This chapter identifies several opportunities to accelerate the transition to low-carbon energy systems while fostering economic growth: removing fossil fuels subsidies and putting a price on carbon, enhancing energy efficiency to get more out of the energy we use, creating the conditions for the phase-out of coal and rapid scale-up of renewables, and improving access to electricity and clean cooking.

Implementing strong carbon prices, including by eliminating fossil fuel subsidies, can harness the ingenuity of businesses and households to reduce emissions using least-cost approaches and by spurring innovation into new solutions.⁶³ Carbon pricing incentivises energy savings and use of cleaner fuels. Fossil fuel subsidies discourage investment in renewable energy and energy efficiency and encourage the lock-in of high-carbon assets. The IEA estimates that fossil fuel consumption subsidies were almost double the amount of renewable energy subsidies in 2016,⁶⁴ effectively acting as a ‘negative’ carbon price and counteracting policies in place to reduce emissions. This policy misalignment is expensive, inefficient, and socially regressive and reduces the effectiveness of climate policies.

More and more governments are using carbon pricing in the form of carbon taxes or emissions trading systems (ETS) as part of a broader policy package to tackle climate change. While the prices of carbon emissions facing energy users – or the effective carbon rate (ECR) –is primarily due to energy use or excise taxes rather than carbon prices in most jurisdictions, the number of carbon-pricing systems implemented or planned has quadrupled over the past 10 years, now covering over 70 jurisdictions and about 20% of GHG emissions globally (see Figure 4).⁶⁵ Major new developments in 2017 included the official launch of the Chinese national ETS in December and the introduction of new carbon taxes in Chile and Colombia, as well as increased prices or tightened caps in most existing carbon-pricing systems. Carbon pricing at the sub-national level, in particular in US states and Canadian provinces, continues to build pace. A pan-Canadian carbon price will be implemented in 2018, and carbon taxes are scheduled to come into force in Argentina, Singapore, and South Africa in 2019.⁶⁶ Business support is also growing: Almost 1,400 major companies and some large development banks have committed to applying a shadow internal carbon price to make their investment decisions ‘future-proof.’⁶⁷

There has also been notable progress in phasing out fossil fuel subsidies, with at least 40 countries starting or accelerating subsidy reforms between 2015 and 2017 (see Figure 5).⁶⁸ Egypt, for instance, raised fuel prices by 78% in 2014 and plans to double them by 2019. Indonesia raised gasoline and diesel prices by 33% in 2013 and another 34% in 2014. India eliminated diesel subsides in October 2014, removed price controls on gasoline, and has launched a successful campaign to get wealthier consumers to give up subsidised LPG (see Box 9). Saudi Arabia announced a five-year plan to raise fuel prices in 2015, and Mexico removed transport fuel subsidies and introduced a modest carbon tax in 2014.⁶⁹ In 2016, G7 leaders committed to eliminate “inefficient fossil fuel subsidies” by no later than 2025.⁷⁰ Following Germany’s leadership, the EU committed to phasing out subsidies to hard coal mining by the end of 2018.⁷¹ Despite this progress, the latest data from the IEA and OECD suggests that known subsidies and other support to fossil fuel production and consumption globally have declined from recent levels of over US$600 billion per year to just over US$373 billion per year in 2015.⁷² While this is in part due to real reform efforts, it is also partly attributable to recent low oil prices (resulting in a lower gap to cover to keep consumer fuel prices low), so it will be critical to ensure that these subsidies do not rise again as oil prices are on the increase again in 2018.

Evidence of the Benefits

Carbon pricing can go hand-in-hand with strong economic growth, as seen across a wide range of countries and regions applying carbon pricing for years and even decades. Sweden, one of the first countries to apply a carbon price in 1991 and now reaching prices of over US$150 per tonne of CO2, has also seen robust GDP growth while emissions fell by 25% since the tax was introduced. California, representing one-seventh of the US economy, has grown at a rate that consistently outpaced the US national average since it launched its economy-wide emissions trading scheme in 2012.⁷⁵ British Columbia has similarly outpaced growth in most of the rest of Canada since introducing a carbon tax in 2008 (see Box 8).

In addition, implementing strong carbon prices and eliminating fossil fuel subsidies has the potential to raise (or save) significant government revenues, a particularly important factor, given often stretched government budgets (see Figure 6). Carbon pricing schemes raised about US$33 billion in government revenue in 2017,⁸³ and annual revenues could be in the trillions if strong carbon prices were widely adopted.⁸⁴ Empirical results for this Report using the E3ME model indicate that pricing carbon and the removal of fossil fuel subsidies could generate an estimated US$2.8 trillion in government revenues in 2030, more than the GDP of India today.⁸⁵ Revenues can be used to spur economic growth, including through growth-enhancing tax reform, to ensure a just transition for fossil fuel-dependent communities and to invest in basic infrastructure, education, poverty reduction, and climate resilience (see Box 4).

In Indonesia, after raising prices on gasoline, diesel, and kerosene in 2005 and 2008, the government distributed multi-tranche cash transfers to approximately 19 million poor and near-poor households to offset the higher energy prices.⁸⁶ According to the World Bank, despite some difficulties in implementation, more than two-thirds of the total benefits went to the poorest 40% of the population, and cash transfer recipients showed improved education, health, and labour outcomes.⁸⁷ At the end of 2014, Indonesia further reformed gasoline and diesel subsidies at the same time as world oil prices fell. As a result, it saved IDR 211 trillion (US$15.6 billion) on fossil fuel subsidies, equal to 10.6% of all government expenditure.⁸⁸ The fuel subsidy savings in 2015 were reallocated to major investments in social welfare and infrastructure through increased budgets for ministries, state-owned enterprise, and transfers for regions and villages.

