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121. Who Finances Energy Projects in Africa?

Author:
Oyintarelado Moses
Publication Date:
11-2023
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Public and private energy finance to Africa from countries in the Group of Twenty (G20) and multilateral development banks (MDBs) from 2012 to 2021 totaled $345.76 billion, according to this paper’s findings. Amounting to an average of about $35 billion per year, this finance was within the estimated $31.5–$45 billion range necessary to address Africa’s annual energy finance gap. However, it was distributed unevenly, with ten countries receiving 77 percent of all finance over the ten-year period. Some inequity may be a consequence of differing domestic energy demands, investment environments, or natural resource endowments across countries. However, the resulting distribution of energy finance over the past decade was such that many African countries—home to hundreds of millions of people—were left with substantial gaps in their financing necessities. This paper also shows that only a few countries and multilateral financing entities—including China, France, Italy, the United States, and the World Bank Group—supplied the majority of energy finance to Africa between 2012 and 2021. In many ways, this finding is unsurprising; however, it serves as a reminder that significant amounts of energy finance are subject to the policies and priorities of a small number of countries and institutions. To that point, this paper demonstrates a near total retrenchment of funding for coal projects beginning around 2018, reflecting the policy priority among these major funders to stop financing overseas coal projects. Most of the $345.76 billion in energy finance for African countries went to projects with gas/liquefied natural gas (LNG), mixed fossil fuels, and solar energy sources. Of the total energy finance, $197.17 billion (57 percent) came from public institutions, while $148.59 billion (43 percent) came from private corporations. The paper identifies some important similarities and differences between public and private finance. Both streams were highly concentrated in terms of senders and recipients, though the recipients differed slightly. For both streams, gas/LNG projects received the most or nearly the most finance. Public finance was directed to projects with more diverse energy sources, but less of the financing was directed to solar and wind projects. Most of the private finance was directed to fossil fuel projects, but when compared to public finance, a higher proportion of private finance supported solar and wind projects. Overall, the average amount of energy finance commitments that flowed to Africa from 2012 to 2021 may have been within the range of estimated need, but the unequal distribution of this finance risked leaving many countries behind. The small number of major players on the supply side of energy finance also created the potential for volatility, as internal guidance on funding priorities among these senders could evolve over the coming years and decades. Policymakers in financing countries could therefore prioritize finance distribution based on annual demands from historically low-level recipients, diversify financiers by redirecting financing to African regional banks and investors, and use public finance to crowd in private finance to projects with high potential for energy access in Africa.
Topic:
Development, Finance, Investment, and Energy
Political Geography:
Africa

122. Good to the Last Drop

Author:
Thomas L. Crisman and Zachary S. Winters
Publication Date:
05-2023
Content Type:
Journal Article
Journal:
Cairo Review of Global Affairs
Institution:
School of Global Affairs and Public Policy, American University in Cairo
Abstract:
In 1907, Theodore Roosevelt was asked how his cup of coffee tasted, to which he responded “good to the last drop”. The Middle East and North Africa (MENA) region is exhausting its limited water resources, and without adaptive management and alternative water sources will soon reach the “last drop”. This threatens the future of humanity in this region, as the UN recognized in 2010 by declaring that access to water and sanitation (termed the “human right to water and sanitation” or HRWS) is a basic human right due to its necessity for sustaining human life. Many MENA countries always had scarce surface waters, mainly springs, that were quickly diminished or totally lost to pumping of groundwater for agriculture. In 1990 and before placing significant curbs on pumping, Saudi Arabia had forty-six active springs. It now has only fifteen. Major aquifers of the region containing “fossil water” from moderate climate periods thousands of years ago have been significantly reduced in size and volume to a point where they are no longer viable water sources. Nations have recently resorted to building expensive desalination plants to supply their basic water demands. Even nations relying on major rivers (the Nile, Tigris, or Euphrates) as traditionally inexhaustible sources of water have seen both the quantity and predictability of water threatened by climate change and increased human demands in the multiple countries they flow through. Current water sources are either too expensive or too threatened politically to be wasted.
Topic:
Climate Change, Water, Food, Conservation, Energy, and Conference of the Parties (COP)
Political Geography:
Middle East and North Africa

123. How an international agreement on methane emissions can pave the way for enhanced global cooperation on climate change

