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Emerging economies grapple with clean energy transition


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Emerging economies grapple with clean energy transition

Led in large part by China, emerging economies across the world are trying to figure out how to "square the circle" of increasing energy access and sustaining development while also transitioning toward clean energy sources.

China leads the world in both energy consumption and production. Energy consumption growth in China over the last 10 years exceeds the annual consumption of India and is five times the annual consumption of the U.K., according to ENN Group Chief Strategy Officer Xavier Chen.

"The [Chinese] government realizes that this cannot continue. There is a secular shift in focus from energy security as a core of energy policy to environmental security as a core of energy security," he said at Columbia University's 2019 Global Energy Summit on April 10.

Chen, who has worked at large oil companies such as BP PLC and Equinor ASA, as well as at nongovernmental organizations such as the International Energy Agency, said coal's share of total electricity generation in China has fallen to about 60% today from 70% about a decade ago, and that the country aims to expand natural gas's market share to 15% by 2030 and that of nonfossil fuels to 20% by 2030 and to 50% by 2050.

"This policy shift … is going to change the landscape not only for China but … for the world," Chen said.

China's challenge is to transition toward renewables without relying on subsidies, Chen said.

Sunita Narain, director general of the Center for Science and Environment, a Delhi-based think tank focusing on environment and development issues in India, said air pollution was among the main imperatives driving energy policy in India, where policymakers view natural gas as a clean fuel option.

"The ruling party as well as the Congress party have both in their manifestos put in strong words about their determination to deal with air pollution," Narain said. "Whether you are burning it in your car or you are burning it in your power plants … it's about the fuel you use."

Mari Pangestu, a professor of international economics at the University of Indonesia and the country's former minister of trade, said that while the country's state-run power company has not yet put in place incentives to transition its power grid away from coal, policy in larger emerging markets provides a greater sense of urgency.

"They need to wake up. You are perhaps in a sunset industry. We are already facing reduced exports to Indian and China because India and China are shifting," Pangestu said.

Former Colombian Minister of Mines and Energy Mauricio Cárdenas noted that 19 million Latin Americans chop wood as their main source of energy.

"Many of these countries are rich in fossil fuels. … A lot of the people generate their income through fossil fuels. So how do you square the circle," Cárdenas asked. "Priority number one is energy access. We cannot talk about development and the reduction of poverty without really bringing access."

"The irony of it is … if you look at the IEA's latest statistics [on] the total renewable capacity added in the world, the U.S. and India had equal contributions," Narain said. "That is pathetic. India is a poor country. We are still investing in what is still a more expensive source of energy because we understand the need to make that transition. … We have a lot more to do to link the issue of clean energy to the needs of the poorest."

Cárdenas said many of those who lack access to energy in Latin America live in isolated rural communities, and he called solar panels and mini grids that could bring that access "an interesting commercial opportunity."

In some cases, fossil fuels provide a more compelling path to economic growth in emerging economies. Amid its economic collapse, Venezuela's oil production has fallen from 2.5 million barrels per day to less than 800,000 bbl/d, Cárdenas said.

"The first thing they have to do when there's a change in government … is they have to increase oil production, because that's really the main economic opportunity," Cárdenas said. "In some countries, priority number one is getting the economy back on track, and in the case of Venezuela it means producing more oil."