Putting a price on carbon also provides significant benefits to human health: In the nine US states that participate in the Regional Greenhouse Gas Initiative (RGGI)⁹⁰ – a cooperative effort establishing CO2 allowances for the power sector and therefore defining a cap on emissions from power – the public health benefit of the resulting reduced air pollution from power plants has been calculated at more than US$1.4 billion per year for a total of $US5.7 billion over 2009–2013.⁹¹ It is estimated that phasing in a US$70 carbon price in China could prevent nearly 4 million premature deaths from air pollution up to 2030.⁹²

Pricing carbon and removing distorting fossil fuel subsidies is also often the most cost-effective approach to reducing GHG emissions. For example, it is estimated that the phase-out of fossil fuel consumer subsidies could reduce GHG emissions by as much as 10% globally by 2050; while phase-out of production subsidies could result in a GHG emissions reduction of up to 37 Gt of CO2 by 2050, equivalent to the total annual emissions from aviation worldwide.⁹³

Challenges

Carbon pricing systems remain too limited and, where they exist, prices are far too low in most jurisdictions to drive transformative change. The 2017 High-Level Commission on Carbon Prices suggested that appropriate carbon prices should reach US$40–80 per tonne of CO2 by 2020 and US$50–100 per tonne by 2030, with the ranges reflecting that different prices will be appropriate for countries at different levels of development.⁹⁴ While most carbon pricing systems saw an increase in prices in 2017 compared with previous years, the majority remain far too low compared with what is needed.⁹⁵ Half of all carbon prices are less than US$10 per tonne CO2e – far short of what is needed to drive transformational change.⁹⁶ According to the OECD review of 41 countries, when including the carbon-price signals from excise taxes as well, and considering all CO2 emissions from energy use, about 60% of emissions are not priced at all, and for those that are, 90% face a price of less than US$35 per tonne of CO2.⁹⁷ Coal remains the lowest taxed fuel in most countries, despite being the most polluting. A number of jurisdictions — including Canada, the EU, and some US states — recently agreed on carbon price increases or established automatic mechanisms to ratchet up prices or reduce emission quotas, so some progress is notable. An important revision of the EU ETS was finally agreed to in 2017, and momentum to establish price floors, as in the United Kingdom and potentially others, will help ensure a more robust pricing signal.

Despite the expansion of carbon pricing systems recently, in many regions, there is still strong political resistance to implementing any new taxes in general. Sometimes carbon taxes face particular resistance, with opposition coming from major incumbent industries and consumers concerned about rising energy bills, making implementing or increasing carbon prices difficult. If past efforts to introduce carbon pricing systems in a given jurisdiction have failed or been poorly communicated, these can exacerbate citizens’ lack of willingness to accept expansions or price increases, even in other jurisdictions. The inherently political nature of carbon markets often results in a high level of political uncertainty and challenges, and the threat of backsliding is real. For example, a newly elected provincial government in Ontario, Canada in 2018 has announced it will be looking to cancel the cap-and-trade scheme and fight the national carbon tax scheme.⁹⁸

Similarly, fossil fuel subsidy reform⁹⁹ has been particularly challenging in many countries, with reform efforts in some cases leading to major public protests, strikes and even government instability. The recent progress in over 40 countries as cited above is both a testimony to progress in understanding how to manage and communicate reforms successfully, and also in part a result of relatively low oil prices globally in recent years.

Experience has shown that there are ways to address the political challenges of subsidy reform: dedicating resources to support a robust and well-communicated reform process, providing clear information on the costs and impacts (both positive and negative), setting credible and staggered time frames for phasing out subsidies, providing targeted support to low-income households, and delivering on other social priorities (such as schools, hospitals, public transport) (see Box 9 on India).¹⁰⁰ In Indonesia, communications campaigns operated through newspapers and television have been foundational to the success of fossil fuel subsidy reform. In Jordan, political will, cash-transfer schemes to lower-income households, and citizen communication and engagement contributed to reform success in 2012.¹⁰¹ In Germany, the government has launched a commission on “growth, structural transformation and employment”, which will work through the end of 2018 to ensure a just energy transition in the country. The commission will develop plans for, amongst other things, the phase-out of coal-powered energy production, outlining a gradual shutdown of fossil power plants and the financial compensation that might accompany this structural change.¹⁰²

The advent of rising oil prices, as seen in 2018, may pose challenges to maintaining fossil fuel subsidy reforms in some countries. A number of recent reforms were in part successful as a result of low oil prices in recent years (given that a number of governments previously subsidised the difference between high oil prices in the market and fixed lower prices at the pump domestically). As and when prices rise again, ensuring other mechanisms to more directly target support to low-income households who may be at risk of energy poverty will be essential, as well as clear communication of these measures, to ensure continued support for the reforms. A shift toward greater reliance on renewable energy and electrification can also help to attenuate the effects of oil price fluctuations.

Absent new carbon taxes, some countries are adjusting existing taxes to better reflect their carbon and pollution content. Since 2012, some countries, including Ghana, have better aligned diesel taxes with gasoline taxes, and some low- to middle-income countries have increased taxes on transport fuels.¹⁰³ In the absence of the political will or readiness to implement a carbon price, these and other tax reforms can reflect environment concerns, but also make good budgetary sense. Similarly, air pollution charges, such as those accounting for black carbon, represent short-term policy options for countries not yet ready to implement carbon pricing systems.

Accelerators

• Major economies, starting with the G20, should put in place carbon pricing and phase out fossil fuel subsidies by no later than 2025. This would build on existing commitments under the G20 and G7, and recent progress in many major economies at the national or sub-national levels. In 2017, China launched plans for the world’s largest cap-and-trade programme; in India, there is strong business leadership and important progress on subsidy reform and implementation of a coal cess; and the Indonesian reductions in diesel and petrol subsidies are expected to lead to long-term savings of US$15.5 billion.¹¹¹ Countries can enhance their progress by implementing best practices for subsidy measurement and by monitoring progress towards reform in a transparent and standardised way, by implementing adjustment packages, and by conducting impact studies to identify and manage political economy challenges. Building on this momentum and with the support of the international community like major intergovernmental institutions (World Bank, IMF, OECD), countries have an opportunity to design country-tailored approaches to rapidly accelerate action to achieve their growth, social, and climate goals.
• National and sub-national governments can build on recent momentum for carbon pricing by seeking synergies between environment and tax policy objectives. Carbon prices are effective as revenue-raising mechanisms as well as delivering climate and broader environmental objectives. Combining decarbonisation with revenue-raising through well-designed carbon prices can strengthen support across government and with the public. For example, increasing excise on transport fuels, particularly where these are now comparatively low, can be a quick and effective way to raise effective carbon prices.
• Countries should integrate fossil fuel subsidy and carbon-pricing reforms into broader energy sector transition plans. Taking this approach can ensure a just and well-managed transition for workers, low-income households, and communities. Canada, Norway, and Germany all developed multi-stakeholder processes to support their energy transitions. Building on lessons learned from their experiences and recent successes in subsidy reform and carbon pricing in countries like Indonesia and India, there is an opportunity to use national and local dialogues engaging business, government, and social partners to develop low-carbon and climate-resilient energy transition plans.
• Governments should utilise regional approaches, like the Carbon Platform of the Americas¹¹² and technical partnerships, such as the Partnership for Market Readiness,¹¹³ to enhance carbon pricing and link existing schemes in a way that can address competitiveness concerns. Carbon pricing is being successfully implemented in Canada, Mexico, Chile, Colombia, California, and the nine US RGGI states, with positive economic outcomes, benefits for low-income households, and reduced emissions. If jurisdictions in the Americas move towards more robust and aligned carbon prices of US$50–100 per tonne CO2 by 2030, and phase out fossil fuel subsidies, they could realise over US$528 billion per year in revenues or savings by 2030, based on the E3ME modelling undertaken for this Report.¹¹⁴
• DFIs should apply shadow carbon prices to all investment decisions. The World Bank, the ADB, and the EBRD followed the example of the European Investment Bank and committed to apply a shadow carbon price.¹¹⁵ The International Finance Corporation (IFC) uses an internal carbon price for three high-emitting sectors with plans to expand.¹¹⁶ Many – though not all – of the DFIs have shifted away from financing coal power, and the World Bank will stop financing upstream oil and gas exploration from 2019 onwards. Between 2013 and 2015, MDBs collectively committed US$128 billion to infrastructure investment.¹¹⁷OECD DAC Statistical System, May 2017, as published in OECD, 2017. Technical Note on Estimates of Infrastructure Investment Needs, Background Note to Internal carbon pricing ensures that this infrastructure will be sufficient quality to achieve long-term climate and sustainability goals, and it can help to trigger carbon pricing by the commercial investors and financiers given portfolio assessments. Public finance institutions – including multilateral, regional, and national development banks as well as export credit agencies – have a responsibility to lead in aligning their investments with the global climate goals endorsed by countries through the Paris Agreement.

