The 21st Century climate challenge

countries speeding-up the deployment of CCStechnologies at home, and then ensuring thatthey are available to developing countries assoon as possible and at the lowest price. Perhapsthe most concrete example of cooperation inthis area to date is the Near-Zero EmissionsCoal Project, which is part of the EuropeanUnion–China Partnership on Climate Change.The project is planned in three phases, startingwith a three-year feasibility study (2005–2008)to explore technological options. The ultimatetarget is a single demonstration plant in 2020.However, progress in implementation hasbeen slow—and details for implementing laterphases have yet to be revealed. 133 Collaborationbetween the United States' FutureGen ‘cleancoal’ project and Huaneng, China’s third largestcoal-power generation company, has been besetby similar uncertainties.The missing link—a framework forfinance and technology transferWhat is missing from the current patchworkof fragmented initiatives is an integratedinternational framework for finance andtechnology transfer. Developing that frameworkis a matter of urgency.There are several areas in whichinternational cooperation could helpstrengthen climate change mitigation effortsthrough support for national energy policyreforms. Under the UNFCCC, developedcountries undertook to “meet the agreed fullincremental costs” of a range of measuresundertaken by developing countries in thethree core areas of finance, technology andcapacity building. 134 National resourcemobilization will remain the primaryfinancing vehicle for energy policy reform.Meanwhile, the focal point for internationalcooperation is the incremental financial costand the enhanced technological capabilitiesrequired to achieve a low-carbon transition.For example, international cooperation wouldmobilize the resources to cover the ‘price gap’between low-carbon options such as renewableenergy and enhanced coal-efficiency optionson the one side, and existing fossil-fuel basedoptions on the other side.The underlying problem is that developingcountries already face deep financingconstraints in energy policy. Estimates bythe IEA suggest that an annual investmentfor electricity supply alone of US$165 billionannually is needed through to 2010, rising at3 percent a year to 2030. Less than half of thisfinancing is available under current policies. 135Financing deficits have very real implicationsfor human development. On current trendsthere will still be 1.4 billion people lackingaccess to electricity in 2030, and one-third ofthe world’s population—2.7 billion people—will still be using biomass. 136Developing countries themselves have toaddress a wide range of energy sector reformproblems. In many countries, heavily-subsidizedenergy prices and low levels of revenue collectionrepresent a barrier to sustainable financing.Electricity subsidies are often directedoverwhelmingly towards higher-income groupspartly because they are distributed throughlarge centralized grids to which the poorhave limited access. Greater equity in energyfinancing and the development of decentralizedgrid systems that meet the needs of the poor aretwo of the foundations for meaningful reform.However, it is neither realistic nor equitable toexpect the world’s poorest countries to financeboth the energy investments vital for povertyreduction at home and the incremental costs ofa low-carbon transition to support internationalclimate change mitigation.These costs are linked to the capitalrequirements for new technologies, the increasein recurrent costs in power generation and therisks associated with the deployment of newtechnologies. As with any new technology, therisks and uncertainties associated with low-carbontechnologies that have yet to be widely deployedeven in the developed world represent a largebarrier to deployment in developing countries. 137The multilateral framework for the post-2012era will have to include mechanisms that financethese incremental costs, while at the same timefacilitating technology transfer. Putting a figureon costs is difficult. One ballpark estimatefor the investment costs to facilitate access tolow-carbon technology broadly consistent withOn current trends therewill still be 1.4 billionpeople lacking accessto electricity in 20303Avoiding dangerous climate change: strategies for mitigationHUMAN DEVELOPMENT REPORT 2007/2008 153