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2021/03 COMMONWEALTH SUSTAINABLE TRANSITION SERIES

SUSTAINABLE Enabling Frameworks ENERGYfor Sustainable ­­Transition SERIESAnthony Polack Commonwealth Transition Series 2021/03 ISSN 2413-3175 © Commonwealth Secretariat 2021 By Anthony Polack. Please cite this paper as: Polack, A (2021), ‘Enabling Frameworks for Sustainable Energy Transition’, Commonwealth Sustainable Energy Transition Series 2021/03, Commonwealth Secretariat, London. Anthony Polack has over 15 years’ professional experience in the energy and change sectors, having worked for the United Nations (UNDP, UNEP, UNFCCC), Commonwealth Secretariat, Pacific Community (SPC), German Agency for International Cooperation (GIZ), and the Australian, British, Fijian, Vanuatu and Palauan governments. He is a Certified Expert in Climate and Finance. Thanks and appreciation goes to Laurence Delina, Assistant Professor in the Division of Environment and at the Hong Kong University of Science and Technology, for his external peer review.

The Commonwealth Sustainable Energy Transition (CSET) Agenda encourages and promotes collaboration amongst Commonwealth member countries in the transition to sustainable energy systems and action towards achievement of the SDGs. It builds on the recognition at CHOGM 2018 of the critical importance of sustainable energy to economic development and the imperative to transition to cleaner forms of energy in view of commitments by member countries under the . It is anchored on the following three key pillars drawn from the agreed outcomes of the inaugural CSET Forum in June 2019 and leverages existing programmes of the Commonwealth Secretariat:

• Inclusive Transitions: advocating equitable and inclusive measures for energy transitions that recognise and address impacts on economies, communities and industries. • Technology: propagating advances in technology solutions and as well as research and development for sustainable energy systems. • Enabling Frameworks: supporting the development of enabling frameworks, including policy, laws, regulations, standards and governance institutions for accelerating energy transitions.

For more information, contact the Series Editors: Alache Fisho ([email protected]), Legal Adviser, and Victor Kitange ([email protected]), Economic Adviser, Trade, Oceans and Natural Resources Directorate, Commonwealth Secretariat.

Abstract This paper examines enabling frameworks that encourage the investment needed for sustainable energy transitions, including policy, laws, regulations, standards, governance institutions and implementation tools. It recommends measures to accelerate transitions and suggests ways to overcome potential barriers, providing policy-makers and other key stakeholders with examples that might be replicated in Commonwealth countries to help achieve the Goals and stimulate economic recovery in the wake of COVID-19.

JEL Classifications: O13, O16, Q01, Q48 Keywords: energy transition, sustainable development, low-carbon, investment, market reform Commonwealth Sustainable Energy Transition Series 2021/03 3

Contents

Summary 5 1. Introduction 6 2. Review and findings 6 3. Opportunities and approaches 13 4. Case studies 16 5. Conclusion 17 6. Recommendations 17

Notes 18 References 20 4 Enabling Frameworks for Sustainable Energy Transition

Abbreviations and Acronyms

CCS carbon capture and storage CO2e equivalent CSEF Commonwealth Sustainable Energy Forum °C degrees Celsius EU European Union GHG IPCC Intergovernmental Panel on IRENA International Renewable Energy Agency LTSs long-term low GHG emission development strategies NDCs nationally determined contributions NEM National Market (Australia) SDGs Sustainable Development Goals UNFCCC UN Framework Convention on Climate Change Commonwealth Sustainable Energy Transition Series 2021/03 5

Summary

During this twenty-first century global health, do so and least social costs and impacts social and economic crisis, the pace of the sus- should consider using either or both tainable energy transition needs urgent accel- regulatory and economic measures to eration. The economics of the transition are phase out fossil technologies and such that low-carbon technologies are becom- subsidies. ing increasingly competitive, risks are bet- • Renew ambition, align COVID, SDGs and ter understood1 and investment in renewable Paris Agreement policies to give investment energy is rapidly growing. However, strong certainty political will and ambition by Commonwealth ºº Declare a climate emergency. member countries is required to establish the ºº Legislate absolute and binding net zero enabling frameworks that set the policy, regu- carbon dioxide equivalent (CO2e) emis- latory, economic and financial measures to sions, 100 per cent renewables, and further attract finance, scale up technology economy-wide and sectoral targets. and lower costs. This will encourage the early ºº Align and merge COVID-19 economic action and investment necessary to achieve recovery stimulus measures with the a low-carbon transition consistent with the mainstreaming of the climate and sus- Sustainable Development Goals (SDGs) and tainable development agendas. Paris Agreement.2 ºº Make trade agreements conditional on Policy frameworks set targets and develop this alignment. the economic and financial instruments that ºº Ensure revised nationally determined provide direction and certainty in investment; contributions (NDCs) are submitted regulatory frameworks provide the market and consistent with achieving long-term rules and allow the integration of low-carbon low greenhouse gas (GHG) emission technologies; and governance frameworks pro- development strategies (LTSs) and the vide the oversight and enforcement to secure Paris Agreement target of 1.5°C. finance and low-carbon investment that align ºº Invest in modernising and increasing with the SDGs and the Paris Agreement and energy efficiency (e.g. buildings, equip- accelerate the sustainable energy transition. ment and appliances), renewable energy, Commonwealth countries, especially now more the of industrial processes, than ever during the recovery from COVID-19, heating and transport, , with the ability to do so and according to the greening of gas networks, education and circumstances of their own sustainable devel- training, and low-carbon research and opment, should adapt, adopt and implement development. these frameworks to ensure that investment in • Reform energy markets their economies is consistent with achieving ºº Ensure energy markets are open, com- the climate and sustainable development agen- petitive, transparent and flexible, so that das and a sustainable energy transition. they optimise the use of modern energy services and energy efficiency, allow the Key recommendations entry of new innovative technologies, • Phase out of technologies and for example, variable renewable energy, subsidies storage and etc., and ºº Due to the declining costs of renewable permit new financial and business mod- energy and storage, Commonwealth els to be integrated that further acceler- member countries with the capacity to ate the sustainable energy transition. 6 Enabling Frameworks for Sustainable Energy Transition

1. Introduction

Transitioning to a low-carbon economy at the Progress towards the energy transition is cur- lowest social and economic cost is one of the rently insufficient and too slow, as noted in the major challenges faced by humanity today and world leading scientific research journal Nature made even more so during the global health (Figueres et al., 2017), and is contributing to and economic crisis caused by COVID-19. The ecological collapse (ibid). Energy-related emis- energy transition brings uncertainties and chal- sions have increased by approximately 1 per lenges for all countries, but in particular those cent each year since 2015, which at current rates whose economies are heavily dependent on fossil would see the world’s ‘carbon budget’ exhausted fuel extraction and/or imports, in terms of future by 2030 (IRENA, 2019a). consumption trends, global investment flows, technology advancements and energy choices.3