Energy efficiency has the potential to meet a significant proportion of the needed climate action. Under the IEA’s Sustainable Development Scenario, which is consistent with a below 2°C pathway, energy efficiency measures account for 44% of the CO2 emissions reductions in 2040 relative to the baseline – a greater share than renewable energy (36%).¹¹⁸ Without efforts to use energy more efficiently in buildings, transport, and industry, continued population growth and economic development is expected to lead to a 60% increase in energy demand by 2050.¹¹⁹ Thus, it is imperative that policy action be as ambitious – or more so – for energy productivity as it is for renewable energy. Globally, buildings represent 30% of final energy consumption, second only to industry¹²⁰ – where significant energy savings can be achieved through the deployment of best available technologies across small and medium enterprises (SMEs) in multiple industrial sectors. Space heating and cooling accounts for 40% of buildings’ energy consumption, and efficiency gains combined with decarbonisation of these services will be essential.¹²¹ Energy-efficient homes and workplaces are cleaner and cheaper to run. Improving the energy efficiency of buildings reduces costs at every stage of energy production, including the need for new energy infrastructure. Each dollar invested in efficiency is estimated to save US$2 in new power plants and electricity distribution costs.¹²² Beyond improving efficiency at end use is the opportunity to collect and manage ‘big data’ to leverage substantial efficiency gains across many activities at once, for example by creating innovative energy management platforms and integrating these into ‘smart’ grid operations.¹²³ Energy-efficiency measures assessed through the E3ME modelling for this Report were found to lead to a full 23.4% increase in the amount of value added per unit of energy generated by 2030, that is, a 1.2% improvement in energy efficiency per year, which is roughly on a par with trends since 2010.¹²⁴

Some appliances used by households and businesses, such as air conditioners and refrigerators, also emit hydrofluorocarbons (HFCs), powerful GHGs that can be up to 4,000 times more potent at trapping heat than CO2. The 2016 Kigali Amendment to the Montreal Protocol implementing call for plans to phase down HFCs; such a phase-down could result in global electricity savings of 2,300 to 7,100 TWh¹²⁵ from 2018 to 2050 and avoid up to 0.5°C of warming by the end of the century.¹²⁶ Coupling the phase-down of HFCs with improved energy efficiency of air conditioning and refrigeration equipment requires aligning financing mechanisms with policies that promote energy-efficient buildings. President of the World Bank Jim Yong Kim, for example, underlines the institution’s US$1 billion initiative in urban areas, “which overlaps with this HFC agenda,”¹²⁷ as part of the Bank’s commitment to supporting energy efficiency in the HFC phase-down.

Evidence of the Benefits

More energy-efficient lighting and appliances can reduce electricity bills and energy poverty – and are important to achieving the Sustainable Development Goal of universal access to affordable, clean, and modern energy. Simply switching to LED lighting can offer savings of up to 50-70% – and up to 80% when coupled with smart systems.¹²⁸ More energy-efficient buildings also build resilience to climate change with the greatest benefits captured by the poor.¹²⁹

Improving energy efficiency in buildings creates jobs. Each investment of US$1 million generates an average of 14 job years of net employment¹³⁰ – up to three times the number of jobs for the same investment in fossil fuels.¹³¹ Energy-efficient buildings also bring productivity, health, and climate-resilience benefits, including improved respiratory health and reduced risk of heat-related illness or death; and they also improve worker productivity.¹³² The health benefits of efficient buildings are worth approximately 8-22% of the value of energy savings in the developed world and likely much higher in the developing world.¹³³

Over the last 25 years, building energy-efficiency measures have realised more than 450 exajoules (EJ) in cumulative energy savings worldwide, but the full potential for energy-efficiency gains remains unrealized.¹³⁴ Rapid deployment of high-efficiency lighting, cooling, and appliances would save 50 EJ in electricity demand between now and 2030 – or nearly three-quarters of current electricity demand (see Box 10 on energy-efficient equipment). The IEA estimates that through 2060, building-related emissions reductions in a Beyond 2°C Scenario could be 275 GtCO2 compared to the reference scenario – more than half the CO2 emissions produced globally in the entire energy sector from 2006 to 2014.¹³⁵

With regard to HFCs, replacing these with greener refrigerants has low up-front costs and can result in energy-efficiency improvements of 10–50% or more when the best available technologies are applied.¹³⁷ Many companies have already realised the benefits of non-HFC refrigeration. Both Coca Cola and Heineken report energy-efficiency improvements of about 40% from HFC-free coolers, with resulting electricity cost savings.¹³⁸ Replacing HFCs with alternatives in line with the Montreal Protocol is an important measure to significantly reduce GHG emissions.

Analysis undertaken for this Report using the E3ME model examined a scenario of global action to enhance energy efficiency in buildings, appliances, industry, and transport roughly in line with what would be required under the IEA World Energy Outlook 450 parts per million (ppm) scenario. Under this global action scenario, CO2 emissions are expected to be 20.5% lower by 2030 relative to a baseline scenario. Co-benefits from this scenario include net employment growth, acceleration in the pace of economic activity, enhanced government budgets, and improved health outcomes through reduced air pollution, among others. Air pollution would be reduced compared to the baseline, which would, for example, translate into a drop in cumulative government expenditure on health of about US$2.5 billion in European countries by 2030 compared with the baseline.

