Financial and technical assistance to the energy transition: A long and winding road?

Financial and technical assistance to the energy transition: A long and winding road?

The recent energy crisis caused by the Russia-Ukraine conflict has revealed pressing issues related to envisaged energy transition. The clock is ticking.

The world’s total consumption of fossil fuels in 2019 is 66.3%, indicating the heavy reliance on traditional energy resources and the urgent need for energy transition. The recent energy crisis caused by the Russia-Ukraine conflict reveals significant problems in the financial and technical assistance framework around energy transition. More recently, actions have been taken by the European Commission and the International Energy Agency to assist States in reducing and eliminating the use of fossil energy.

But how much is really enough?

The recent IPCC Climate Report identified with high confidence that an energy generation diversification, including renewable energy (RE), can reduce vulnerabilities to climate change. Seen in conjunction with the Sustainable Development Goals (SDGs), an energy transition moving away from fossil fuels and towards RE sources is a vital step in achieving Goal 7 of the SDGs, which aims to ensure access to affordable, reliable, sustainable, and modern energy for all. To achieve a real r energy transition, financial and technical assistance remains essential and decisive.

Financial assistance consists of monetary and subsidised loans between governments, and usually flows from developed to developing countries, aimed at improving the development of conditions in those States as requested. Technical assistance, on the other hand, may be separate from an economical component or it may be included as part of financial assistance in a broader project. Technical assistance includes the transfer of knowledge between States to improve policies, institutions, and individual skill sets.

Obstacles and resistance will always exist, one way or another, since energy transition is a complex process involving inter-related elements of capacity-building, energy infrastructure amelioration, and value chain restructuring. The Ukraine crisis represents only one of the many possible conflicts over energy infrastructure and value chains. The Nord Stream 2 pipeline, which was an attempt to disrupt the legacy soviet infrastructure, has recently been halted by Germany. Ensuing labour exploitation continues due to tussles between corporations over the extraction of cobalt reserves in Congo, used for energy transition. Since energy transition is a multifaceted task, a purely environmental perspective on energy transition is insufficient, and may potentially invite power struggles. Thus, financial and technical assistance should be adaptable in response to energy transition challenges that may occur.

Apart from cooperation among States, the mobilisation of international organisations is crucial in implementing financial and technical assistance as well. The International Renewable Energy Agency (IRENA) is the first intergovernmental organisation playing a prominent role in promoting the adaptation and sustainable use of all forms of RE in pursuit of sustainable development. Its objectives are in line with the goals set by the Paris Agreement, Article 2(1)(a), to naturally limit the increase in global average temperature by the adaptation of renewables. Pertinently, RE is a core part of Nationally Determined Contributions, which is the central implementation tool for States under the Paris Agreement, Article 3. To increase RE financing, IRENA, the United Nations Development Programme, Sustainable Energy for All, and the Green Climate Fund have collaboratively initiated the Climate Investment Platform brining governments, financial institutions, project developers and private sectors together. The platform provides a medium for project developers to connect with potential investors by assisting developing States’ governments in formulating clear and transparent, long-term energy policies, to produce a strong enabling environment for RE investments and ensure bankability of projects and financial contributions.

In its international dimension, energy transition requires States to cooperate and assist each other. However, in addressing States’ obligation to provide financial and technical assistance in energy transition, international law is fragmented and can only be identified in the scattered provisions in climate change regimes. For instance, the United Nations Framework Convention on Climate Change (UNFCCC) delineates that States “shall” cooperate in the energy sector (Article 4.1(c)), and developed States “shall” provide financial resources (Article 4.3) and “take all practicable steps” to promote technical assistance (Article 4.5). The Kyoto Protocol duplicates the wording of the UNFCCC. The Paris Agreement reaffirms this general obligation without specifically directing such assistance to the energy sector.

States show good faith on cooperation by including the “shall” obligations. However, these obligations are unqualified and can hardly be seen to mandate a State to further responsibility. Ultimately, States have the discretion to decide what kind of, how, and when assistance may be provided. As a matter of fact, the promise made by developed States in Copenhagen to jointly provide financial assistance of 100 billion USD a year to developing States was broken long ago. The ambition in the decision adopting the Paris Agreement to set a new assistance target - from a floor of USD 100 billion a year - from 2025 onwards seems unattainable for now. Even though the Paris Agreement establishes an Enhanced Transparency Framework to require developed States to report their financial and technical assistance, States are still morally obliged to support developing States without any accountability mechanism in place to guarantee that financial and technical assistance is delivered in a sufficient and timely manner.

The soft nature of international law in energy transition indicates its superficial engagement, and international law should take a more proactive role in influencing State behaviour. It may be possible to introduce human rights law as the relevant rules to energy transition and to interpret the existing obligation as positive obligations of States to protect their nationals’ right to development.

In the most recent Glasgow Climate Change Conference, Parties have been called upon to support the poorest and the most vulnerable towards a “just transition”. In achieving such a target, the dilemma concerning phasing out of fossil fuel, energy transition policies and geopolitical concerns, needs to be resolved through close international cooperation. It is time to enter into a new chapter of energy transition with international law initiatives to guarantee the just implementation of financial and technical assistance, driven by a progressive global realisation of the social, economic and cultural rights and the right to development and by expanding energy access to create an infrastructure supporting equitable development.


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