The Mitigation Work Programme can be a constructive space for developing countries to lay out their financing and technologies needs for an equitable energy transition
Photo: @UNFCCC / Twitter
Countries will gather in Bonn, Germany June 5-15, for the United Nations’s mid-year climate conference (SB58), a precursor to this year’s main climate summit in December — COP28, which will be held in Dubai, United Arab Emirates (UAE).
Mitigation — the act of reducing greenhouse gas emissions so as to prevent further global warming — is a crucial pillar of climate action, covering entire economic sectors from power, industry, and transport, to even forests and land.
At the 27th Conference of Parties (COP27) to the United Nations Framework Convention on Climate Change (UNFCCC) in 2022, India proposed language on the “phasedown of all fossil fuels”, calling for attention on oil and gas, in addition to coal. And while the European Union and United States seemed onboard with this, major oil and gas producers like Saudi Arabia, Iran, and Russia were not.
The COP27 outcome document instead reiterated previous calls “towards the phasedown of unabated coal power and phase-out of inefficient fossil fuel subsidies” and also called for a just transition to renewable energy.
Outside the negotiations, the First Movers Coalition — a voluntary alliance of companies “using their purchasing power to create early markets for innovative clean technologies across eight hard to abate sectors” and governments — showed progress, growing from 25 to 65 members within a year.
They announced the joining of the cement and concrete sectors to the coalition. The group pledged to purchase at least 10 per cent of near-zero carbon cement and concrete by 2030 and also committed $12 billion to scale up green technologies and cut emissions.
The issue of a “just energy transition” gained traction at COP27 as well, since Indonesia announced at the parallel G20 summit, that it would be a recipient of about $20 billion in starter funding through a Just Energy Partnership (JET-P) deal to reduce its coal dependence.
Since the UK COP Presidency made “coal, cash, cars, and trees” their crude slogan for COP26 in 2021, the discourse has shifted globally.
Developed countries are still calling for higher mitigation ambition from developing countries (which one could argue requires their climate finance commitment to be met). Meanwhile, the focus has shifted to encompass “all fossil fuels” and a just energy transition, rather than phasing out just coal.
This has certainly brought the oil and gas sector into the spotlight. Decarbonising the oil and gas industry is on the agenda of the UAE COP28 Presidency, although Scope 3 emissions — accounting for 78 per cent of emissions from the oil and gas sector — are not ambitiously addressed. A May 2023 report by the International Energy Agency (IEA) put forth a pathway that could lead to 60 per cent reduction in oil and gas emissions by 2030.
On the energy transition, renewable energy is flourishing in many parts of the world, helping the European Union reduce its dependence on Russian piped gas, for example. Clean energy investment has risen faster than fossil fuel investment in recent years, says the IEA.
About $2.8 trillion is set to be invested globally in the energy sector this year, of which more than $1.7 trillion is expected to go to clean technologies — including renewables, electric vehicles, low emission fuels, grids, storage, they add.
Yet this is not distributed equally across the world, with most of the increase in clean energy investment between 2019 and 2023 taking place in China, the US and the EU — amounting to an increase of $435 billion.
Poor and vulnerable countries are not seeing a clean energy boom in line with their needs.
About 97 per cent of South Africa’s $8.5 billion JET-P package comprised of loans. So, the energy transition is underway. But its nature is not exactly “just”. It will take time for progress on this front. These are issues that the UNFCCC mitigation negotiations must spotlight.
At UNFCCC forums, the prominent space to negotiate on mitigation is the ‘work programme for urgently scaling up mitigation ambition and implementation’ (also known as the Mitigation Work Programme or MWP). Established in 2021, it was proposed to address the insufficiency of Nationally Determined Contributions (NDC), and bridge the gap by increasing ambition in pledges to cut emissions.
At COP27 in 2022, developing countries emphasised that the programme should not be a replication of the Global Stocktake, and should not set new targets and obligations for developing countries.
