FinancingtheGreen

EnergyTransition

AUS$50trillioncatch

November2023

FinancingtheGreenEnergyTransition:AUS$50trillioncatch|Foreword

03

Foreword

Theglobalcommunityhasbeenonajourneyfrom

skepticismandfearofclimatechangetonowoneofambitiontoseizetheopportunitiesforgrowthand

development.Butthetransitionpathwayisneithercostlessnoreasy.Theenergyandclimatetransitionrepresentsoneofthebiggestmodernizationprojectsoftheproductionsystemofeconomies,worldwide,sincetheIndustrialRevolution;andtheperilsof

climatechangemandatethatthistakesplaceinjustafractionofthetime.

ThisreportonFinancingtheGreenEnergyTransition,isthelatestinDeloitte’sseriesofinsightsfromthe

macroanalysisaroundtheglobaleconomicimperativetogettonetzeroin

TheTurningPoint

,tothecriticalityofskillsin

Worktowardnetzero:theriseoftheGreen

Collarworkforceinajusttransition

,andthepotentialofnewenergyin

Greenhydrogen:energizingthepath

tonetzero

.Thisreportisapracticalcontributionto

theglobaleffortinrecognizing,atitsfoundation,thatfinanceiscriticaltoeconomicgrowthandakeydriverofthiseconomicmodernizationeffort.

Criticaltothisreportisnotsomesimplisticarticulationofratesofreturn,butadetailedstudyinthefactors

tohelpunlockfinanceinserviceofbuildingnew

marketswithnewrules,and,consequently,newrisksandstrategicoutlooks.Importantly,thisreportplacesfocusonalessrecognizedunderstandingofthis

transition—thattheoptimalpathtonetzerorequiresustocollectivelymanagethedebtandequityaspectsofglobalinvestmentflowsinthistransitionupfront.

Why?Becausetheenergytransitionrequires

developingeconomiesasmuchas,ifnotmorethan,

thedevelopedeconomies,forglobalgrowthconsistentwithnetzeroby2050.Andasthefinancecommunityknowswell,de-riskingprojects,ormakingthem

bankable,iskeyforbothdevelopedanddevelopingeconomies.Theessenceofajusttransitionsitsattheheartofthisreport.

Thereporthighlightsthemagnitudeoftheglobal

taskaheadofustoachievenetzeroby2050—an

investmentaskofaboveUS$7trillionperannum

undercurrentfinancingconditions.Butenabling

optimal,low-costfinance,bymakingprojects

bankable,couldhelpoptimizetheglobalinvestment

initiativeandreducetheinvestmentaskbyaround

US$2trillionperannum—aUS$50trillionbenefitto

theglobaleconomyovertheperiodto2050.

Thisglobaltransitionproceedshavinglearnedthe

lessonofthelast80years—thatgrowthandthe

equitabledistributionofthatgrowtharecriticalfora

sustainablefuture.Thegeopoliticalimperativeforthis

cannotbeignoredornotembeddedintoourcollective

thinkinggoingforward.Thisisareporttohelpmake

theeconomictransitionreal—bankable—inthe

serviceofglobaleconomicgrowthandprosperity.

Eachday,theglobalcommunity,andDeloitte’sclients,

stakeholders,andpeopleconfronttherisksand

realitiesofthestructuraleconomicchangeaheadof

us.Ourobjectiveistogenerategreaterconversation

anddebateonthebestmeansofachievingourglobal

imperativeofbuildinganet-zeroeconomyby2050.

Tothisend,Deloittewelcomesyoutoengagewith

usandeachother,aswehelpbuildanecosystemfor

action,ontheleast-cost,optimalandequitablepathto

reachourcommonambitions.

JenniferSteinmann

GlobalSustainability&

ClimatePracticeLeader

DeloitteGlobal

FinancingtheGreenEnergyTransition:AUS$50trillioncatch|TableofContents

04

Foreword03

Glossary05

Executivesummary06

1.Climateneutralityisanunprecedentedfinancialchallenge08

1.1.Limitingglobalwarmingto1.5°C09

1.2.Thestruggletofinancetheenergytransition09

1.3.Objective10

2.Towardaclimate-neutralworld

12

2.1.Adynamicbutinsufficientpolicyenvironment

13

2.2.Keytechnicalcharacteristicsofanet-zeroworld

15

3.Whatisholdingbacksustainableinvestments?

