2021/03 COMMONWEALTH SUSTAINABLE ENERGY TRANSITION SERIES SUSTAINABLE Enabling Frameworks ENERGYfor Sustainable Energy TRANSITION Transition SERIESAnthony Polack Commonwealth Sustainable Energy 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 climate 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 Renewable Energy Finance. Thanks and appreciation goes to Laurence Delina, Assistant Professor in the Division of Environment and Sustainability 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 Paris Agreement. 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 innovations 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 Sustainable Development 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 carbon dioxide equivalent CSEF Commonwealth Sustainable Energy Forum °C degrees Celsius EU European Union GHG greenhouse gas IPCC Intergovernmental Panel on Climate Change IRENA International Renewable Energy Agency LTSs long-term low GHG emission development strategies NDCs nationally determined contributions NEM National Electricity 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 fuel 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 º Declare a climate emergency. member countries is required to establish the º 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 º 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 º Make trade agreements conditional on Policy frameworks set targets and develop this alignment. the economic and financial instruments that º 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 º 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 electrification of industrial processes, than ever during the recovery from COVID-19, heating and transport, energy storage, 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 º 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 fossil fuel technologies and for example, variable renewable energy, subsidies storage and green hydrogen etc., and º 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 power. Deputy Secretary-General Arjoon Suddhoo, Commonwealth Sustainable Energy Forum, June 2019 2. Review and findings 2.1 Energy systems potentially synthetic gases and fuels 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 energy supply 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 energy system through innovations, new tech- in a way that aligns with, and achieves, global nologies and technology transfer, and system and national