…Let us be guided by our wish, our passion, to make a transition towards clean sources of . Deputy Secretary-General Arjoon Suddhoo, Commonwealth Sustainable Energy Forum, June 2019

2. Review and findings

2.1 Energy systems potentially synthetic gases and based on Energy systems are complex interrelated energy hydrogen.6 The energy is then transported and/ supply chains that have implications for the or stored to meet the final demand for energy design of the enabling frameworks for a sus- services in the residential, tertiary, buildings, tainable energy transition. They involve the industrial, transport and agriculture/forestry production, conversion, delivery and use of etc. end-use sectors. energy (Figure 1), and also the underlying busi- Appropriate enabling frameworks can foster ness and financial models. The enabling frame- an that provides greater elec- works need to ensure that the energy systems trification and greater energy efficiency in the not only deliver energy services, but also do this through innovations, new tech- in a way that aligns with, and achieves, global nologies and technology transfer, and system and national policy objectives. The enabling improvements. The demand side of the energy frameworks must be holistic in their design, to system can be more engaged by influencing cus- be capable of encouraging the accelerated low- tomer preferences, participation, and demand carbon transition of a country’s energy systems. response and management, energy conserva- From an energy supply perspective, the energy tion, and behavioural change (e.g. choosing transition involves a shift in over individual car use). sources4 from an energy system historically How the energy transition will take place and dominated (˜81%) by the fossil fuels of , oil at what pace will be determined largely by the and gas to the fast-growing renewable , regulatory and governance frameworks, sources of solar, wind, hydro and geother- including the incentives that are implemented mal, for example.5 The energy system converts and the underlying economics of the tech- these primary energy sources through power nologies involved. These influence the differ- plants or industrial plants to generate second- ent roles and business and financial models of ary energy in electricity, , , and the key stakeholders, and how efficiently and Commonwealth Sustainable Energy Transition Series 2021/03 7

Figure 1. Physical components of a generic energy system supplying fuels and electricity (but not district heat) to end-users

Waste and Primary energy Transport Conversion/ Transport Final energy demand/ secondary energy demand for energy-services

Crude oil Oil transport Re nery Oil transport

Coal Coal transport Cokery Coal transport

Transport

Natural gas Gas transport Gas transport

Electric power station Buildings Power-to-gas Electricity grid plant

Hydro power Hydro power plant Urban waste Industry Geothermal Storages energy plant

Wind energy Wind energy conversion Waste from Electricity grid Transformer/ Agriculture industry substation and forestry plant

Bioenergy power plant Energy plants and residues Bioenergy Bioenergy conversion transport

Unprocessed Traditional usage of biomass traditional transport biomass

Source: Diagram by Robbie Morrison, based on Figure 7.1 (page 519) in Thomas Bruckner, Igor Alexeyevic Bashmakov, Yacob Mulugetta, et al. (2014) ‘Chapter 7: Energy systems’. In IPCC (ed.) Climate change 2014: mitigation of climate change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change, Cambridge, United Kingdom and New York, NY, USA: Cambridge University Press: 511–597. Note: This diagram does not show the use of . effectively they participate in the global energy statements, plans and targets. These provide system (Table 1). short-, medium- and long-term coordinated and coherent direction to member countries to 2.2 Optimal policy, regulatory and achieve the SDGs (energy access, clean cook- governance frameworks ing, clean cooling, renewable energy and energy Optimal ‘good practice’ policy, regulatory and efficiency targets) and the Paris Agreement 9 governance frameworks create an enabling envi- (NDCs, LTSs and the 1.5°C target). ronment that delivers confidence and clear sig- The Paris Agreement, LTSs and the NDCs of nals to attract finance and retain investment in member countries serve essentially as an over- 10 energy businesses, technologies and the necessary arching policy framework or ‘blueprint’ of measures to align this investment with SDG7 and ready-made policies for the low-carbon transi- the Paris Agreement’s target of 1.5°C (Table 2).7, 8 tion. Many of the NDCs, however, were made They also foster supportive , energy prior to the finalisation of the Paris Agreement and financial markets, and human capital, and and are not sufficient to achieve the 1.5°C tar- accommodate and change for the get (Höhne et al., 2020: 25–28). Further, these transition to a low-carbon economy. NDCs included conditional elements of finance and capacity that are reliant largely on devel- Policy oped countries and are, at this stage, not likely In the case of the low-carbon transition, to be achieved. It is important then that subse- a policy framework may comprise policy quent revisions of NDCs, the first due in 2020, 8 Enabling Frameworks for Sustainable Energy Transition

Table 1. Key stakeholders of the energy system

Key stakeholders

Energy companies Oil and gas, electric utilities, renewables developers, service companies, technology and equipment providers, etc. Industrial consumers Chemicals, materials, metals and , mobility, manufacturing, etc. End consumers Residential, commercial Policy-makers Legislators, ministries of energy, environmental agencies, financial regulators, etc. International organisations International Energy Agency (IEA), International Renewable Energy Agency (IRENA), International Energy Forum (IEF), United Nations Climate Change (UNFCCC) Secretariat, Organization of Exporting Countries (OPEC), Commonwealth Secretariat, etc. Financial sector entities Commercial banks, private equity, institutional investors, development banks, etc. Cities Mayors, city planners, mobility providers, etc. Civil society Academia, civil society organisations, philanthropists etc.