20

3.1.Politicalbarriers

22

3.2.Marketbarriers

22

3.3.Transformationbarriers

23

4.Fosteringinvestmentsinthegreentransition

24

4.1.Atoolkittofostersustainableinvestments

25

4.2.Focusondevelopingeconomies

34

4.3.Investmentimplications

36

5.Acallforaction38

Appendices42

Appendix1.Calculationoflevelizedcostofelectricityandhydrogen42

Appendix2.Deloitte’sEnergyTransitionInvestmentCalculator43

Endnotes45

Authors49

Globalcontacts50

DeloitteCenterforSustainableProgress51

FinancingtheGreenEnergyTransition:AUS$50trillioncatch|Glossary

05

Term

Definition

IPP

Independentpowerproducer

LCOE/H

Levelizedcostofelectricity/hydrogen

LICs

Low-incomecountries

MDB

Multilateraldevelopmentbank

MICs

Middle-incomecountries

NDC

Nationallydeterminedcontribution

NZE

Net-zeroemissions

OECD

OrganizationforEconomicCo-operationandDevelopment

OPEX

Operationalexpenditure

PPA

Powerpurchaseagreement

PV

Photovoltaic

R&D

Researchanddevelopment

RoR

Rateofreturn

UK

UnitedKingdom

UN

UnitedNations

US

UnitedStates

Glossary

Term

Definition

ASEAN

AssociationofSoutheastAsianNations

BAU

Business-as-usual

CAPEX

Capitalexpenditure

CBI

ClimateBondsInitiative

CST

Climatestresstest

CCS

Carboncaptureandstorage

CCUS

Carboncapture,utilizationandstorage

(C)CfD

(Carbon)Contractfordifference

CO2

Carbondioxide

COP

ConferencesoftheParties

DBSA

DevelopmentBankofSouthernAfrica

DFI

Developmentfinanceinstitution

DRI

Directreductionofiron

EAF

Electricarcfurnace

ECB

EuropeanCentralBank

EIB

EuropeanInvestmentBank

EMDEs

Emergingmarketsanddevelopingeconomies

EPC

Energyperformancecertificate

ESG

Environmental,socialandgovernance

EU

EuropeanUnion

EV

Electricvehicle

FiP

Feed-inpremium

FiT

Feed-intariff

GBP

Greenbondsprinciple

GDP

Grossdomesticproduct

GHG

Greenhousegas

ICE

Internalcombustionengine

IEA

InternationalEnergyAgency

IMF

InternationalMonetaryFund

Executivesummary

FinancingtheGreenEnergyTransition:AUS$50trillioncatch

06

Executivesummary

Reachingnet-zerogreenhousegas(GHG)emissionsgloballyby2050

requiresafundamentaltransformationofsocietyfromthecurrentfossilfuel-centricmodeltoahighlyrenewableandelectrifiedenergysystem.

Thistransformationentailssignificantinvestments,ontheorderofUS$5trillion/yeartomorethanUS$7trillion/yearthrough2050.However,currently,lessthanUS$2trillionareinvestedeachyeartodrivethistransition.Ifinvestmentsdonotscaleuprapidly,theworldwillfailtomeetitsclimateobjectives.

Adirectresultofpoorinvestmentopportunitiesandrisk-returnprofilesforgreenprojectsisthelackof

privatemoneyfinancingtherequiredtransformation.

Mostoftheidentifiedtechnologicalsolutionsfor

climateneutrality(renewableenergy,electrification,greenhydrogen,etc.)arehighlycapital-intensive

andoftennewandimmaturewithsignificant

developmentuncertainties.Ahighlycapital-intensiveenergytransitionmeansthatthecostofcapitalis

akeycostdriver.Thisreflectsanimmutablelawoffinance:theriskiertheprojectthehigherthecostofcapital.Infact,financingcosts,stemmingfromthecostofcapital,canaccountforasmuchashalfoftheinvestmentexpenditure.

Greenprojectscurrentlysufferfromunderinvestmentandhighrequiredreturnratesbecauseprivate

investorsseegreentechnologiesasriskierthanalternativeinvestments.Akeycontributortothisriskperceptionisthepoliticalandregulatoryrisksthatstemfromgovernments’failuretoestablishthenecessarymechanismsandinstrumentsthatcanguaranteeattractivereturnsoninvestment.

Developingeconomies,whereaboutthree-quarters

ofgreeninvestmentsshouldoccur,oftenfacegreater

risksandstricterpublicbudgetconstraintsfor

energytransitionprojects.Therefore,greenprojects,

especiallywhentheyareintheGlobalSouth,areoften

notbankable,i.e.,theirrisk-returnprofilesdonotmeet

theinvestors’criteriatomobilizesufficientcapital.

Deloitte’sFinancingtheGreenEnergyTransitionproject

aimstoraiseawarenessoftheneedforgovernments,

financialinstitutions,lendersandinvestorsand

projectdeveloperstojointlydevelopandagreeon

mechanismstofosterbankability.Thecurrentpaper,

asthefirstofitsseries,addressesthisbankability

challengeandassessesthefinancialinstruments

thatcanfosterinvestmentsinthegreentransition,

notablyindevelopingeconomies,focusingonthe

energy-industrynexus,responsiblefor80%ofglobal

greenhousegas(GHG)emissions.Inwritingthis

report,Deloittecallsonitsreaderstoengageinthe

conversationonthefutureofgreenfinanceandonthe

resolutionofkeyinvestmentbarrierstoacceleratethe

energytransitiontoday.

