geographies, space, time and sectors encourages a collaborative model, which is key to spreading knowledge, fostering research and helping to diffuse new ideas. Technology inclusivity also recognizes that new low-emission energy technologies are resource intensive and require a complex combination of new value and supply chains including critical minerals, metals and materials (the 3Ms), which must come from many different geographies and regions of the world. A combination of these 3Ms is essential for producing and manufacturing nearly every new low-emission, energy technology — including everything from wind turbines to all modes of transport and the required infrastructure. Buildings and the cities of the future will also be a major consideration.

5. Regulatory inclusivity

The first “energy crisis” of the energy transition is already teaching us valuable lessons. Isolated policy-making can create gaps for the world’s poor and economically challenged regions of the world. Governments and society must be careful not to create exclusive policies that result in a mismatch between growing populations, economies, and energy demand, and under-investment in affordable, secure supply. To date, the net-zero narrative has been led by the Global North (mainly industrialized OECD countries)— with little input from the Global South. Expectations of a linear global energy transition following a simple, single net-zero path will be very difficult to meet.Instead, a multi-dimensional approach that is inclusive of different situations and circumstances in different parts of the world will be required, including:

• Reflecting varied starting points, diversity in policy approaches, and is equitable.Recognizing we need fresh ideas to enable further progress.Must include a wider spectrum of ideas and perspectives on the energy transition and how best to achieve it.
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  What’s the World Economic Forum doing about the transition to clean energy?

  Moving to clean energy is key to combating climate change, yet in the past five years, the energy transition has stagnated. Energy consumption and production contribute to two-thirds of global emissions, and 81% of the global energy system is still based on fossil fuels, the same percentage as 30 years ago. Plus, improvements in the energy intensity of the global economy (the amount of energy used per unit of economic activity) are slowing. In 2018 energy intensity improved by 1.2%, the slowest rate since 2010. Effective policies, private-sector action and public-private cooperation are needed to create a more inclusive, sustainable, affordable and secure global energy system. Benchmarking progress is essential to a successful transition. The World Economic Forum’s Energy Transition Index, which ranks 115 economies on how well they balance energy security and access with environmental sustainability and affordability, shows that the biggest challenge facing energy transition is the lack of readiness among the world’s largest emitters, including US, China, India and Russia. The 10 countries that score the highest in terms of readiness account for only 2.6% of global annual emissions.

  

  To future-proof the global energy system, the Forum’s Shaping the Future of Energy and Materials Platform is working on initiatives including, Systemic Efficiency, Innovation and Clean Energy and the Global Battery Alliance to encourage and enable innovative energy investments, technologies and solutions.Additionally, the Mission Possible Platform (MPP) is working to assemble public and private partners to further the industry transition to set heavy industry and mobility sectors on the pathway towards net-zero emissions. MPP is an initiative created by the World Economic Forum and the Energy Transitions Commission. Is your organisation interested in working with the World Economic Forum? Find out more here.

The first “energy crisis” of the energy transition has taught us that we must be careful not to create policies that result in a mismatch between growing energy demand and underinvestment in supply.We have also learned that misguided policies that do so are creating a “cost of living crisis” for many in the world — not only in the developed North, but especially in the Global South, where many are still struggling with access to necessities.It is evident that the inclusivity framework with the prescribed five dimensions needs to be translated into tangible “sweet spot” parameters but key questions remain. Will we see a day when we have a holistic global scenario of the future energy system centred on achieving the sweet spot of the inclusivity framework?