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From G7 to COP26: A Path Forward for the Global South
The Global South is pissed off. And rightly so. Developing countries have borne the brunt of climate change and now COVID-19 related health impacts and economic contractions. While the Global North is ready to move onto a post-pandemic era, most countries in the Global South are still battling the pandemic and can’t roll out the vaccines fast enough—often caught in the middle of vaccine diplomacy gamesmanship.
Prior to the pandemic, the Global South was already teetering towards the brink of a sovereign debt crisis. Despite recent incremental new pledges by a handful of rich countries, the promise made in 2009 at COP15 to channel $100 billion a year to support the Global South to adapt to climate change and set their economies on a sustainable pathway has fallen far short. Earlier this year, the G20 came together to pass an important Debt Service Suspension Initiative (DSSI). However, the DSSI is viewed as insufficient. Neither the DSSI nor its accompanying “Common Framework” address the structural imbalances that create instability, or relate the burgeoning debt crisis to climate action.
More recently, the G7 met in London to agree on a set of initiatives to accelerate climate action and address the pandemic in the Global South. The G7 pledged to scale their commitments to address the climate emergency, vowing to eliminate coal-fired power plants. It also pledged to increase support to COVAX—the World Health Organization’s fund to support COVID-19 vaccinations in the Global South. However, critics argue that the G7’s announcement is nothing new and simply re-packages previous commitments.
Following the failure of the G7 to match ambition with means of implementation, countries from the Global South have intensified their pressure to deliver on the climate commitments and funding promises made at COP15. These legacy issues coupled with growing economic inequality between the Global North and South and vaccine apartheid will converge at this year’s COP26 in Glasgow in early November. The failures of the G20 and G7 to address these issues have hit a boiling point and will be on full display in Glasgow. The success of the COP26 hangs in the balance.
At RMI, we are committed to making COP26 a success. Out of every crisis there is an opportunity. The COVID-19 pandemic and dynamic national and global politics of 2020 have shattered decades of climate complacency. The United States has re-committed to the Paris Agreement and citizens around the world are demanding their governments accelerate climate action. In this blog we attempt to lay out clear steps for rich countries to support a comprehensive solidarity package that tackles the interconnected issues of economic inequality exacerbated by the pandemic and the climate crisis.
SIDS and the Circumstances of the Global South
By focusing on Small Island Developing States (SIDS) – the country grouping arguably most negatively impacted by both the pandemic and climate crisis, we will present a set of actionable solutions scalable across the Global South that can change the trajectory of SIDS and the Global South for decades to come.
SIDS embody a microcosm for the unique challenges and circumstances faced by vulnerable developing countries in the Global South—including those in sub-Saharan Africa and other regions of the world. Their small size, distance from major global markets and geographical disposition at or near the equator make them particularly vulnerable to external shocks such as economic crisis and extreme weather events. Their dependence on single, non-diversified economic sectors (mostly tourism and agriculture) comes with compounded risks—exemplified by the disproportionate impacts SIDS’ face because of COVID-related economic contractions.
Climate change poses an existential threat to SIDS. Despite strong political will, SIDS have made little progress to adapt their infrastructure or to transition their energy systems to lower cost, more resilient clean energy. This unfortunate fact is due, in part, to that fact that SIDS have not been able to access their fair share of climate financing—despite internationally agreed climate financing policies that theoretically prioritize them.
Accessing capital has grown onerous and complex for this capacity constrained group of countries. Compounding this trend, clean energy projects in SIDS often lack the scale to meet minimum requirements of funding sources, even those created specifically for their use like the Green Climate Fund. Current technical assistance offerings have proven unfit to support SIDS access climate financing to scale and accelerate the required investment.
In addition to the structural barriers in the international climate regime, several market barriers have also hampered clean energy investment in SIDS, which are indicative across the Global South. They include: 1) lack of local expertise to plan for and implement the new energy infrastructure. 2) lack of bankable clean energy projects , 3) lack of fiscal space to provide sovereign guarantees to backstop power purchase agreements, and 4) poor credit ratings and inability to access international capital markets.
An Opportunity for a Just Transition
At COP26, the Global North has the opportunity to address the needs of SIDS by delivering a comprehensive package designed to stimulate a just energy transition as rapidly as possible. This package of support can easily be replicated and scaled across low-income countries in the Global South. In the process, the Global North and South can partner to demonstrate a new vision for a unified climate future. RMI has laid out a plan for what that could look like in the Caribbean, showing how coordinated investment in distributed energy resources can create jobs, increase climate resilience and bolster economic recovery and diversification.