Challenges

For investors, investments trigger cost savings, but the savings can appear to be risky or disproportionately low compared to high up-front capital costs, creating a barrier to investment. A challenge is in developing appropriate incentives and financing vehicles to cover these relatively high up-front costs. A number of the examples in the boxes below highlight innovative approaches to financing energy-efficiency improvements. But such successes need to be rapidly scaled: An estimated US$8.8 trillion in additional investment in energy-efficient equipment and infrastructure across buildings, transport, and industry is required by 2030.¹³⁹

For policy-makers, a challenge lies in the fact that investments in energy efficiency are spread across multiple sectors, meaning decision-making is also highly distributed. It is hard therefore for public policy to find tools that can accelerate progress on multiple fronts simultaneously to reach meaningful scale.¹⁴⁰ Particularly in developing countries, a lack of enforcement of existing standards and lower adherence can result in less than expected impacts, frustrating investors. Price reforms offer an important means by which to harness demand side and distributed energy resources by incentivising investment in these. This challenge and set of opportunities can be illustrated by the case of building energy-efficiency policies. For property developers, payback times on investments made can typically take 10 to 20 years (if renovation and retrofit are extensive), and this is unattractive for a private organisation to take on without financial incentives.¹⁴¹ Well-targeted policies can decrease the cost of these investments for consumers through financial incentives (such as subsidies for energy audits, energy-efficiency investments, or loans) or fiscal incentives (such as tax reduction, tax credit, or accelerated depreciation). Similarly, policies can incentivise energy utilities to invest in smart meters and digital technologies to achieve greater demand side flexibility. Financial incentives tend to be the dominant policy tool in countries surveyed by the World Energy Council with 87% use of financial incentives versus 13% use of fiscal incentives.¹⁴² Building standards have also proven to be highly cost-effective in a number of jurisdictions, including for example California.¹⁴³

In buildings – as in industry – the lifetime of the infrastructure constitutes an additional challenge: Where significant infrastructure build-up has already occurred, particularly in developed and emerging economies, improving energy efficiency requires retrofitting existing infrastructure. In OECD countries, roughly 65% of the building stock expected by 2060 has already been built. To put the global building sector on a net-zero carbon pathway, there needs to be a 30% improvement in global average building energy intensity by 2030, as much as a doubling of the rate of building renovation in the coming decade (see Box 11 on Seoul’s retrofitting programme).¹⁴⁴

The main barriers for HFC phase-down include the lack of availability and high up-front costs of low global warming potential (GWP) fluids and technologies in certain markets; the lack of technical capacity for installation and maintenance; and restrictive safety codes and standards that restrict use of low GWP fluids that might be flammable, toxic, or operate at high pressure.¹⁴⁷

Accelerators

• National and sub-national governments should introduce building energy-efficiency regulatory policies for new and existing buildings. This creates financial savings and builds resilience for the poorest.[1] ¹⁴⁸ Policies include mandatory building codes and code enforcement strategies;¹⁴⁹ benchmarking, disclosure, and sector retrofit targets; GHG mandates;¹⁵⁰ cap-and-trade programmes that include buildings¹⁵¹; and deep retrofit requirements. Codes for new construction are particularly important, as studies indicate that they result in greater energy savings than either retrofit policies or appliance standards and labelling (see Box 11).¹⁵² In India, for example, building codes can reduce electricity demand by 25% and cooling loads by 70%, compared to business as usual in 2050.¹⁵³ Tokyo was the first city to include buildings in a cap-and-trade scheme (see Section 1.A), and by 2016, it reduced CO2 emissions from covered buildings by 26%.[1] ¹⁵⁴ Coupling building standards with sustainable construction can compound energy savings. For example, combining passive house design with laminated timber materials (see Box 51 on the growing use of timber) could reduce lifecycle CO2 emissions (embodied and operational) by more than 90%.¹⁵⁵
• National and sub-national governments should pass legislation enacting energy efficiency resource standards (EERS). An EERS (also known as an energy efficiency obligation) establishes specific, long-term targets for energy savings that utilities or non-utility program administrators must meet through customer energy-efficiency programs, and analogous to renewable portfolio standards. Policy action for energy efficiency needs to be commensurate with its mitigation potential. In the United States, 26 states already have adopted EERS, with Massachusetts and Rhode Island having the most stringent requirements, mandating more than 2.5% new savings annually.¹⁵⁶ A US national EERS could result in net consumer savings of more than $144 billion by 2040.¹⁵⁷
• National and local governments and utilities should expand financial tools and private engagement to address the up-front capital costs. These tools include property-assessed clean energy (PACE)¹⁵⁸ financing in the United States, which is being developed in Europe;¹⁵⁹ on-bill financing¹⁶⁰ and government-led finance programmes; energy services companies, such as climate revolving funds;[1] ¹⁶¹ and public-private partnerships. Melbourne has adopted an innovative environmental upgrade charge (see Box 14), and Seoul’s BRP has made low-interested loans available to more than 14,000 buildings (see Box 11). Germany created the Energy Efficient Rehabilitation Programme, which blends finance, retrofit standards, and technical assistance (see Box 15), leveraging US$16 for every US$1 in government investment. EESL, the energy service company set up by the Government of India (Box 10), has saved the country an equivalent of 3% of its annual electricity use.
• All countries should ratify the Kigali Amendment to the Montreal Protocol for the phase-down of HFCs. Implementation of the Kigali Amendment is expected to avoid an increase in atmospheric temperature of 0.5°C by the end of the century.¹⁶² As of March 2018, only 28 countries have ratified it — and not yet major emitters like China, India, and the United States.¹⁶³ All countries should accelerate the schedule of HFC reductions, such as including them as part of their next NDCs for climate action that are due to be submitted by 2020.
• National governments should establish, enforce, and regularly ratchet up appliance minimum efficiency performance standards (MEPS) and ban high-GWP HFC refrigerants while also introducing labelling programmes that enable consumers to choose better products.¹⁶⁴ Japan’s ‘top runner’ programme makes the most energy efficient appliances the basis for the new standard.¹⁶⁵ Cross-country harmonisation on MEPS can further accelerate progress. The SHINE programme’s AC standards are projected to reduce electricity consumption by 5,373 GWh per year across eight Southeast Asian countries, including Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Thailand, and Vietnam, saving the average households about US$260 (€217) over five years (see Box 13).

