Renewable Energy Investment Deficit Makes Global Warming Last

The lack of green investment which is not distributed evenly hinders the achievement of carbon emission reduction targets.

PETRUS RADITYA MAHENDRA YASA

The steam that comes out of the chimney of the Lahendong Geothermal Power Plant (PLTP) in Tompaso, Minahasa Regency, North Sulawesi on Monday (27/9/2021). The six units in the Lahendong PLTP supply 21.33 percent of the electricity needs in North Sulawesi-Gorontalo with a production capacity of 120 megawatts.

The growth in investment value in the renewable energy sector throughout 2023 is considered insufficient to reduce the rate of increase in world carbon emissions. Apart from the minimal amount, the distribution of green investment funds has also not been distributed evenly.

Based on a report from REN21, a global renewable energy community consisting of academics, government, non-governmental organizations (NGOs), and industries, there will be more than 622.5 billion US dollars of new investment channeled into renewable energy and fuels by the end of 2023.

However, in order to keep the average temperature rise of the Earth's surface to no more than 1.5 degrees Celsius, as stipulated in the 2015 Paris Agreement, REN21 calculates that an investment of 1.3 to 1.35 trillion US dollars per year until 2030 is needed for the renewable energy sector.

A total of 44 percent of green investment funds flow into the East Asia region, 26 percent to Europe, and only less than 4 percent flow to Africa and the Middle East.

The annual report also shows that global renewable energy capacity this year reached a record 473 gigawatts, an increase of 36 percent from 2022. However, the growth rate of renewable energy has not been able to keep up with the world's increasing energy demand.

One of the reasons is the unequal distribution of investment flows towards renewable energy. Based on the REN21 distribution report data, 44 percent of investment funds flow to East Asia, 26 percent to Europe, and less than 4 percent flows to Africa and the Middle East.

This condition causes poor countries to incur larger costs in providing environmentally friendly energy supplies. "The average capital cost for renewable energy projects in developing countries can be more than twice the capital cost for renewable energy in developed countries," said REN21 Executive Director Rana Adib, quoted by AP on Saturday (27/4/2024).

KOMPAS/KRISTIAN OKA PRASETYADI

A group of government officials and Polish entrepreneurs led by the Polish Ambassador to Indonesia, Beata Stoczynska, visited the amphitheater complex in the Likupang Tourism Special Economic Zone (KEK) in Pulisan Village, East Likupang, North Minahasa, North Sulawesi, on Friday (September 15, 2023). They explored investment opportunities in several sectors, such as waste management, green energy, and hospitality.

At the same time, in developing countries, public funds or state budget continue to flow into fossil fuels in the form of subsidies. There is also approximately 20 percent of energy project financing from donor countries and multilateral development banks that goes towards non-renewable sources.

Inequality

While developed countries enjoy renewable energy, developing countries tend to carry out extractive economies at the expense of natural resources.

The situation is in line with the latest report from the International Energy Agency (IEA), which also indicates that the implementation of environmentally friendly energy is still too concentrated in developed countries.

Also Read: IMF Debt Scheme Triggers Surge in Carbon Emissions in Developing Countries

At a time when global production of carbon dioxide emissions related to the use of fossil energy throughout 2023 reached 37.4 gigatons, or an increase of 1.1 percent compared to 2022, developed countries experienced a record decline in carbon dioxide emissions in 2023, even as their gross domestic product (GDP) increases.

The emissions produced by the European Union were reduced by 7.4 percent in 2023 due to the decrease in the use of fossil fuels. Meanwhile, the carbon dioxide emissions produced by the United States decreased by 1.9 percent last year.

The Executive Director of the IEA, Fatih Birol, stated that the reduction in emissions in developed countries is driven by a combination of strong use of renewable energy, transition from coal to gas, increased energy efficiency, and reduced industrial production.

"The emissions produced by developed countries have dropped to their lowest point in 50 years, while coal demand has returned to levels not seen since the early 1900s," said Birol.

"Last year was the first year in which at least half of electricity generation in developed countries came from low-emission sources such as renewable energy and nuclear power," he continued.

Meanwhile, in India, the robust GDP growth in the country contributes to an increase in emissions of around 190 million tons by 2023 or 0.5 percent of the world's total carbon emissions.

The very limited rainy season in India last year has increased electricity demand and reduced hydroelectric power generation, contributing a quarter of India's total emissions increase.

Also Read: Optimize the Acceleration of Renewable Energy in the Second National Emission Reduction Document

According to Birol, achieving equal distribution requires greater international efforts to increase investment and implementation of environmentally friendly energy in developing countries. "The world needs much larger efforts to enable developing countries to increase investment in environmentally friendly energy," he said.

The Carbon Majors report published by InfluenceMap states that the majority of carbon dioxide emissions that cause global warming since 2016 originate from 57 fossil fuel and cement producers.

It is recorded that during the period of 2016-2022, 57 entities consisting of state-owned enterprises and private companies produced 80 percent of the world's carbon dioxide emissions from fossil fuels.

Most companies have expanded their production of fossil fuels since 2015, the year when almost all countries signed the Paris Agreement.

The three largest carbon dioxide emitting companies in the world during that period were Saudi Aramco (Saudi Arabia); the Russian energy giant, Gazprom; and the Coal India Limited coal producer.

The report found that most companies have expanded their fossil fuel production since 2015, the year when almost all countries signed the Paris Agreement committing to take action to curb climate change.