It should also be guided by the UNFCCC’s principles of CBDR (common but differentiated responsibility) and equity. Over the past year however, the MWP has shifted from a space viewed with hesitation by developing countries, to one where they can possibly lay out constructive demands for international financing and technology support to accelerate domestic mitigation ambition.
In Bonn this month, the MWP’s co-chairs have announced that “accelerating just energy transition” will be the topic of focus in 2023. Centre for Science and Environment (CSE) and Down To Earth (DTE) spoke to Lola Vallejo, a co-chair of the MWP.
Deliberations will begin with a Global Dialogue, followed by an Investment-Focused Event. The Intergovernmental Panel on Climate Change is clearly setting out what needs to happen at a collective level, but the MWP ought to advance multilateral discussions on the “how” and dive in deeper into countries’ experiences — the good and the bad, Vallejo specified.
“These first events aim to provide a new setup, broadening the participation beyond traditional negotiation circles to make space for the practitioners in charge of the domestic energy transition, civil society experts and financiers,” she said. “They also innovate in terms of facilitating matchmaking to help countries get their projects off the ground or providing space for regional discussions.”
But developing countries face specific barriers which must be brought to the fore. Discussions around the falling costs of renewable energy around the world often neglect the high cost of capital, for example, that makes it unaffordable in many developing countries.
For example, one estimate suggests that unsubsidised solar power costs ~140 per cent more in Ghana than in the US solely because of differentials in cost of capital. According to the IEA, financing costs can be up to seven times higher in emerging and developing economies compared with the US and Europe.
“Financial barriers to the energy transition, including cost of capital, will be discussed in specific breakout groups on the second day of the Global Dialogue, to allow more interaction between participants,” Vallejo said.
“These discussions will be reflected in reports under the MWP, but there is nothing preventing us from connecting the dots with efforts led in other fora — for instance highlighting the IRENA-led work on cost of capital for clean energy for India’s G20 Presidency, or other ideas discussed in the run-up to Summit on a New Global Financial Pact taking place in Paris in June”.
Vallejo outlined three markers of success for the MWP discussions: A shared understanding of the energy transition challenge rooted in the best available science, bringing country practitioners on board to engage more deeply, and demonstrating to developing countries that the MWP can support tangible outcomes in terms of investment.
While the focus on a just energy transition is a good start to the year’s first major climate negotiation, there is scope for agreements to deviate away from equity considerations once we start discussing pathways, financing packages, and collective goals.
First and foremost, the energy transition itself must be equitable. Many rich countries, who are also historical polluters, have transitioned from coal to natural gas — which is cleaner but is still a fossil fuel. Developed countries must rapidly reduce their use of coal, oil, and natural gas, and also reduce energy demand through efficiency measures and appropriate behaviour change.
Large developing countries like India, South Africa, Vietnam, and Indonesia derive more than 75 per cent of their primary energy from fossil fuels today. It is not easy to transition away from them, especially when energy demand is still growing.
Moreover, these countries have lower per capita energy use than the developed world and must balance their need for economic development with their commitment to reducing emissions.
The challenge is to find a way to accommodate energy needs without compromising development goals or exacerbating climate change. For this, they must domestically create sectoral pathways for decarbonisation, for not just the power sector, but also for hard-to abate industrial sectors and transport. This will enable the creation of clear ‘asks’ or projects where international financing can be demanded and directed.
CSE-DTE support the setting of a global renewable energy target. The developed world needs to take the lead and add vast amounts of RE capacity while simultaneously phasing out fossil fuels.
The developing world cannot sit back — it needs to scale up RE as well, but to make that possible adequate finance and technology support is required from developed countries.
Concessional financing — with as little dependence on debt-creating instruments as possible — is needed to accelerate the transition in developing countries. This will help developing countries reduce fossil dependence, and also cushion their economies from taxation regimes like carbon border taxes that can reduce the competitiveness of commodities made from dirty power.
Thus, rather than primarily placing demands or “sticks” on phasing out coal, JET-P deals must become the “carrot” to grow clean energy infrastructure in the developing world.
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