Today, power represents 20% of global final energy consumption, and the global power mix relies heavily on fossil fuels (65%) – with a significant proportion of that being coal (37%) – while renewables only represent 24%.¹⁷⁸ But we are heading towards an increasingly electrified world: The deployment of electric cars and electric heating and cooking in buildings will drive power demand growth in the short term, while some segments of heavy-duty transport and heavy industry could also switch to electricity by mid-century. This could eventually lead to a tripling or quadrupling of power demand globally by the end of the century¹⁷⁹ and make power decarbonisation even more crucial to avoid disastrous environmental impact. Meeting growing power demand with low-carbon energy sources has the potential to transform the health of the planet and people. Results from the E3ME modelling analysis indicate that a shift away from fossil fuels and towards renewable sources of energy could yield a 37.8% increase in the amount of energy produced per unit of carbon emissions by 2030, which is a 1.8% annual increase in the carbon productivity of energy.¹⁸⁰ According to IRENA analysis, this shift towards renewables is also a massive economic opportunity: Doubling the world’s renewable energy capacity by 2030 could save the global economy between US$1.2 and US$4.2 trillion each year, largely due to a massive reduction in the costs incurred from pollution by non-renewable sources.¹⁸¹

Worldwide, the equivalent of 1,500 coal plants are estimated to be in construction or planned,¹⁸² but the deployment of large-scale renewables is accelerating due to rapidly falling costs and new developments in batteries and energy storage.¹⁸³ Wind and solar power are reaching cost-competitiveness with fossil fuel-based power generation, with prices hitting record lows—as low as under US$ 3 cents per kilowatt hour–in recent auctions.¹⁸⁴ The Carbon Clean 200 index identified 366 publicly listed companies with more than US$1 billion market cap for which clean energy represents more than 10% of revenues,¹⁸⁵ demonstrating that clean energy is already an investable market. One hundred and forty companies with a collective revenue of over US$2.75 trillion have also committed to source 100% renewable electricity as part of the RE100 initiative.¹⁸⁶

Meanwhile, more than 30 countries and states have already joined the Powering Past Coal Alliance, launched in November 2017.¹⁸⁷ In the United Kingdom, coal-based power generation in the winter months is estimated to be just a fifth of 2012 levels,¹⁸⁸ and there were several coal-free days in 2017 and 2018.¹⁸⁹ There is growing evidence that India will not need any new coal power plants to meet the increasing electricity needs of its population and economy over the next 15 years.¹⁹⁰ In 2018, Ireland became the first country to commit to divest from fossil fuels.¹⁹¹

The cost of managing the intermittency of wind and solar power generation is also tumbling. Battery prices have halved over the past three years,¹⁹² and the deployment of smart grids makes it easier to manage and optimise use of multiple sources of flexibility in the power grid, in particular via demand response. By 2035, running a predominantly intermittent-renewable-based power system is likely to be cost-competitive with running a gas-based power system in most places, thanks to the combination of decreasing renewable generation costs and decreasing flexibility costs.¹⁹³ Gas-fired thermal plants will continue to be required to meet peak demand, especially seasonal peaks, such as winter heating, but continued use of gas during the transition period commands that methane leakage be under control, not to cancel the emissions benefits of a coal-to-gas switch.¹⁹⁴ Where they are available, other zero-carbon energy sources like hydro and nuclear power will play a complementary role in meeting power demand. Coal-fired plants with CCUS are not likely to be cost-competitive but could still be used in countries with recently built plants that could be retrofitted.

The rapid uptake in renewables globally over the past two decades has far surpassed the expectations of leading energy experts.¹⁹⁵ Maintaining the favourable policy environment that has helped to drive this progress is essential. As the share of low-carbon power grows and the clean energy transition progresses, greater focus will be needed on managing the social and political fallout from the phase-out of coal power generation and the increasing shift away from other fossil fuels. A number of countries, companies, and communities are organising multi-stakeholder dialogues or other processes to identify approaches that can help ensure a just transition for workers and affected industries (see Box 5). For example, Germany supports early retirement schemes for coal workers and shares the costs of reform with the industry. And China has put in place a US$15 billion fund for retraining, reallocating, and early retirement of an estimated 5–6 million people who will be laid off due to reductions in coal and steel overcapacity.

Evidence of the Benefits

The deployment of at-scale renewable power has the potential to deliver abundant low-cost low-carbon electricity, saving residential consumers money and enhancing industrial consumers’ competitiveness (see, for instance, Morocco’s solar deployment, Box 16).¹⁹⁶ It is expected that household energy expenditure for fuel consumption would drop below today’s level during the 2040s in a 2˚C scenario.¹⁹⁷ Renewable energy also creates more jobs on a per MWh basis than fossil fuels: In 2016, renewable energy companies employed 10.3 million people worldwide, and they are the fastest growing source of jobs in several countries.¹⁹⁸ Based on E3ME modelling results, more than 65 million additional jobs can be created in low-carbon activities by 2030 from actions identified in this Report, relative to the baseline, which would more than offset an expected loss of about 28 million jobs in high-carbon activities (i.e. coal; oil and gas; manufacturing of fuels; and the supply of electricity, water, and gas) for the same period.¹⁹⁹

The deployment of distributed renewable generation can also bring energy access to regions with non-existent or weak connections to the grid, in particular in rural sub-Saharan Africa, which will represent nearly 90% of those without electricity access by 2030 (see also, Section 1.D on energy access).²⁰⁰

Finally, in most countries, local renewable power generation can greatly enhance energy security, since it reduces the dependence on imported fossil fuels characterised by volatile prices, currency exchange, and geopolitical risks. Within the G20, countries that are currently net importers of fossil fuels would save US$1.95 trillion per year in energy import bills by 2050.²⁰⁴

The energy sector is currently the largest emitter of air pollution – indoor and outdoor – including from harmful pollutants such as sulphur dioxide (SO2), nitrogen oxides (NOX) and fine particulate matter (PM2.5), which are responsible for about 9 million premature deaths each year.[1] ²⁰⁵ Outdoor air pollution, much of which is linked to fossil fuels, is linked to 4.2 million premature deaths per year.²⁰⁶ The OECD estimates global welfare costs to be about US$3 trillion in 2015, possibly rising to US$18-25 trillion in 2060 without targeted policies to shift away from fossil fuel use and control air pollution.²⁰⁷ A recent study found that doubling renewables in the global energy mix by 2030 could save up to 4 million lives.[1]²⁰⁸ IMF’s analysis of the damages caused by fossil fuels shows that coal has the largest negative impact on human health, yet coal’s use is pervasively undercharged in energy taxation and carbon-pricing systems (see Section 1.A).²⁰⁹ Based on E3ME modelling results, European countries alone would benefit from improvements in air quality linked to carbon pricing and the removal of fossil fuel subsidies, with a consequent reduction of government expenditures in health of about US$7.2 billion between 2018 and 2030.²¹⁰

