Technology transfer at the core of energy cooperation – Academy

The energy transition is a key element of countries’ efforts to meet their emissions targets. Moving away from fossil fuels, especially for electricity generation, is essential if the world is to limit global temperature rise to 1.5 degrees Celsius.

The world still generates a third of its electricity from coal according to the International Energy Agency (IEA), reaching an all-time high in 2022. It is imperative that we see more green energy around the world – both replacing existing facilities for fossil fuels, and to support low- and middle-income countries (LMICs) for whom increased access to electricity and equitable economic growth are out of the question.

Emerging economies face two key challenges in increasing the role of green energy in their economies. First, access to capital. The energy transition in 48 developing economies is estimated by the United Nations Conference on Trade and Development (UNCTAD) to require almost US$6 billion in investment each year between 2023 and 2030, or 19 percent of their gross domestic product—something which these countries cannot hope to finance alone.

Second, access to advanced technologies that enable green technologies to be cheaper, cleaner and more efficient and provide a real competitor to cheap coal and wood.

But with so many international collaborations and promises on the table, has the world witnessed a seamless technology transfer? And have global financial agreements for green energy made technology transfer possible?

One of the latest milestones in green finance is the Just Energy Transition Partnership (JETP), which Indonesia and the International Partnership Group (IPG) announced last year at the Group of 20 leaders’ summit in Bali. While this partnership has the potential to unleash much-needed investment to accelerate fair and incremental energy processes in Indonesia, it remains to be seen whether this commitment will also be able to accelerate efforts to harness the power of technology.

Facilitating technology transfer will help Indonesia translate its already strong climate commitments into stronger action. The technology has the potential to make green energy more efficient and less expensive, helping to displace fossil fuels more quickly. The Southeast Asian nation has committed to emissions reductions of 32 percent unconditionally and 43 percent conditionally under its enhanced nationally determined contribution, achieving the goal of net zero emissions (NZE) by 2060.

Part of the commitment is to increase the share of new and renewable energy (NRE) in Indonesia’s total energy mix to 31 percent by 2050 – with conditional JETP commitments significantly more ambitious. This is where technology plays a critical role, as shifting energy production requires the latest innovations – many of which only advanced industrialized economies have.

In order to witness a smooth technological transition, we need stronger political will on the part of advanced economies. As it stands, there is already a shortage of resources and funding.

According to the Tony Blair Institute report published in 2022, there is a huge climate divide between developed countries and LMICs. The report calls on advanced economies to meet their climate finance commitments, in particular the pledge to commit $100 billion to climate finance annually (made at COP15 in 2009). The pledge has not yet been realized and we can see that LMICs are experiencing “promise fatigue”.

Instead, many developing countries around the world have demonstrated their own policy breakthroughs and development initiatives that can be further leveraged through technology transfer.

In Indonesia, the government looked for ways to break the link between growth and higher CO2₂ emissions. Efforts to decarbonize its energy system and energy-intensive sectors include initiatives such as the Energy Transition Mechanism (ETM) Country Platform.

Indonesia and some other countries have demonstrated their commitment, and we now need more effective international cooperation based on mutual respect and a deeper understanding of the local context to help them take the next critical step to upgrade green technologies. A cookie cutter technology transfer strategy will not work because each country is presented with a unique set of knowledge, resource and human capital challenges.

With the unprecedented opportunity for LMICs to create a modern, low-carbon energy system, it is critical for developed economies to support this transition by prioritizing green technology investments and technology partnerships in these emerging economies.

In this way, global communities not only mitigate the worst impacts of climate change, but also support LMICs to achieve their national goals of job creation, industrialization and sustainable economic development.

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The writer is Head of Economic Prosperity at the Tony Blair Institute, Indonesia.