Transition to a green economy. The role of international cooperation for the renewable energy sector in developing countries: the approach of EU and Japan

Energy gives life to economic and social development: it lies at the basis of household activities, food production, transportation, health, education and security. In recent years, many global summits have been working to raise awareness on the negative consequences of global warming, focusing on the reduction of CO2 emissions. Indeed, it seems that the most rapid way to reduce the production of greenhouse gases is to adopt clean energy technologies, and alternatives to  fossil fuels. The Kyoto Protocol (1997) represented the first attempt to divide the effort and monetary costs of this research among its adhering nations. Specifying aims and rules for each of them (Paramati: 2017). Later, the Paris Climate Change Conference (COP21 in 2015) marked a strong commitment of 196  countries to combat climate change; they acknowledged the risks climate change poses to the global environment and committed to adopting alternative energy sources (Ibid). Among the participants, developed countries such as the US and EU member states have already been working towards the transition to greener alternatives for decades. At the same time, developing countries consider the inflow of investment and transfers of technological and financial capital as a decisive reason to support the struggle towards a greener society. Developing countries host  80% of the global population, and by the 2035 their economic development will have led to them making up 90% of the world’s energy demand (Buntaine & Pizer: 2014). In 2002, it was estimated that about 350-400 million households in then emergent  nations did not have access to electricity, driving investment in  providing energy, primarily to rural areas and to  expanding urban spaces. Nevertheless, traditional sources of fuel still constitute the burning of biomass (such as wood and organic matter), which accounts for 30-45% of developing countries energy production (Martinot et al:2002). Renewable energy projects are not just capital-intensive investments; they also require the transfer of technology and knowledge. The aforementioned international climate conferences are a way to create solid relationships and associations between developed and developing countries. Indeed, through political cooperation, nations with more experience at reducing emissions could assist other countries in creating strategies to do so as well , and may be able to provide technical and financial assistance to weaker economies. In fact, the international community has recognized that “low-income countries should generally not be expected to subsidise the development of the renewable energy sector (Griffith-Jones et al.: 2012)”.

Bearing this  in mind, this article shall aim to analyze two examples of international cooperation in this field: the framework for overseas investments of the European Investment Bank (EIB), and the policies of the Japanese International Cooperation Agency (JICA).

First of all, both of these agencies closely collaborate  with their respective regional bodies, such as the European Development Fund (EDF), or the Asian Development Bank (ADB). Such close ties allow them to provide financial support to even the largest  projects, without even mentioning how they increase the availability of specialized experts and researchers. Besides funding renewable energy projects in EU member states, the EIB follows a specific program for helping non-EU countries to take action against climate change, a big part of which is directed to financing green energy alternatives. In fact, the EIB resources employed for developing countries show a growing trend regarding environmental and sustainable projects, being currently granted  almost one third of the total available funds. Tanks to this program, technical knowledge developed in EU states can be transferred to and used by new partner states. Naturally, each project is scrutinized through an evaluation system before it is approved for funding. The decision-making must include a series of criteria: environmental and social factors and consequences, a net carbon footprint (in other words, asking how much carbon will be emit by the construction and operation of the facility) and a positive economic return. This last point is of particular interest, as  the calculation of earnings generated by the investment over a specific amount of time, has to have been demonstrated to be sustainable in promoting renewable energy projects. A good example of such investment can be found in a joint project with the African Development Bank, to fund a large area of offshore wind turbines in Cape Verde. With 45 million euros of investments, the project is predicted to secure a green and long-term source of electricity for the Republic’s citizens (Griffith-Jones et al.: 2012). As another worldwide leader for donor aid assistance,the JICA also attempts to remedy energy security and sustainability issues. Its work is based on the concept of the “3Ls” policy, which looks for a low-cost, low-carbon, and low-risk projects (JICA Website, Energy and Mining: n.d.). JICA identifies three main areas of actions: the first one particularly involves  rural areas, such as through promoting the extension of the national electrical grid or by guaranteeing a more stable access to it through small-scale renewable stations. Looking at countries dependent on importing fossil fuels, JICA fosters the installation of alternative energy sources. For example, for several small, insular Pacific states, the Japanese agency is providing technical and infrastructural support for the generation of hybrid grids, integrating renewable power with lower fuel consumption. Finally, international organisations such as  JICA and EIB promote the transition to greener economies in another fundamental field: policy-making. Through consultancy and information sharing, less-experienced nations can pursue more efficient and sustainable ways of generating and consuming energy (JICA Website, Energy and Mining: n.d.).

To conclude, this article has given an insight into how intergovernmental organizations are cooperating for improve the use and viability of renewable energies in low-income countries. A period of project assessment study is required before financing new plans, and many factors, such as political stability in the recipient countries, are observed and examined. However, large projects financed by huge amounts of capital cannot alone fulfill the growing demand for electricity in emerging economies that we will witness in the near future. In rural remote areas in particular, the role of domestic or external NGOs will play an important part in granting basic technical education to local people, and in supporting local innovation in the energy sector.

Benedetta Mantoan is from Italy. After a bachelor degree in Japanese Studies at the Ca’ Foscari University in Venice, she is now a recent MA graduate in “Politics, Society and Economy of Asia” at Leiden University, The Netherlands. Her strong interest in East and Southeast Asian culture is combined with a genuine passion for sustainable development and nature conservation.

References

• Mark T. Buntaine & William A. Pizer (2015) Encouraging clean energy investment in developing countries: what role for aid?, Climate Policy, 15:5, 543-564.
• Martinot, E., Chaurey, A., Lew, D., Moreira, J. R., & Wamukonya, N. (2002). Renewable energy markets in developing countries. Annual review of energy and the environment, 27(1), 309-348.
• Griffith-Jones, S., Ocampo, J. A., & Spratt, S. (2012). Financing renewable energy in developing countries: mechanisms and responsibilities. European Report on Development.
• Japanese International Cooperation Agency (n.d.). Thematic Issue – Our work – Energy and Mining. Para 2, 3, 4. Retrieved from: https://www.jica.go.jp/english/our_work/thematic_issues/energy/activity.html.
• Paramati, S. R., Apergis, N., & Ummalla, M. (2017). Financing clean energy projects through domestic and foreign capital: The role of political cooperation among the EU, the G20 and OECD countries. Energy Economics, 61, 62-71.