Accelerating the transition to a low-carbon energy system can further reduce air pollution and global warming by targeting emissions reductions of short-lived climate forcers, a class of pollutants that is associated with a higher GWP and increased air pollution at the local level. Reducing emissions from pollutants such as black carbon, methane, and HFCs (see Section 1.B) can improve local air pollution and health outcomes close to the source of emissions, as well as secure significant climate benefits. For example, methane – the key component of natural gas – has 34 times the GWP as CO2,²¹¹ and reductions in methane emissions can reduce toxic compounds at ground level.²¹² Highlighting these local benefits to climate action can be an important means to gain public support for action.

Challenges

Fossil fuel use is a hard habit to break. After four years of flat emissions, global carbon dioxide emissions from fossil fuels and industry rose 2% in 2017, mainly driven by increases in China and other developing countries,²¹³ and world oil production has never been higher.²¹⁴ At the same time, methane emissions, particularly from oil and gas industries, are also growing.²¹⁵ In a number of countries, particularly fossil fuel-rich economies, there is a real challenge to diversifying the economy. Norway, a nation whose economy has been built on oil and gas revenues, has been a leader in reinvesting these revenues in current and future generations. The country has more recently set up a dedicated Expert Committee for Green Competitiveness, which worked with leading companies and civil society to identify 11 sectoral road maps for transition to a low-carbon future.²¹⁶ The process helped build widespread buy-in to the transformative changes needed to transition to clean energy and identified a number of innovative solutions, but implementation will take time and dedicated political leadership. The challenge for fossil fuel-dependent developing economies will be far greater, and support from the international community will be essential to enable them to identify and transition to alternative growth paths that can still deliver strong, equitable, and environmentally sound development.

As noted, there is potential to create stranded assets and with that the risk of stranding jobs. This debate is particularly visible in coal-producing countries like India or Poland. Making a green grid politically defendable will require carefully crafted strategies to phase out coal power generation, while providing alternative sources of revenue for the populations and regions that are affected by this shift. (See Canada’s and Germany’s efforts to manage the transition, Box 17). Dialogue with trade unions is particularly important in that context to help identify socially beneficial solutions. In Italy, for example, the closure of 23 coal-fired power plants by ENEL has been negotiated in an agreement with the sector unions so as to guarantee that there would be no involuntary redundancies and that the workforce would be redeployed within the company.²¹⁷ ENEL has committed to looking for employment-generating solutions, such as building renewable power or technology hubs in those communities.

Solar and wind are characterised by high up-front capital costs and low operating costs, which makes total costs particularly dependent on the cost of capital – that is, reflecting the rate of return required by different types of investors. Renewable projects still face relatively higher cost of capital than other infrastructure projects, due to the as yet relatively limited track record of investments in the sector and by political risks, especially on future prices of electricity. This is further accentuated in developing countries by capital scarcity provoked by a wider set of country risks. One way to lower uncertainties for investors is by providing increased certainty on future electricity prices. This is where tendering for power supply by auctions proves to be a particularly attractive mechanism.²²³ Blended finance structures – that is, the strategic use of public or philanthropic development capital for the mobilisation of additional external private commercial finance – can also reduce risk for private investors, especially in developing economies.²²⁴

Nuclear power can also potentially play an important role in deep decarbonisation. Nuclear currently provides 11% of world electricity, and the challenge of transitioning to zero-carbon energy systems over the coming decades is much greater if renewables need to replace nuclear. Countries with limited renewable energy resources will also continue to need complementary power-generation sources. But nuclear fission faces significant challenges, such as the high cost of maintaining aging plants, cost overruns on new projects, and concerns about proliferation, safety, and waste disposal; and nuclear fusion technologies are yet to be proven. A concerted public-private innovation push on so-called Next Generation or Generation IV nuclear designs holds the promise of potentially dramatic improvements in efficiency and safety, waste, and reduced construction costs.²²⁶

Finally, there is still a strong belief among policy-makers that the grid cannot absorb more than a certain level of variable renewables without jeopardising reliability of supply. On the contrary, recent analysis demonstrates that a grid relying significantly on variable renewables could be operated – and at low-cost – even if it relied only on two sources of flexibility in the grid: gas plants operating in times of peak demand and lithium-ion batteries.²²⁷ Investing in transmission grids, including between neighbouring countries, and the technologies that facilitate demand response (such as smart meters) will make grid management easier.²²⁸ Recent experience demonstrates the viability of grids relying significantly on renewables, thus countering the fear among policy-makers about reliability of supply.

Managing these different challenges calls for integrated energy-system planning at the country level in order to simultaneously and coherently plan for both shifts in power supply and in power demand across buildings, transport, and industry. The shift to the energy system also calls for use of multiple policies to drive change – for example, carbon pricing, power market design, and regulations. In particular, decision-making should not be based on outdated facts and paradigms. Institutional boundaries will need reshaping to include robust information systems and new technical know-how.