Source: Adapted from World Economic Forum with analytical support from McKinsey & Company (2018). align with the Paris Agreement and the SDGs. budgets, 50 per cent carbon reduction by 2030, It is only when global and national energy poli- carbon neutral by 2050 or earlier, with a high- cies are more closely aligned that the magnitude probability and equitable 1.5°C trajectory) of the gaps between the conditional elements of should be established as soon as possible.11,12 the NDCs and the finance and capacity pledged This is because delayed action will result in a can be better understood and addressed. higher likelihood of overshooting 1.5°C, higher If not already done, setting absolute short-, and longer-term economic impacts, the locking medium- and long-term, and not relative, in of carbon-intensive infrastructure, greater CO2e targets (for example, five-yearly carbon emissions to be reduced, greater mitigation

Table 2. Benchmark indicators of policies and regulations that support achievement of SDG7

Target Policies and regulations

Electricity • Existence and • Grid • Affordability of • Utility access implementation of electrification electricity creditworthiness electrification plan • Mini-grids • Utility transparency • Scope of • Standalone and monitoring electrification plan systems Clean cooking • Planning • Scope of • Standards and • Incentives and planning labelling attributes Renewable • Legal framework • Network • Planning for • Counterparty risk energy for renewable connection and renewable energy energy use expansion • Incentives and • Carbon pricing • Attributes of regulatory support and monitoring financial and for renewable regulatory incentives energy Energy • National energy • Energy efficiency • (Net zero) building • Minimum energy efficiency efficiency planning entities energy codes performance • Types of electricity • Mandates and • Information provided standards rate structures incentives: large to electricity • Carbon pricing • Mandates and consumers consumers and monitoring incentives: utilities • Financing • Mandates and • Transport energy • Energy labelling mechanisms for incentives: public efficiency system energy efficiency entities