Author:
Kimberly Clausing, Luis Garicano, and Catherine Wolfram
Publication Date:
06-2023
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
Under the 2022 Inflation Reduction Act, the United States has for the first time implemented a methane emissions fee as a backstop to new methane regulations in the oil and gas sectors. The European Union is also implementing methane regulations on fossil energy. Methane is a short-lived but potent greenhouse gas, and reducing it is imperative for limiting global temperature rise to the 1.5°C target. Among the primary sources of methane emissions (including agriculture, fossil fuels, and waste), the oil and gas sectors have the greatest low-cost abatement potential. Clausing and colleagues recommend that the United States and the European Union coordinate their methane reduction policies and eventually impose border adjustments on imports from countries that fail to raise their standards. The aim would be to encourage oil and gas exporters to adopt comparable regulations or, if they fail to do so, pay a border adjustment fee on exports to the two jurisdictions. A US-EU methane border adjustment policy in oil and gas would reduce methane emissions by an estimated 15 to 45 percent worldwide, while having an indiscernible effect on key energy prices US and EU households face. With time, most major energy importers would ideally join the coalition of countries cooperating on both stringent domestic regulations on oil and gas production and border adjustments on any dirty, nonregulating exporters. Such an international agreement would help defuse frictions caused by differing climate policies and increase incentives for ambitious climate policy action worldwide.
Topic:
Climate Change, Environment, International Cooperation, Treaties and Agreements, European Union, and Energy
Political Geography:
Europe, North America, and United States of America

124. Russia's invasion of Ukraine has cemented the European Union's commitment to carbon pricing

Author:
Jacob Funk Kirkegaard
Publication Date:
09-2023
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
The European Union managed to overcome Russian energy blackmail in 2022 and used the political motivation from this national security crisis to accelerate its decarbonization process. The planned dramatic increase in the scope of carbon pricing in the European Union can herald the total decarbonization of sectors covered in the EU Emissions Trading System and expand into important new ones. The interplay between the EU carbon border adjustment mechanism (CBAM) and the US Inflation Reduction Act may cause transatlantic trade friction. But these two approaches could also offer a path to greater cooperation. Kirkegaard outlines proposals for how both the European Union and the United States can implement additional policies to secure their comprehensive decarbonization.
Topic:
Climate Change, Environment, European Union, Carbon Emissions, Decarbonization, and Energy
Political Geography:
Europe and United States of America

125. How the United States solved South Korea’s problems with electric vehicle subsidies under the Inflation Reduction Act

Author:
Chad P. Bown
Publication Date:
06-2023
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
South Korea felt “betrayed” when President Joseph R. Biden Jr. signed his administration’s flagship climate legislation, the Inflation Reduction Act (IRA) of 2022, into law. This paper first shows how the Biden administration addressed Korea’s concerns about the law’s effect on its sales of electric vehicles (EVs) in the United States. Thanks in part to the Treasury Department’s regulations written to implement the law, Korean exports of EVs to the United States grew even after the IRA went into force. Whether these actions by the Biden administration are enough to assuage the concerns of the Koreans—and other allies adversely affected by the IRA—remains to be seen. Furthermore, the US accommodation of Korean concerns came with tradeoffs by offsetting key incentives Congress may have intended in passing the IRA. The paper examines the potential impact of the law on South Korean battery companies, and it provides an initial exploration into how the Korean government responded to the IRA by adjusting its own policy mix of EV consumer tax credits and industrial policy for its EV plants and battery makers.
Topic:
Climate Change, Science and Technology, Inflation, Energy, and Electric Vehicles
Political Geography:
Asia, South Korea, North America, and United States of America

126. How trade cooperation by the United States, the European Union, and China can fight climate change

Author:
Chad P. Bown and Kimberly Clausing
Publication Date:
10-2023
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
Recent efforts to reduce greenhouse gas emissions have revealed different policy priorities; the United States and China have emphasized subsidy-based approaches, and the European Union has emphasized carbon pricing. These divergent policy choices—some lowering energy costs, others raising them—raise concerns about industry competitiveness and have implications for upstream and downstream firms in supply chains. This paper identifies the trade tensions resulting from varying climate policy approaches and describes policy efforts to address them. It then describes the role of a rules-based trading system in tackling the challenges that these distinct policy approaches create, examining World Trade Organization (WTO) rules on subsidies, border measures, and export restrictions. The authors suggest that the United States, the European Union, and China prioritize reforms to those rules as a path forward for cooperation on trade and climate. Such an approach would be an important starting point toward creating a functioning multilateral system.
Topic:
Climate Change, European Union, Trade, Cooperation, and Energy
Political Geography:
China, Europe, and United States of America