Accelerators

• Countries should join the Powering Past Coal Alliance and commit to phasing out coal power production by 2025 or 2030 at the latest. The closure of thermal generation capacity makes economic sense as renewable power reaches cost-competitiveness with coal-based power, as is the case in India today,²²⁹ and even more so when considering the health costs related to coal burning. All countries will need to give careful consideration to their own context by establishing transition plans through multi-stakeholder processes and implementing these in a way that ensures a just transition for coal workers and affected regions. Countries should work together to share experience and lessons learnt as they move transition plans forward.
• National and state governments should raise targets for renewables penetration into the grid well above 30% of power generation by 2030 reaching more than 50% by 2040 in most locations. Higher targets should, in particular, be a key feature of the revision of the NDCs to the Paris Agreement. Given recent developments, there is evidence that this will not jeopardise the reliability of power supply.²³⁰ Auctions are an essential tool to meet these targets at low cost. In parallel, jurisdictions should undertake ‘grid of the future’ exercises, like New York’s Reforming the Energy Vision strategy and California’s Flexible Capacity Procurement (Box 19), to prepare for the smooth integration of higher shares of intermittent renewables in the grid. Analysis of a low-carbon pathway undertaken for this Report using the E3ME model indicates an increase in the share of renewable energy from a quarter of the total generation in 2018 up to 43% in 2030 and to over two-thirds by 2050.²³¹
• Governments should make state-owned enterprises (SOEs) a driver of the low-carbon transition. SOEs are prominent actors in global energy markets as investors in both fossil fuel power plants and renewable energy. A recent OECD report shows that SOEs in G20 countries account for roughly half of the currently planned or ongoing investment in the power sector, and they own 56% of the coal-fired power plants in operation and 52% of those planned; governments can use their ownership of SOEs to accelerate the low-carbon transition.²³²
• International financial institutions, development banks, and philanthropic foundations should develop blended finance funds and support governments in policy reforms to deploy renewables at scale in emerging and developing economies. Blended finance tools reduce both perceived and real risks associated with investments in renewable energy in developing countries (as in the case of the Lake Turkana project, Box 18). Concessional debt co-financing facilities and funds specifically aiming to support private sector climate investment, such as the ADB’s Canadian Climate Fund for the Private Sector in Asia, provide a key means to blend finance to support of renewable energy in emerging and developing economies; established in 2013, the Fund is supporting solar investments in Cambodia and Samoa, hydropower in Georgia and wind and geothermal in Indonesia.²³³ Moreover, India, South Africa, Mozambique, Cambodia, Mongolia, Uganda, Kenya, and Rwanda have recently been identified as particularly favourable countries for the development of blended finance for renewables (see also Section 1.D).²³⁴
  All oil and gas producers – in particular national oil and gas companies – should join the Oil and Gas Methane Partnership launched by the UN with nine oil and gas majors in 2014. Today, BP, ENI, Neptune Energy, PEMEX, PTT, Repsol, Shell, Equinor, and Total have committed to evaluate, monitor, report publicly on, and reduce nine key sources of upstream methane emissions.²³⁵

Expanding electricity access through renewable energy and scaling up clean cooking drives productivity and growth, reduces poverty and pollution, and improves health and quality of life, with the largest benefits for women. Today, roughly 1 billion people do not have access to electricity, and over 2.9 billion people do not have access to clean cooking.²³⁷ By 2030, planned policies are expected to deliver clean energy to millions, but population growth is expected to outpace progress, leaving 674 million people lacking electricity access and more than 2 billion people without clean cooking (Figure 7). Nearly 90% of those expected to be without electricity in 2030 are in rural sub-Saharan Africa, as are 40% of those without clean cooking access, while cooking with traditional biomass is also concentrated in developing Asia.²³⁸

A range of renewable energy solutions are emerging – from large-scale renewables to add to grid-based capacity to smaller-scale, off-grid solar – and all will be needed to help eradicate poverty and achieve universal access to modern energy by 2030.²³⁹ Achieving the goals of the Paris Agreement and NDCs requires deploying renewable energy at scale as countries move to fill the energy access gap. Solar home systems are spreading quickly in some places, offering affordable access to limited amounts of electricity to power basic household or micro-enterprise needs (for example, lighting, phone charging, small fans, and/or television). Although solar-powered micro and mini-grids are not yet commercially viable in developing countries, they offer much greater potential for transformative, rapid progress on electrification and economic development as they can provide higher levels of electricity for more productive uses (for example, community schools, medical centres, or hospitals).²⁴⁰ The IEA estimates that mini-grids offer a US$300 billion investment opportunity between now and 2030 and some countries are positioning to exploit this opportunity.²⁴¹ For example, India is strongly committing to development of renewable mini-grids and is finalising policy to add 500 MW by 2021 and achieve its ambitious energy goals by 2022; although it has not finalised its policy, the Government of India has begun to co-invest with companies in these systems, and, by early 2018, 63 new mini-grids were in place.²⁴²

Off-grid solar markets are rapidly expanding worldwide. By the end of 2017, they will have reached about 73 million households, transforming the lives of over 360 million people.²⁴³ Growing at about 60% per year since 2010, market penetration in 2017 is estimated to be about 17% with a total market value of about US$3.9 billion.²⁴⁴ Driving this market are new business models using mobile phones and mobile money to capitalise on rapidly declining costs of solar, batteries, and energy-efficient technologies. In less than one year, the number of households using pay-as-you-go (PAYG) solar systems doubled to almost 500,000 in East Africa in 2015 (see Box 21), while in 2016, it was 800,000.²⁴⁵

In Bangladesh, a decade of policy effort, including grants for partial subsidies and funding for loans to support a microfinance business model, has successfully delivered about 4.12 million SHS installations, reaching 18 million people or 12% of the population (see Box 22).²⁷⁰

For clean cooking, a range of technical alternatives are possible, from improved biomass technologies to LPG solutions, with varying costs. Despite limited success, pockets of progress in some countries can provide lessons for others. For example, Brazil’s creation of a national infrastructure for LPG production and distribution, the development of a retail market, and provision of subsidies resulted in 100% of Brazil’s urban residents having access to LPG, delivering local air quality and human health benefits.²⁷⁸

Evidence of the Benefits

Electricity access at the household level increases employment and earnings and boosts the productivity of home-based enterprises, while increasing the likelihood that children, particularly girls, will finish school and that women will work outside of the home.²⁷⁹

Census data from Brazil show girls with access to electricity to be 59% more likely to complete primary education than those without.²⁸⁰ Larger benefits accrue to women when access is combined with use of time-savings appliances such as a washer.²⁸¹ The income benefits of electrification for women in Brazil are particularly pronounced in urban areas (see Figure 8).

Rural electrification through SHS typically replaces kerosene or diesel use, generating financial savings in a two- to three-year period to consumers and GHG reductions.²⁸³ There are also vast market opportunities for off-grid solar solutions in urban areas to compensate for unreliable or sometimes too costly grid infrastructure access, which in turn will yield large financial and human health benefits to urban households.²⁸⁴ Clean cooking, which replaces traditional biomass use, also improves living standards by freeing up women’s time and improving their health, while reducing GHG emissions.²⁸⁵ Household cook stoves consuming solid fuel produce about 25% of global black carbon emissions. This is significant as black carbon has the second highest global warming impact after CO2.²⁸⁶ A shift to cleaner fuels and more efficient cook stoves to replace traditional biomass use is also likely to help curb deforestation in sub-Saharan Africa.²⁸⁷

The IEA estimates universal access to clean cooking alone could avoid 1.8 million premature deaths per year in 2030, free up billions of hours, and improve livelihoods for hundreds of millions of women.²⁸⁸ Growing demand for distributed solar and clean cooking drives innovation and lowers the costs of alternatives. The rapid decline in solar technology costs combined with availability of high efficiency devices (for example, LED lighting) allows bundling of technologies to further lower the costs and raise the quality of services provided.

