Unlocking Opportunities In Emerging Markets And Developing Economies – IRENA Report

This report discusses the challenges and opportunities surrounding a just and inclusive energy transition in Emerging Markets and Developing Economies (EMDEs). EMDEs, home to 85% of the global population, contribute significantly to global CO2 emissions, largely due to their dependence on fossil fuels. Transitioning to renewable or low-carbon energy sources is crucial for limiting global temperature rise to 1.5°C and improving local welfare. However, there is a significant disparity in energy transition-related investments, with most financing directed toward advanced economies and larger EMDEs like China, India, and Brazil. In contrast, regions like Sub-Saharan Africa receive far less investment.

To address this imbalance, stronger public support and innovative financial instruments like blended finance and green bonds are needed to reduce investment risks in EMDEs. Public institutions, multilateral banks, and international collaborations must play a central role in providing technical support, capacity building, and concessional loans.

Effective energy planning is key to ensuring that investment strategies align with broader socio-economic goals. A transparent, well-coordinated approach that integrates long-term objectives, such as climate mitigation and adaptation, is essential for boosting investor confidence and addressing development and climate challenges. The G20, through initiatives like the proposed Global Coalition for Energy Planning, can enhance energy planning by supporting knowledge exchange and capacity building.

Sustainable fuels, especially biofuels, are identified as vital components of this energy transition. They play a critical role in decarbonizing hard-to-abate sectors such as aviation, shipping, and industrial processes, while also creating socio-economic and environmental benefits. However, governance around biofuel production must be carefully managed to avoid negative impacts on land use, food security, and ecological conservation.

The document also highlights the importance of inclusivity, advocating for policies that ensure all communities, particularly disadvantaged ones, benefit from the energy transition. This includes education, vocational training, and the promotion of community-owned energy systems, which can foster local value creation and economic development. While initiatives like the Just Energy Transition Partnerships (JETPs) provide some financial support for EMDEs, they remain insufficient to meet the scale of investment required. More grants, concessional loans, and public investments are necessary to mobilize private capital and ensure that the energy transition is both socially equitable and environmentally sustainable.