Source: World Bank, ESMAP (2018). Commonwealth Sustainable Energy Transition Series 2021/03 9 costs, higher carbon prices, and greater reliance electrification using renewable energy, as cur- on (Rogelj et al., 2018). rently the power sector receives the most policy The targets should be national and include attention and ambition (World Bank, ESMAP, sectoral (e.g. transport, industry, heating) 2018). For example, a study by the Renwable renewable energy, job creation and individual Energy Policy Network for the 21st Century company/organisation targets (scopes 1, 2 and (REN21) found that there are 143 countries 3).13 This can provide the short-, medium- and with power regulatory policies, but there are long-term coordinated and coherent direction only 70 countries with transport regulatory to member countries to achieve the SDG7 and policies, and only 23 countries with heating the Paris Agreement 1.5°C targets. and cooling regulatory policies. In response, The Commonwealth countries of Canada, some of the measures REN21 recommends are Fiji, New Zealand, Singapore and the United to create accessible market conditions, mandate Kingdom already have net zero carbon goals, for technologies such as heat along with Cyprus and Malta as part of the pumps, ensure electric vehicles maximise the European Union (EU) and about 20 other use of renewable energy, undertake energy effi- countries. Also, Bangladesh, Canada, Cyprus, ciency retrofits of housing and buildings, imple- Maldives, Malta and the UK have declared a ment net zero building energy codes, establish climate emergency, along with several other fuel efficiency standards, encourage bans of fos- countries and the EU.14 These actions also sil fuel, especially in heating and transport, and raise awareness and can be followed by educa- integrate planning among all energy sectors. tion programmes and consumer behaviourial In recommending particular policies and change programmes. measures, there is a need to recognise the diver- These can complement , gent pathways adopted for the energy transi- New Social Contract and COVID-19 recovery tion by Commonwealth member states and the stimulus measures that combine social welfare, challenges of sustaining economic growth and economic development, employment and cli- development. Developing countries, especially, mate goals. An employment adjustment mecha- may lack the resources and capacity to quickly nism can be used to guarantee the employment make the transition, as they are constrained by of those whose jobs are transitioning or no a significant dependence on importing fuel or longer exist and build equitable, inclusive and exporting extractive resources. They are also resilient economies. trying to alleviate while curb- Trade agreements can incorporate alignment ing carbon emissions, but at the same time fac- with climate policies to assist in achieving Paris ing the risk of stranded assets15 and the loss Agreement commitments, e.g. the free trade of stock market value and/or export revenues negotiations between New Zealand and the from their resources, for example, coal in South United Kingdom that are likely to support the Africa and India. In comparison, developed achievement of New Zealand ’s zero carbon bill countries like Australia, Canada and the United and the UK’s goal of zero carbon by 2050. This Kingdom may be better placed to lead the tran- can be supported by carbon border tariffs or tax sition by mitigating risks and diversifying the adjustments, such as the EU plan for a carbon energy supply to rapidly include more renew- price on imports which has been endorsed by able energy, reduce emissions, transfer technol- the International Monetary Fund (IMF). Other ogy and assist developing countries to make measures include the lifting of tariffs/duties on, their transition. or providing tax exemptions to, low-carbon and Also, there are interdependencies between climate-resilient equipment/products, encour- countries that need to be recognised in bilateral aging foreign direct investment in low-carbon cross-border energy trade, as they may pres- technologies, establishing a process whereby ent opportunities or barriers in energy transi- developing countries can access low-carbon tion to low-carbon economies. A coal mine technology patents, and fostering net zero in Australia may be supplying a power station finance that aligns all lending and operations in India, which may be importing equipment with these climate policies (Pigato et al., 2020). from China and exporting power to a grid that The heating and cooling, and transport sec- is interconnected to Bangladesh. The policies tors need greater policy focus, including their of one country may impact many others. For 10 Enabling Frameworks for Sustainable Energy Transition example, a change of government in Australia finance and encourage the introduction of may result in the closure of a coal mine, India innovative financial and business models. This may decide to increase domestic coal produc- can improve the ability to scale up renewable tion, Bangladesh may decide to reduce planned energy and energy efficiency and promote coal power plant development from 41GW inclusive economic development and growth, to 5GW, or China may decide to limit coal secure and reliable access to energy, and envi- imports. Some phase out of fossil fossil invest- ronmental sustainability. ments may also be at the risk of investor-state As discussed above, the LTSs and NDCs dispute settlement if countries breach interna- as implicit global policy frameworks must be tional investment obligations. aligned with the Paris Agreement. Therefore, all Finally, it is not just ensuring the implementa- climate and development financing should also tion of these policies or measures, but also their align with the Paris Agreement. There should timing. Early action and ensuring they occur be credible fiscal and financial regimes to with urgency, allows for them to be scaled and encourage investors (whether they be individu- sped up as necessary and have the maximum als, communities, small-to-large businesses or impact in keeping cumulative emissions down. institutions), the banks and capital markets to mobilise and scale up lending and investments Regulatory from private and public finance. Also, cred- Climate-related targets should be made bind- ible fiscal and financial regimes are needed to ing through laws and regulations. This should develop the markets and industries to continue be supported by complementary renewable improving access to low-carbon modern energy energy portfolio standards, energy efficiency and divestment from fossil fuels. standards, mandates and quotas, and building This could be achieved by introducing a form codes (including a moratorium on gas con- of carbon pricing16 to internalise the cost of cli- nections for new housing/buildings). This will mate-related (that is, the environ- assist in reducing emissions from generation, mental cost of GHG emissions).17 This would transport (e.g. phasing out of fossil fuel vehi- result in cost-reflective technologies and there- cles and light trucks, and replacing air travel fore make low-emission technologies more with train travel, where possible), equipment competitive and attractive. As a result, finan- and appliances, and buildings. Energy mar- cial flows would be redirected towards a low- kets should also undergo regulatory reforms carbon economy and revenues would be raised to modernise and allow for greater adoption of to manage any negative social impacts. These low-carbon and least-cost technologies. revenues could be redistributed to those who Laws and regulations should give greater use less carbon, so that those in lower-income certainty to the policy framework and express groups, predominantly, are no worse off. the rules for investment. Predictable and stable In the absence of an economic instrument, market and regulatory frameworks should be such as a carbon pricing scheme where they implemented or improved to remove barriers are not politically possible or in developing and encourage investments in, and reflect the countries,18 a fiscal and financial regime that economic value to the energy system of, renew- encourages innovation, investments and volun- able energy, battery storage, the development of tary changes may be preferred over economic and mini-grids in areas instruments. This could be supported by legis- not covered by national grids, and district heat- lation to mandate change to balance command ing and cooling systems. A pipeline of bankable and control, and market-based instruments. projects could be established and approval of This regime would include the appropriate projects could be governed by legislating mini- pricing of energy and infrastructure, security of mum emissions reductions or requiring retro- property rights, energy trading rules, removal fitting of existing equipment or technologies to of information asymmetries, and de-risking of ensure adequate or improved performance. renewable and energy efficiency investments – which have high upfront capital costs.19 The Finance regime would also encourage lending to new The policy and regulations of a country can technologies and attract private sector invest- influence the quantity and pace of available ment, which would enable investors to establish Commonwealth Sustainable Energy Transition Series 2021/03 11 viable business models for renewable energy mainstream sustainability into risk manage- investments. It would also foster already-exist- ment, e.g. stranded assets, and recognise the ing and proven measures, such as: need for transparency and long-termism in investment decision-making.21 Climate change • a scheme where payment is made for emis- and all other associated risks need to be inter- sions reductions from a particular tech- nalised into the macro-fiscal and budgeting nology, like solar PV installations, efficient frameworks (taxation, prudential and capital lighting or heat pumps; markets regulations, climate budget tagging). • public green procurement, where govern- New Zealand will be reportedly the first coun- ments buy in bulk to foster market devel- try to require the financial sector to report on opment of specific renewable or energy these risks. There should be timely and trans- efficient technologies; parent climate accounting of full lifecycle emis- • renewable energy tenders or auctions to sions, and a legal and fiduciary duty to include minimise the need for subsidies or move climate risks and revalue assets (capital), price subsidies from those that are now commer- assumptions and future profitability (perfor- cially viable to those that are not yet; mance) on company financial statements22 and • increased access to financing through likely dividends – as recommended by the Task blended public and private finance, low- Force on Climate Related Financial Disclosures. interest loans for green buildings and green Executive remuneration could be linked to the conversions, renovations and retrofits (i.e. achievement of climate and/or company emis- using renewable heating systems, rooftop sion reductions targets, and companies’ articles solar, batteries, and other smart energy and of association could be aligned with the Paris energy efficiency measures), and project- Agreement. Sovereign wealth, hedge and pen- based financing support; and sion funds, and other asset owners divesting • investment tax credits for research and from fossil fuels, for example, towards green development. and climate resilience lending, investments and bonds should be continued and expanded. Enabling frameworks are critical to allow tech- nologies and business models to be imple- Governance/Institutional mented where currently this is not possible, Institutions must be fit for purpose. They are such as supporting more variable renewable critical to good policy implementation and energy penetration and electrification. An enforcement of legislation. Government minis- example is large users of energy, such as: tries, departments and agencies must be coordi- nated at the national and sub-national level, so • data centres where digital technologies as to cooperate and interact using an integrated are combined with energy efficiency and approach to the energy sector, underpinned by renewable energy to optimise operations thorough stakeholder engagement and com- and provide grid stability services;20 munity consultations. Institutional mapping • battery storage (connected to and supported can be used to assess how an energy system is by renewable energy sources such as wind governed and owned in terms of the relation- farms) to store and sell energy or grid stabil- ships of government ministries, agencies, utili- ity services; ties and the private sector. These relationships • green hydrogen (produced using renew- can then be addressed to ensure that there is the able energy) supplying aluminium smelters, relevant oversight, accountability and transpar- with these smelters using excess solar and ency to achieve the economic, environmental wind when needed by grid; and and social objectives of balancing energy, cli- • the batteries of an fleet mate, development, and and pov- exporting excess electricity to the grid over- erty alleviation. night to provide grid stability services or energy. 2.3 Barriers to creating successful enabling frameworks Financial institutions, asset owners, regulators and shareholders need to redirect capital/finan- Once the appropriate enabling frameworks cial flows towards climate and SDG alignment, have been identified, there are barriers that 12 Enabling Frameworks for Sustainable Energy Transition must be overcome to ensure their successful the supporting infrastructure that is needed to implementation. ensure its economic viability. Garnering the political will for the transition Countries also experience the barriers of is difficult when long-term certainty is needed, capacity constraints, where they have limited but political cycles are short term. Governments institutional and technical capacity and need can also be captured by vested interests and technical assistance to develop this capacity. shareholders who own the incumbent high- The World Bank RISE (Regulatory Indicators carbon technologies that have been providing for Sustainable Energy) reports scores of coun- revenues and income to the state. There may tries on how attractive their policy and regu- still be strong resistance to change, despite the latory environments are for investment in overwhelming evidence of the increasing risk improving universal access to energy (electric- and costs of the potential of stranded assets. In ity and clean cooking), renewable energy and some countries, voters who are employed in, or energy efficiency, and ultimately achieving communities and informal sector workers who SDG7. It also notes that investment in sustain- are supported by, these industries may also be able energy is heavily influenced by factors well resistant to change, as they associate their iden- beyond what can be governed by energy sector tity with their and may bear the brunt of policies, namely the establishment of strong the economic and social impacts. institutions, access to credible data, appropri- Fossil fuel subsidies can distort energy mar- ate financing mechanisms and a robust private kets, be anti-competitive and involve govern- sector. ments as actors in financial markets rather than The World Bank RISE reports and data can as regulators. The subsidies, whether they be be used to review the varied implementation grants, concessional loans, guarantees or inter- of policy and regulatory frameworks perfor- est subsidies should be phased out, especially mance across countries, so that lessons can be while fossil fuel prices and demand are low.23 learned, challenges overcome and successes These can be redirected to support climate- considered for possible adaption and adoption friendly activities, such as energy efficiency, elsewhere. Cote d’Ivoire, for example, improved electrification, renewable energy, community its RISE score by approving its rural electrifi- organisations and essential public services – for cation plan, developing a framework for grid example, infrastructure, public/electric trans- connection and mini-grids, a legal framework port (charging stations, trains, cycling), health- for renewable energy, the holding of renewable care and education. Low fossil fuel demand energy auctions, the improving of regulatory and prices also means a loss in revenue for fos- and financial incentives, and the adoption of a sil fuel-exporting economies, which may have national energy efficiency action plan. otherwise been spent on infrastructure, edu- Barriers can be also overcome by encour- cation and health. This highlights the vulner- aging the sharing and exchange of infor- ability of fossil fuel dependency and the need mation and research and international to manage these risks by developing broader cooperation and innovative partnerships, e.g. sources of revenue from investment in growing the Commonwealth’s Access energy transition-related industries like energy Hub, the NDC Partnership, and the Climate efficiency and renewable energy, for example. Technology Centre and Network. Where there is an industry sector that is Other barriers include the lack of cost- heavily reliant on fossil fuels and subsidies, and reflective tariffs, currency risk, sovereign risk, has high upfront costs of capital with little pos- off-taker risk, land acquisition risks, transmis- sibility of electrification – for example, cement, sion/network constraints, , lack of steel, the thermal heating sector – a technology finance and the terms of finance. barrier may need to be overcome. The devel- opment of green hydrogen as an alternative 2.4 COVID-19 fuel to support the thermal heating sector will require accompanying policy and regulatory COVID-19 is now a significant factor to frameworks, along with a mandate, targets and enabling frameworks for the sustainable energy standards to ensure that that there is a redirec- transition. It is important to ‘build back bet- tion of fossil fuel subsidies and investment in ter’ while it is more economical to do so and Commonwealth Sustainable Energy Transition Series 2021/03 13 avoid further ‘locking-in’ and entrenching Nonetheless, the overall demand for energy high-emission pathways and technologies. declined during the pandemic. Although fos- There are correlations between climate change sil fuel energy use dropped dramatically, along and COVID-19. The global response to the with the general demand for electricity, solar COVID-19 pandemic has shown where expert and wind generation remained steady.24 It is evidence and science-based decision-making important to ensure that COVID-19 does not advice are heeded, advance preparation is ini- cause underinvestment in energy efficiency and tiated and global cooperation action is taken sustainable energy and miss the opportunity to simultaneously then global outcomes can be retire inefficient polluting equipment. achieved. However, it is also the most vulner- Any COVID-19 economic recovery mea- able that carry the greatest burden. There may sures should be climate-friendly expenditures. also be a link between people exposed to air At the same time, it is also important to ensure (e.g. from coal power that employees are retained or retrained where stations) suffering increased complications possible or new jobs are created, levels of pub- from COVID-19 (Hoang and Jones, 2020). lic health services are maintained, and a social During the crisis, the importance of access welfare safety net is guaranteed during the pan- to energy for health facilities, storing medicine, demic. IRENA estimates that doubling annual supplying water and communication etc., and energy transition investment to US$2 trillion other critical sectors of the economy, has been over the next three years can leverage private demonstrated. Energy wil also remain impor- sector investment by up to three to four times, tant for reliable of the cold sup- creating 5.5 million jobs and boosting world ply chain when COVID-19 vaccines are made gross domestic product (GDP) by 1 per cent available and deployed in large scale. (La Camera, 2020).25

