It is so easy to be critical of environmental issues, particularly when one doesn’t have any responsibility for outcomes. In essence, the issue stands at the crossroads of responding to growing energy demand (the largest source of carbon emissions) and generating much needed economic development—particularly in emerging economies. Reconciling these seemingly conflicting goals is all-too-often forgotten or simply assumed away. 

The article “Walking on a Knife’s Edge to Reconcile Energy and Environment” attempts to identify what is missing in this process and provides some tips for moving forward the agenda in a more effective matter:

Seen in a broader perspective, world population is expected to increase from 8 billion today to nearly 10 billion in 2050. With 2 billion more people on the planet and a growing number of them populating urban areas, emerging economies—where energy demand growth is higher—will require:

• More reliable, affordable energy
• Higher living standards driven by global economic growth
• Reduced greenhouse gas emissions

The world will be different in 2050, but the need to provide reliable, affordable energy that drives economic prosperity and better living standards will remain just as critical as it is today. Achieving this balance will require wind, solar, oil, and natural gas, as well as nearly every other new form of available energy; in the end, access to energy drives human development and quality of life.

In other words, in 2050 the world will be different—vastly different! We are, however, at a pivotal stage, which will require:

• Reducing carbon emissions and still providing affordable energy to people in need
• Lifting nations toward the modern energy minimum, which may well drive a projected 15% increase in total energy use worldwide between now and then
• Understanding that we are at an early stage of technological development for many new energy generation investments. While oil and natural gas remain vital, emerging technologies (such as geothermal, hydrogens, biofuels and others) point to a promising (but not yet certain) future. We must accordingly encourage much needed technological development for economic and effective energy sources.
• Further technological development will help meet the growing demand by diversifying into newer sources such as geothermal, hydrogen, and biofuels. However, complementary approaches will be required to overcome constraints of different energy sources, such as carbon capture to reduce emissions of traditional sources, storage to enhance the low load factor, heavy weather, and location dependence of renewables.
• In the meantime, we have to “live with the problem” for a while and “manage” the transition through adaptation investments—until we have developed the capabilities to produce more reliable, affordable, and cleaner energy.

This will, however, require major resource mobilization efforts to finance the quantum jump of energy needs in emerging economies. Conversely, energy use in developed nations may decline probably by more than 10% as efficiency improves. Any transition that fails to affordably meet this demand is bound to create a source of tension between the haves and the have-nots. 

In all, investments are estimated to have reached more than $2 trillion, including $844 billion in China, in clean energy alone in 2024. Developing countries other than China will, however, need to spend an additional$1 trillion per year on climate-related goals by 2025 (4.1% of GDP) and around $2.4 trillion per year by 2030 (6.5% of GDP). How to close this vast shortfall in the finance available for climate action and energy transition is still an unresolved issue, particularly in emerging economies. Crowding in larger amounts in private funding, will thus be—not only to close the gap but more importantly to transfer know-how and build international links that are key in emerging economies.

Even as developing economies grow and consume more energy, global carbon emissions may well start to fall for the first time by 2030. In fact, most outlook and projections see carbon emissions continuing to decline through 2050.

However, for this to happen, changes will have to center on reversing proactive government interventions—such as subsidies, regulatory clearance arrangements for projects with environmental implications, and so much else. Some were helpful, many were not. In the end, though, to assure sustainability, three elements are needed:

1. Supportive public policy
2. Significant technology advancements
3. A smooth transition from government subsidies to market-based mechanisms for more effective resource allocation, including reduction of heavy processing requirements associated with much needed investment projects

Featured Author:

Miguel Schloss was Director of Corporate and Budget Planning at the World Bank and Executive Director of Transparency International during its formative years. He is currently President of Surinvest Ltda.

All views expressed by members are their own and not reflective of the views of the Bretton Woods Committee.