RMI is well-positioned to support the UK, United States and members of the G7 to deliver on this opportunity. Leveraging our on-the-ground technical and operational support to SIDS, our recently launched Climate Finance Access Network (CFAN) and Energy Transition Academy (ETA), we have built-for-purpose platforms to rapidly transition SIDS to clean energy.
It first starts with clean energy projects that are considered commercially bankable. Over the last seven years, RMI has worked closely with governments, funders, utilities, and regulators in the Caribbean to address the first and second challenge of energy infrastructure planning to develop national energy transition plans and identify viable clean energy projects. These transition plans align energy stakeholders around a common vision for the energy sector and lay out detailed clean energy investment plans that uniquely fit the local electrical grid.
Projects identified share a common theme: they collectively lower the cost of electricity for customers, were developed with an inclusive local process, and build resilience to the impacts of climate change. To date, RMI has identified over $1 billion in clean energy investment opportunities for the Caribbean region alone, with over $650 million of projects near ready for investment.
But, to date, these projects aren’t moving forward, stalled by the same bottleneck from moving from planning to action that hampers climate action. What’s missing here is early stage philanthropic or venture capital willing to overcome the final barriers. With less than $15 million in project preparation funding, we can unlock a private sector-led investment that will change the trajectory of the region for decades to come.
But unlocking the public financing needed to crowd in private sector investment won’t be easy. Due to their lack of fiscal space, poor credit ratings and perceived political risk, SIDS need innovative financial instruments backstopped by international climate finance. However, climate finance institutions and their instruments are notoriously dated and onerous—often displacing private capital as opposed to crowding it in.
Solutions for Transformational Change
While it is the responsibility of the international community to reform the modalities of development and climate finance, they won’t be fixed overnight. However, CFAN can provide a prompt and practical solution to the current climate finance bottleneck. Funded with an initial CAD $9.5 million contribution from the Government of Canada, CFAN is a demand-driven initiative and will be hiring and deploying advisors in all SIDS regions. By hiring and training climate finance advisors to be embedded in SIDS governments and direct access entities, CFAN can add and build lasting capacity for project development and finance structuring. For more on the role of CFAN, see our previous blog.
The next, and arguably the impactful investment needed is in SIDS energy practitioners. Currently, many utilities and regulators in SIDS—and across the Global South—lack the expertise to plan for and implement clean energy projects beyond pilots. In addition, governments lack the absorptive capacity to effectively manage and coordinate the wave of financial and technical capacity across the development partner landscape to adequately ensure the proper use of resources.
This is where RMI’s Energy Transition Academy (ETA) comes in. The aim of the ETA is to support SIDS and other developing economies in the provision of curated information, training, tools, peer-to-peer problem-solving, and coaching networks. Collectively, we intend these resources to address the daily challenges of decision makers and practitioners in the clean energy transition.
Previous capacity development efforts aimed at these issues have been top-down and limited in time and scope, and they often fail to fully consider the wide range of challenges faced by energy practitioners in the Global South. These efforts may achieve incremental change but cannot lead to a transformational shift at the scale and pace required to address the climate challenge.
Missing from the global energy landscape are opportunities for energy leaders in the Global South to directly connect with peers who are confronting similar challenges. Such community is needed to help facilitate the sharing of resources and best practices across the Global South during the decisive decade on climate action, enabling leaders to amplify their current work and voice into the global conversation, and quickly learn from and support each other during implementation.
By combining the power of training, hands-on coaching, and peer-to-peer knowledge networks, the ETA will provide decision makers with the confidence, tools, and information to make important power sector-related decisions in the context of high uncertainty and transformative opportunity.
Digging Deeper to Deliver
The IPCC has warned that we have only 10 years to halve global emissions to have a fighting chance at remaining below 1.5°C, and international cooperation is critical to achieving that goal. To make that happen, rich nations will need to dig deeper and deliver on both vaccines and the $100 billion in climate finance that was promised over a decade ago. They can do this as part of a comprehensive and practical package of solutions to both support economic recovery and accelerate the energy transition in those nations that have been hardest hit.
Collectively, the actions outlined in this blog will help create thousands of jobs, cut regional emissions, improve energy security and reduce long-term dependence on imported diesel in SIDS. In the process, the Global North can catalyze a replicable blueprint for diverse, resilient and sustainable economies in SIDS and the broader Global South. But to do so, we must make energy transition pipelines investment-ready, deploy skilled advisors in-country to structure climate finance projects and amplify Global South renewable energy leader’s voices. RMI stands ready to do its part through working with SIDS governments and energy stakeholders across the Global South.
While the outcome of the recent G7 in London and the larger lack of action by the Global North to fulfill its financial obligations to the Global South hasn’t paved the way to success, it is not too late to turn this ship around. COP26 must deliver. There is too much on the line.