3. Opportunities and approaches

3.1 Coal, gas and oil management falling fossil fuel prices means it is not necessar- To accelerate the transition from fossil fuel- ily economic or profitable to extract remaining based economies to carbon neutral economies, reserves. To be consistent with environmental Commonwealth member countries have to and social justice principles, those countries confront different transition pathways avail- where the social impacts of the transition are able to them to achieve their NDCs. These may likely to be least, e.g. developed countries like include difficult policy choices on, for exam- UK, Canada and Australia, should be urged to ple, whether to ban or cut back from new coal prioritise these actions. They are likely to be mines and power plants, new gas extraction better able to mitigate and absorb the adverse and power plants, imports of shale gas from impacts on workers and communities, as hydraulic fracturing, and/or new oil drilling. compared to countries where communities The cancellation of imminent projects and/or disproportionately experience the harms of the rapid phasing out of current coal and gas extraction, such as pollution, and not the ben- extraction and power plants consistent with the efits. Renewable energy plants could be placed 1.5°C target could take place using both eco- near the retired coal power plants to utilise the nomic (e.g. extraction taxes) and regulatory remaining transmission lines, as is planned in (e.g. licensing moratoria) measures.26 Whatever renewable energy zones in Australia. approaches are considered, they need to take IRENA states that replacing the highest cost into account varying individual country cir- 500GW of coal with solar PV and onshore wind cumstances (Jakob et al., 2020). in 2021 would reduce power system costs by up Any subsidy for fossil fuel exploration, to US$23 billion each year and cut annual emis- extraction, transportation and power plants sions by around 1.8 gigatons of CO2, equivalent should also be phased out, especially since to 5 per cent of total global CO2 emissions in 14 Enabling Frameworks for Sustainable Energy Transition