127. How does decarbonization change the fiscal equation?

Author:
Ruud de Mooji and Vitor Gaspar
Publication Date:
11-2023
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
This paper explores the fiscal implications for countries of global climate mitigation in the medium term. If climate action is unilateral, it might be limited in scope and rely more on subsidies and spending to avert political constraints. This can put fiscal sustainability at risk. Coordinated carbon pricing or other mitigation policy can more effectively put the world on a path to 1.5 to 2°C above pre-industrial temperatures, as agreed in Paris in 2015, while helping manage fiscal and political constraints. Coordination could be initiated by large players, such as China, the United States, India, the African Union, and the European Union. The authors find that the implications for fiscal revenues over time are shaped by a combination of rising carbon prices, the gradual erosion of existing fuel tax bases, and possible revenue sharing arrangements. Public spending rises during the transition to build green public infrastructure, promote innovation, and support clean technology deployment, although much of this spending could be more efficiently financed through higher sectoral prices and taxes rather than through the general budget. Countries will also need funds for compensating vulnerable households, industries, and poor countries. With well-designed climate-fiscal policy relying on carbon pricing, global decarbonization will have anything from moderately positive to moderately negative impacts on fiscal balances in high-income countries. For middle and low-income countries, net fiscal impacts are generally positive and significant. Hence, as mitigation strategies improve fiscal balances, they can accommodate development spending needs. Revenue sharing at the global level would make an historical contribution to breaching the financial divide between rich and poor countries.
Topic:
Climate Change, Fiscal Policy, Decarbonization, and Energy
Political Geography:
Global Focus

128. Green innovation and the transition toward a clean economy

Author:
Daron Acemoglu, Philippe Aghion, Lint Barrage, and David Hémous
Publication Date:
12-2023
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
To combat climate change without sacrificing long-term economic growth, innovation must be redirected toward green technologies. The authors review recent literature that has developed a directed technical change framework where innovation can be endogenously targeted either toward fossil-fuel enhancing technologies or clean energy sources (such as renewables). They provide empirical evidence of path dependence in firms’ choice between green and dirty innovation. They then draw implications of this path dependence for the design of environmental policy and for economic growth. In particular, they show that their framework has distinctive implications regarding unilateral environmental policies, international cooperation, the use of intermediate energy sources such as natural gas, and the role of civil society.
Topic:
Climate Change, Science and Technology, Innovation, Energy, Green Transition, and Green Economy
Political Geography:
Global Focus

129. The Russia-Ukraine Conflict: From Full-Scale War to Conflict Resolution and Post-War Recovery

Author:
Yuri Yakymenko, A. Bychenko, Makysm Bielawski, V. Zamiatin, and Oleksiy Melnyk
Publication Date:
06-2023
Content Type:
Journal Article
Journal:
National Security and Defence
Institution:
Razumkov Centre
Abstract:
For 570 days, Ukraine has been living in a full-scale war against the russian aggressor, defending its freedom, independence and very right to exist. During this time, our country has suffered losses and destruction on a scale unimaginable on the European continent after the World War II. Towns and villages wrecked to the ground, tens of thousands dead, artificially created environmental disasters and constant nuclear blackmail, the deportation of Ukrainian children – an outright act of genocide against the Ukrainian people, systematic destruction of the country’s energy, transport and agricultural infrastructure, the war against the civilian population, the war-induced migration and demographic crisis are just a few points in the long list of disasters caused by russian aggression.
Topic:
Foreign Policy, Defense Policy, National Security, Economy, Energy, and Russia-Ukraine War
Political Geography:
Russia, Ukraine, and Eastern Europe

130. The global future of nuclear energy

Author:
Matt Bowen
Publication Date:
08-2023
Content Type:
Special Report
Institution:
Atlantic Council
Abstract:
Energy supply is an integral and essential part of modern society. Since nuclear energy provides low-carbon, baseload power, it could play a larger global role in addressing growing energy demands while reducing the risks of climate change and air pollution. Russia’s unprovoked invasion of Ukraine has also highlighted energy security as a national imperative that nuclear power could help countries to achieve. Both preserving the existing fleet of reactors and building new advanced nuclear power plants could play a role in achieving deep decarbonization of electricity supply systems by mid-century. Public support, designs with greater inherent safety, licensing advanced reactors, and reasonable costs and schedules will be integral parts of this strategy. Nuclear power’s future would also benefit from national governments putting renewed emphasis on spent nuclear fuel disposition. This report by Matt Bowen discusses a number of actions that the United States, Japan, and other civil nuclear allies could pursue so that nuclear energy can play a larger role in overcoming the challenges related to energy demand, energy security, and associated environmental and public health risks.
Topic:
Security, Foreign Policy, Nuclear Energy, and Energy
Political Geography:
Russia, Japan, Europe, Ukraine, North America, United States of America, and Indo-Pacific