Challenges

Many countries in developing Asia still have low-cost coal in their plans for expanding capacity, and much planning remains focused on grid expansion while ignoring off-grid opportunities for a strengthened and integrated system across both. Today, utility-scale solar and on-shore wind have become cost-competitive with fossil-fuel generation (even excluding external social costs of climate change and local air pollution) in some markets,²⁸⁹ and Africa is experiencing a solar revolution.²⁹⁰ Yet supportive policies and market incentives to further renewable off-grid and mini-grid systems are lagging, and financiers in local capital markets are reticent to invest due to limited experience with renewable technologies. There is often widespread failure in public governance of the energy sector in countries where energy access is a major challenge, for example where these basic failures lead to problems of quality or reliability of supply even after access is gained. Despite the great promise of decentralised solutions, a recent analysis of financing for energy access in 20 high-impact countries (representing 80% of the access gap) shows that a miniscule share of all traceable finance for electricity – less than 1% or about US$200 million per year – is supporting decentralised solutions.²⁹¹ The majority of electricity policy and finance is targeting grid expansion, ignoring the vast potential for decentralised solutions to complement the grid to accelerate electricity access.²⁹² Access to domestic capital is a barrier to timely investment; and while foreign investment has been driving the SHS business in Africa so far, costs of capital are driven up by foreign exchange risk, prompting some DFIs to partner with business to offer guarantees through currency hedging products to offset such risk.²⁹³ Such guarantees remain relatively expensive, however, so a complementary, longer-term solution is for countries and DFIs to work with local financial institutions to raise awareness and capacity to boost local investment.

The business case for mini-grids is growing, but business models need to be tapered to local consumers and market segments; and, for the moment, they are not commercially viable in poorer developing countries.²⁹⁴ Mini-grids require more up-front investment and patient capital, typically with a payback of 10–20 years.²⁹⁵ Mini-grids may require a 50% public finance subsidy and public-private partnerships to attract necessary private investment.²⁹⁶ By contrast, PAYG business models operate with a simpler form of consumer finance that has shorter payback of 2–3 years. Delivering SHS often requires limited or no public subsidy.²⁹⁷

On the cooking front, alternatives to traditional fuels also require solutions to be tailored to local contexts. Barriers to clean cooking include poor stove quality and inappropriate design; inadequate research and understanding of consumer needs; inadequate producer technical capacity and finance; lack of production at scale; lack of consumer awareness; cultural preferences for other methods; and affordability, particularly of up-front costs.²⁹⁸ In sub-Saharan Africa, for example, the cost of a basic improved biomass cook stove was less than US$15 in 2012, while the cost of a double-burner LPG or electric stove was at least US$50.²⁹⁹ When factoring the costs of fuel, the annual costs of LPG and electricity can be 30 -40% higher than wood.³⁰⁰

Additionally, monitoring electricity and clean cooking access can be challenging given lack of data as well as the binary definition as compared to multi-dimensional definitions of access, which would include measures of quality and quantity of supply. Information technologies today enable geospatial data collection and modelling, including use of satellite imagery, which together can help achieve better planning and integration of on- and off-grid electricity and clean cooking solutions.³⁰¹

Accelerators

• DFIs and national governments can work with local financial institutions to raise awareness and create local financial products to support investment in decentralised solar and clean cooking solutions. In turn this will lower the cost of the capital.³⁰² This includes partnering with national development and commercial banks, among other actors, to put in place measures such as green credit lines and de-risking instruments to crowd in local capital alongside foreign investment³⁰³ (See also Box 23).
• National governments should set time-bound targets for clean cooking and for decentralised electricity as part of integrated energy and electrification plans, enabling the development of project pipelines.³⁰⁴ Plans, targets, and ensuing project pipelines need to be developed in close collaboration with local stakeholders. A key step is to improve data collection and monitoring to assess progress and guide decision-making, including measures of access as well as quality and quantity of supply. Policies in Brazil, India, and South Africa are paying off as they achieve near universal access to clean cooking and are on track to achieve universal electricity access before 2030. In Brazil, 98% of the population has access to clean cooking, due to a three-pronged approach that included the development of national infrastructure for LPG production and distribution, the creation of a retail market that featured the participation of private entrepreneurs, and the provision of subsidies to the poorest families to ensure affordability.³⁰⁵
• Governments should support innovative business models to expand distributed solar and clean cooking markets by setting technical standards for solar technologies and clean cook stoves, reducing import restrictions and tariffs for technology components, and reforming kerosene and diesel subsidies. In 2016, 800,000 East African households were using PAYG solar systems,³⁰⁶ with thousands more in Nigeria served by Lumos.³⁰⁷ PAYG is now being used by firms in Africa to deliver clean cooking solutions, such as LPG.³⁰⁸ M-KOPA estimates that households with a SHS save US$750 because of avoided kerosene costs and eliminate 1.3 tonnes of CO2 over the first four years. More than 4 million households in Bangladesh are serviced by SHSs. Non-energy policies will also be needed to enable innovation in the information and technology (ICT) and mobile money or banking sectors, as well as to ease the costs of doing business.
• Development finance providers should provide early-stage support and dedicated funds or facilities for mini-grid electrification, off-grid solar, and clean cooking entrepreneurial activities. The blending of public and private finance is key and could include carbon finance or social impact bonds. As part of the International Solar Alliance, India pledged a concessional credit line of US$2 billion to Africa for largely decentralised solar energy projects; it has announced interest from Indian companies to install 664,000 solar pumps and 56 megawatts of mini-grids and train 5,400 solar mechanics in Africa.³⁰⁹ Beyond offering financial support, development cooperation providers can provide technical assistance for targeted design of solutions, including partnerships between grid and mini-grid operators or market creation for clean cooking devices and fuels.³¹⁰ The World Bank has piloted results-based financing and technical assistance for clean cooking markets in China, Mongolia, Lao PDR, Bangladesh, Uganda, Kenya, and Indonesia, helping companies to enter the market.³¹¹
• DFIs, national governments, and the private sector should partner to build and promote women’s skills and leadership to support the full clean energy access supply chain. Grameen Shakti in Bangladesh has trained 3,000 women as solar technicians to install and maintain SHSs in rural areas.³¹² BURN Manufacturing in Kenya is producing clean cook stoves and has a business model prioritising employment for women to support change through local distribution and servicing of its products. A special focus on training for women and women’s leadership as an integral part of business models can accelerate social impact (see also Box 23 on ADB’s efforts to support clean energy access and Box 20 on women as agents of change).³¹³