2019. It would also provide an investment return used for green hydrogen, as it becomes more of US$940 billion, which is equal to around 1 economically viable. per cent of global GDP (IRENA, 2020a). It is estimated that replacing the entire fleet 3.3 Innovative financing of global coal plants with clean energy plus battery storage could be done at a net annual Green and climate bonds allow governments saving as early as 2022 (Bodnar et al., 2020). and multilateral development banks to raise The economics of the rapidly declining costs finance and direct capital into renewable of renewables increase net annual savings to energy and other , assets US$105 billion in 2025. All this is before con- and measures. A green and climate bond sidering the health, climate and environmental framework needs to be created that sets out impacts of coal, or accounting for the social and the bond standards, the criteria for sectors environmental benefits of reducing pollutants and assets for investment, as well how the pro- (ibid). The energy return on investment (EROI) ceeds of the bonds will be used so as to enable of large-scale wind and solar PV are projected more renewable energy and energy efficiency, to be above 10 per cent, while increasing and for example (IRENA, 2020b). Sovereign bonds the amount of storage needed is relatively small issued by countries should also seek alignment (Diesendorf and Wiedmann, 2020; Brockway with investments that seek to achieve the Paris et al., 2019). Agreement and SDGs. As an example of the changes taking place, Other innovative financing models should renewable energy in India is expected to make also be considered to encourage and leverage up 51 per cent of total generation capacity private sector finance, such as energy perfor- by 2030, by which time coal-fired power is mance contracting (EPC), revolving funds, expected to reduce to 33 per cent – with the cooperative models and crowdfunding, for majority of coal expected to come from domes- example, to bridge the gap between current cli- tic sources (Government of India, 2020). At the mate finance flows and what is needed for the global level, 42 per cent of coal capacity was transition. Resource efficiency and transition- loss-making in 2018; this figure is estimated to ing to a , where products are be 56 per cent by 2030 and 72 per cent by 2050 designed and priced to ensure resources are (Carbon Tracker Initiative 2018). reused, recycled and kept in the loop with no waste, should also be considered. 3.2 Green hydrogen 3.4 Energy market reform Establishing enabling frameworks for green hydrogen may also assist with the transition. As Many national power grids and markets were the costs of renewable energy become increas- established prior to the growth in develop- ingly competitive or in locations where there ment of variable renewable energy like wind is currently excess renewable energy, and the and solar, and therefore the rules that govern costs of electrolysers decrease, green hydrogen market operation and trade have not evolved can be produced from solar and wind energy. It sufficiently to maximise the benefit from these can then be used, for example, as a feedstock in newer technologies. Where this is the case, the sectors which have been thought as difficult to regulatory environment needs to be improved decarbonise, such as and cement and strengthened, and have the barriers and in refineries, production and removed. the chemical industry (Glenk and Reichelstein Energy markets need to be reformed to tran- 2019). Green hydrogen can fuel buses, trains sition power systems from those that favour and heavy trucks and, in the future, potentially incumbent centralised, firm, synchronous fos- ships and planes. It can balance a renewables- sil fuel generation technologies to newer and based electricity system by turning electricity innovative flexible power systems. These new into hydrogen when the wind blows or the sun power systems integrate decentralised, variable, shines, storing large amounts of this power to non-synchronous generation technologies and be used later. Infrastructure developed or tran- energy services, for example, variable renew- sitioned for grey (fossil gas) and blue (fossil gas able energy and battery energy storage systems with carbon capture) hydrogen could be later that also provide ancillary market services Commonwealth Sustainable Energy Transition Series 2021/03 15 such as grid stability services (Kujala, 2020; energy target also requires complementary grid McKenzie, 2020; Parkinson, 2020). Innovations access and priority dispatch rules. like the use of blockchain, artificial intelligence Continued innovations, as well as research and smart grids also need to be accommodated. and development, demonstration projects, Energy markets can also be strengthened intellectual property rights, partnerships by being open and competitive, and by allow- between the public and private sectors, and ing the entry of independent power pro- technology transfer, should be explored. It ducers (IPPs) and the signing of long-term should be noted that in respect to carbon cap- standardised renewable energy power purchase ture and storage (CCS)27 it is more cost effec- agreements (PPAs) with industry and consum- tive to add renewables where this is a viable ers to provide simplicity, stability and certainty. substitute to generate the required energy sup- Any plans that forecast the future investment ply than to develop CCS technologies for coal needed in gas and electricity networks should plants – for example, the shutdown of the Petra be made public and accessible to investors, coal-fired carbon capture plant in Texas. with straightforward standardised connection However research on the economics of CCS for agreements used to simplify and accelerate the gas and industrial sources, for example, cement investment in, and connection of, new renew- production and capturing CO2 from the atmo- able energy generation. sphere, is ongoing. The use of new business models which cre- ate the business case for new services and offer 3.5 Employment new revenue streams for enabling technologies, Investment in renewable energy is expected to markets designed with regulations to incentiv- create more jobs per unit of energy generated ise investments, value flexible renewable energy and US dollar invested compared to fossil fuel- services, and which provide new business based technologies, with multiplier effects in opportunities and innovative system operation, employment and increased economic value in should be considered in accelerating the energy other sectors of the broader economy. transition (see Table 3) (IRENA, 2019b). A study by the Global Institute Noting that not all solutions are applicable found that: to all countries, markets for low-carbon tech- nologies need to be created by building gov- […] establishing emission reduction targets for ernment and technical capacity and making the electricity sector with renewable energy tar- finance available, accelerating the green hydro- gets which enable both decarbonization and job gen industry, along with installing behind-the- creation… (and) By setting more ambitious goals meter batteries at the individual household in their NDCs countries could create a significant level. These actions should be combined with number of quality jobs and economic value added the right incentives to unlock demand-side flex- as co-benefits to reducing GHG emissions while ibility and ease system integration of electricity simultaneously making progress toward multiple from wind and solar energy. Any renewable SDGs.

Table 3. Innovation in energy markets

Business models Market design Innovative system operation

• Aggregators • Increasing time granularity in • Future role of distribution • Peer-to-peer electricity trading electricity markets system operators between and consumers (e.g. • Increasing space granularity in • Cooperation between Malaysia, the UK, Australia and electricity markets transmission and distribution Bangladesh) • Innovative ancillary services system operators • Energy as a service • Redesigning capacity markets • Advance forecasting of variable • Community ownership (e.g. • Regional markets renewable power generation community solar, pay-as-you-go • Time-of-use tariffs • Innovative operation of pumped models, on-bill financing model • Market integration of distributed storage etc.) energy resources • Virtual power lines • Net billing schemes • Dynamic line rating

Source: IRENA (2019b). 16 Enabling Frameworks for Sustainable Energy Transition

As an example, a report by Beyond Zero retrain or reskill employees that no longer have Emissions, an energy and climate change think- jobs. These jobs could be transitioned to green tank, says practical projects to decarbonise the employment in manufacturing of battery stor- Australian economy could create 1.78 million age, building and industry energy efficiency, ‘job years’ over the five years from 2020 to making or converting electric vehicles, install- 2025 – on average, 355,000 people in work each ing solar PV and on- and offshore wind, public year – while modernising Australian industry transport, energy efficient appliances, power (, 2020). networks, biofuels, hydrogen, urban infrastruc- The Philippines has a Green Jobs Act (2016), ture, clean cooking, and methane reductions, as with a training programme and incentives for examples. businesses and social protection, combined With the current decline in demand for oil with a coal tax and renewable feed-in tariffs, and gas, asset write-downs, employee lay-offs, and a strategy to improve the climate resil- low prices and high costs, it may be that work- ience of infrastructure. There is also a National ers are not necessarily transitioning from high- Ecotourism Strategy Action Plan that includes to low-carbon employment but finding new jobs and livelihood support. This, however, has employment in renewable energy, for exam- been contrasted against the lack of political sup- ple. The industrialisation and development of port and the Philippines’ road map of 10GW of renewable energy throughout the value chain coal-fired power plant capacity by 2025. needs to be central to national development A job creation target could be set and a green plans, to determine what jobs can be created employment mechanism established to retain, domestically in these new markets.

4. Case studies

4.1 Grid-connected battery storage: through instantaneous capacity for voltage and South Australia frequency support, support variable renewable

28 energy, provide storage capacity for short out- The recent installation of the 150MW /194MWh ages, and has a financial model that combines Hornsdale Power Reserve, a large battery a windfarm with the battery storage to provide energy storage system, in the South Australia the ability to arbitrage and supply the market region of Australia’s National Electricity when prices are high. A five-minute settlement Market (NEM) has highlighted the potential market rule is expected to be introduced in the for renewable energy technologies with stor- NEM to increase the attractiveness of investing age in the energy transition. This is especially in, and adopting, this technology to provide so as some of Australia’s coal power stations are energy and network ancillary services. ageing, becoming unreliable and experiencing rising maintenance costs, including require- 4.2 : South Africa ments to install pollution controls. The battery supports the large capacity of wind and solar South Africa is addressing climate change by power (almost 50 per cent of total generation), using a carbon tax to mitigate its GHG emis- by meeting some of the energy demand during sions and also investing in renewables to ben- periods of low variable renewable energy supply efit communities. The carbon tax initially and providing ancillary services to balance fre- covers 5 per cent of the economy up until 2022. quency and provide greater stability in the grid. As the South African coal industry employs When there was an unexpected loss of load in some 80,000 people, the government has a the NEM and an islanding event, the battery New Growth Path and Jobs Resilience Plan to contained the initial reduction in system fre- stimulate transitional jobs for a quency and then quickly changed generation that includes the manufacturing of renewables back to load to reduce the over-frequency con- in areas with high economic potential and dition. The battery is able to stabilise the grid social needs. The experiences of South Africa Commonwealth Sustainable Energy Transition Series 2021/03 17 with a carbon tax should be monitored by environment where there is a strong coal lobby, other Commonwealth countries to assist with a trade union movement that is protecting jobs implementation of similar measures, especially in the mining sector, and criticism of a lack of as these measures are being undertaken in an policy coherence (REN21, 2020).

5. Conclusion

Policy-, regulatory- and governance-enabling the integration of low-carbon technologies. A frameworks are important in accelerating the governance framework provides the necessary sustainable energy transition in Commonwealth oversight and enforcement. Now more than member countries, as they ensure that the ever, during the recovery from COVID-19, finance and low-carbon investment that aligns there is an urgency that Commonwealth coun- with the SDGs and the Paris Agreement is tries with the ability to do so, and according to brought forth. Policy frameworks are needed to their circumstances, should adopt, adapt and set targets and develop the economic and finan- implement these frameworks to ensure that cial instruments to provide direction and cer- investment in their economies is consistent with tainty in investment. A regulatory framework is the climate and sustainable development agen- required to provide the market rules and allow das and achieves a sustainable energy transition.

6. Recommendations

6.1 Renew ambition, align policies, and in alignment with this long-term planning and build confidence in investment with corresponding environmental, social and corporate governance principles. Investment in Commonwealth member countries should modernising and increasing energy efficiency, consider taking the opportunity of the COVID- renewable energy, electrification of industrial 19-produced economic slowdowns to declare a processes, heating and transport, building climate emergency and legislate climate targets codes, equipment, appliances, energy storage, that are absolute and binding as soon as pos- greening of gas networks, education and train- sible, if they have not already done so. These ing, and low-carbon research and develop- should be CO2e neutral, 100 per cent renew- ment should be considered. Progress should ables, economy-wide and sectoral targets for the be tracked using measurement, reporting and short, medium and long term. They should also verification. garner the political will to renew and amplify climate ambition, by aligning and merging eco- 6.2 Reform energy markets nomic recovery stimulus measures with the mainstreaming of the climate and sustainable Commonwealth member countries should development agendas. They should also make ensure energy markets are open, competitive, trade agreements conditional on this align- transparent and flexible, so that they optimise ment, and ensure that revised NDCs are sub- the use of modern energy services and energy mitted and are consistent with achieving their efficiency, allow the entry of new innovative LTSs and the Paris Agreement target of 1.5°C. technologies – for example, variable renewable This will give the certainty needed to bring energy, storage and green hydrogen etc. – and forth the required low-carbon and climate- permit new financial and business models to be resilient investment. To boost investor confi- integrated that further accelerate the sustain- dence, any finance made available should be able energy transition. 18 Enabling Frameworks for Sustainable Energy Transition

6.3 Phase out fossil fuels and subsidies • where feasible, cancel any imminent proj- ects in these areas; Due to the declining costs of renewable energy • consistent with their NDCs under the Paris and storage,29 Commonwealth member coun- Agreement, phase out rapidly any current tries with the capacity to do so and least social coal power plants; costs and impacts (e.g. developed countries like • implement immediate, short-term and the UK, Canada and Australia, as they can bet- long-term measures for energy transitions ter mitigate and absorb the adverse impacts on from gas extraction and power plants, and workers and communities, as well as countries nuclear power plants consistent with their where communities disproportionately experi- NDCs under Paris Agreement; ence the harms of extraction and not the ben- • phase out subsidies for fossil fuel explora- efits) (Stockholm Environment Institute, 2020) tion, extraction, transportation and power should consider using either or both regulatory plants; and and economic measures to: • redirect fossil fuel subsidies to energy effi- • ban or cut back on new coal power plants ciency, renewable energy and/or essential and mines, new gas power plants and public services. extraction, imports of gas from hydraulic fracturing, and new oil drilling;

Notes

1 These risks include transition risks – the policy, regula- by heat pumps, industrial excess heat recovery, munic- tory, legal, technology, market, reputational and finan- ipal solid waste (non-renewable), municipal solid cial risks – as well as the physical (acute and chronic) waste (renewable), green/renewable-generated hydro- risks of climate-related impacts, e.g. level rise etc. gen, grey/gas-generated hydrogen, blue/gas-generated 2 Paris Agreement’s Article 2.1 (c) on ‘making hydrogen+CCS, renewable ammonia, synthetic meth- finance flows consistent with a pathway towards ane, liquid synthetic fuels, and ocean energy (tidal low and climate-resilient and wave). With new or at least upgraded/retrofit- development’. ted infrastructure, bioenergy, green hydrogen, syn- 3 Without a smooth transition, there will be significant thetic methane, liquid synthetic fuels and the circular impacts on the world economy. The International economy could be used to decarbonise the industry/ Renewable Energy Agency (IRENA) estimates that manufacturing sectors. Biomass, green hydrogen, and to enable the energy transition and limit global tem- the circular economy could be used to decarbonise the perature rise below 2 degrees Celsius (°C), cumulative chemicals/petrochemicals and steelmaking sectors. investment must increase by 30 per cent up to US$120 Biofuels, synfuels from green hydrogen, and behav- trillion by 2050 in low-carbon technologies, averaging ioural change could decarbonise the aviation sector, around 2 per cent of global gross domestic product and biofuels, synfuels from green hydrogen and elec- (GDP) per year. Notably, the benefits of a smooth tran- trification could be used to decarbonise the shipping sition will outweigh the costs and are likely to result sector. in increased economic growth and broader socioeco- 5 In 2019, renewables contributed just over a quar- nomic benefits. Through 2030, a shift to low-carbon, ter (27.3 per cent) of total global electricity produc- climate change-resilient economies could bring US$26 tion, according to REN21’s Global Status Report. trillion in economic benefits and create more than 65 Hydropower is the single largest contributor of clean million jobs, according to the Global Commission electricity at 15.9 per cent, followed by (5.9 on the Economy and Climate. The recovery from per cent), solar (2.8 per cent), bioenergy COVID-19 is an important time to ensure that the (2.2 per cent), and geothermal and other sources (0.4 energy transition and SDGs are central to the recov- per cent). ery from the economic impacts of COVID-19, and not 6 Hydrogen is a clean-burning molecule that can be delayed but further accelerated. used as a substitute for coal, oil and gas in a large 4 Energy sources include coal, fossil oil products, fossil variety of applications. But for its use to have net gas, uranium, waste, steam, bioenergy (biowaste and environmental benefits, it must be produced from solid biomass), liquid biofuels, biomethane, , clean sources, rather than from unabated fossil fuel electricity, biomethane heat, biogas heat, solar thermal processes – which is the usual method at present. heat, geothermal heat, aero/geothermal heat captured Renewable hydrogen can be made by electrolysers that Commonwealth Sustainable Energy Transition Series 2021/03 19

split water into hydrogen and oxygen, using electric- and/or the auctioning of carbon permits and linked to ity generated by cheap wind or solar power. The cost international markets. of the electrolyser technology to do this has fallen by 17 ‘On average, carbon dioxide emissions fell by two per 40 per cent in the last five years, and can continue to cent per year over the period 2007–2017 in countries slide if deployment increases. Clean hydrogen could with a and increased by three per cent per be deployed in the decades to come, to cut up to 34 year in the others’ (Best et al., 2020). per cent of global greenhouse gas emissions from fossil 18 A global carbon trading system is yet to fully emerge, fuels and industry (Bloomberg NEF, 2020). It can also especially without agreement on Article 6 of the Paris be converted into ammonia for storage and shipping. Agreement. 7 Climatescope defines an enabling framework as one 19 Lending is often a form of relationship lending, where that encompasses the fundamental structures and finance is made available to existing customers and market conditions typically required for a given coun- technologies rather than to new customers and new try to attract investment and interest from financiers, technologies, while energy efficiency lending has a project developers or independent power producers barrier in that there is not necessarily any collateral to looking to develop new low-carbon projects, com- recover if the loan is not repaid. panies or manufacturing facilities. It also takes into 20 Power grid stability services, such as frequency and account how amenable such structures are to the voltage control, black start, short circuit current, firm deployment of distributed generation capacity, such capacity, variable renewable energy ramp control, fore- as mini-grids, or residential wind or solar systems. A cast error correction, fault ride through, fault recovery welcoming enabling framework is one where: a com- and generation time shift (Ratka and Boshell, 2020). prehensive, effective and stable set of rules is in place; 21 The International Finance Corporation (IFC) will no the power market structure encourages and adequately longer make equity investments in financial institu- rewards new market entrants; the private and public tions that do not have a plan to phase out support sectors foster universal access to clean and sustainable for coal, and will use conditions attached to its exisit- energy in rural or isolated communities; clean energy ing and new equity investments to ensure the banks penetration of the power and primary energy matrices involved reduce their exposure to coal to zero by 2030. is ever increasing; adequate price signals are available; 22 Income statement – revenues and expenditures, cash and growing demand for power and rapid electrifica- flow statement, and balance sheet – assets and liabili- tion combine to create a substantial market. ties, and capital and financing. 8 The creation of enabling environments and associated 23 There may be cases in developing Commonwealth policy and regulatory frameworks are considered by countries where fossil fuel subsidies may be impor- the Green Climate Fund (GCF) to demonstrate a para- tant to ensure energy access, e.g. for cooking digm shift. fuel. Therefore, as discussed, difficult policy choices 9 Countries are invited to submit LTSs by 2020 to set regarding the tradeoff between energy access, energy long-term goals for climate and development and poverty, public health and emissions reductions need direct/guide short-term decision-making on climate to be carefully considered. and alleviating poverty. 24 Long-term contracts not exposed to variations in 10 This could even be described as a fossil fuel non-pro- prices occurring during the period, equity perfor- liferation treaty. mance for new build renewables and investor demand 11 Targets should be ‘SMART’ – specific, measurable, continued to increase. achievable, relevant and time-bound. 25 Loans taken out by governments for energy transition

12 Including all greenhouse gases, e.g. CO2, methan investment could be paid back through the economic (CH4), nitrous oxide (N2O) and F-gases. savings this action creates, along with the proceeds 13 Scope 1 – All direct emissions from the activities of an of green bonds and tax system reforms using carbon, organisation or under their control. Scope 2 – Indirect environmental and digital taxes, for example, which emissions from energy purchased, supplied and used further incentivises the energy transition. by the organisation. Scope 3 – All other indirect emis- 26 Methane () is an invisible gas that is more sions from activities of the organisation, occuring efficient at trapping heat than carbon dioxide. It there- from sources that they do not own or control. fore has a higher , but it 14 The EU plans to cut greenhouse gas net emissions by remains for less time in the atmosphere. at least 55 per cent by 2030 and become climate neu- 27 ‘There isn’t one example of a CCS project anywhere in tral continent by 2050. The UK government has estab- the world that offers a financial justification for invest- lished a COP26 Energy Transition Council and a 50 ing in CCS’ (IEEFA, 2020). million pound (£) Clean Energy Innovation Facility 28 A world record at the time of the injection of energy for developing countries. into the grid. 15 Economic assets affected by premature write-downs or 29 Notwithstanding the health, climate and environmen- downward revaluations, or converted to liabilities. tal impacts, or accounting for the social and environ- 16 Whether it be carbon or green taxes, an emissions mental benefits of reducing pollutants (Bodnar et al., trading scheme, a baseline and crediting mechanism, 2020). 20 Enabling Frameworks for Sustainable Energy Transition

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