Governmentsofcountriesacrossthefullspectrum

ofeconomicdevelopmentshouldworkwithfinancial

institutionstodevelopmechanismsandinstruments

thatcanreducerisksandunlockprivatefinance

atattractivecosts.Theserisksareassociatedwith

political,marketandtransformationbarriers.

Executivesummary

FinancingtheGreenEnergyTransition:AUS$50trillioncatch

07

Thekeyactionleverstoovercomethemcanbegroupedin

threemaincategories:reducingtherisksofgreenprojects,bridgingthecostgapbetweenfossil-basedGHG-intensive

productsandtheirgreencounterpartsandcuttingtheuseoffossilfuels.

?Clearclimatepolicies,guaranteemechanisms,offtake

reliabilityandthedevelopmentofdomesticcapitalmarketscansignificantlyreducetherisksassociatedwiththese

projects.Notably,blendedfinancemechanismscanreducebothprojectrisksandfacilitatecommercialcapitalflows

togreenprojectsbyvirtueofthemobilizationpowerof

concessionalcapital.US$1ofconcessionalpublicfinancecanmobilizemorethanUS$4commercialcapital,morethanhalfofwhichcancomedirectlyfromprivatecapital.

?R&Dandupfrontinvestmentsupportschemes,theadditionofoperatingpremiumstogreenassetsandthepenalizationofGHG-intensiveassetsaresomeofthekeytoolstobridgethecostgapbetweengreenandGHG-intensiveassets.Theyareoftenusedincombinationtofacilitatemarketintegrationofgreenproducts(e.g.,carbontaxandfeed-inpremiums).

?Endingfossilsubsidies,compensatingfortheearlyphase-outofsomeofthefossilassetsandfacilitatingthejobtransitionofpeopleemployedinGHG-intensiveindustriestocleanonescanfacilitatethetransitionbothsociallyandeconomically,

preparingthegroundworkforcuttingfossilassets.

Developingcountriesoftenfacehigherpoliticalandregulatory,offtaker,marketliquidity,currencyandinflationrisks.These

areallfactorsimpactingprojects’financingcosts,making

capital-intensiveenergytransitionprojectsdisproportionatelyexpensive.Whiledevelopingregionsgenerallyhavebetter

renewableendowments,highercostofcapitalentailshigher

productcostsintheseregions.Financingcostsaccountfor

aboutone-quarterofthelevelizedcostofelectricity(LCOE)

fromsolarpowerplantsinadvancedeconomies,butthey

accountforabouthalfofitindevelopingeconomies.Moreover,thegovernmentsofdevelopingcountriestendtorunontighterbudgets.Therefore,twokeyeffortschieflyaimedatemergingeconomieswillbetode-riskprojectstolowerthecostofcapital,andtoremovebarriersconstrictingtheflowofprivatecapital

towardgreenprojects.

Intheabsenceofconcessionalfinanceindeveloping

economies,anet-zeroscenariowouldcostmorethanUS$7trillion/yearonaveragethrough2050(almostUS$200trillion

cumulatively).About70%ofthoseinvestmentswouldtake

placeinlow-andmiddle-incomeeconomies.Reducingcapitalcostscanbothfacilitateprivatecapitalflowstowardthe

transitionandreducetheircost.Achievingbankabilitycan

unleashprivatefinanceandbringinvestmentspendingdownbyUS$2trillioneveryyear(US$50trillioncumulatively,abouthalfofglobalyearlyGDPtoday)intheperiodto2050.

Achievingclimategoalsisaformidablechallenge.Decisiveandcoordinatedpolicysupport,andcollectiveactionfrominvestorsandpolicymakersareparamounttoguideinvestmentstowardgreenandsustainableprojects.

?Governmentsshouldreducetherisksthatthreatenthebankabilityofgreeninvestments.Allunderlyingrisks,

fromunreliableofftaketounstablemacroeconomics,raisefinancingcosts.De-riskingtheinvestmentlandscapecanhelpunlockthelow-costcapitalthatwillmakethecostly

andcapital-intensiveenergytransitionmoreaffordable.Overall,governmentswillbepivotalinmakingmoregreenprojectsbankable.

?Undercurrentfinancingconditions,reachingnetzeroby2050cancostmorethanUS$7trillion/year.Concessionalfinanceviainnovativefinancingstructurescanreducethe

costofthetransitionbynearly40%fordevelopingcountries,loweringglobalinvestmentneedstoUS$5.5trillion/year.

?Societiesandinvestorsshoulddealwithsignificant

upfrontinvestmentstodayandreapthebenefitslater.

Thecostofinactionishigherthantheburdenofasmooth,plannedtransitioninitiatedtoday.ThegreentransitioncanincreasetheworldeconomybyUS$43trillionbetween2021and2070.Requiredinvestmentlevelsremainbelow6%

ofglobalGDPannually,whereasacurrentpolicypathway

(alignedwith+3°Cofglobalwarming)wouldentailalmost8%ofglobalGDPlossby2070.

?Investorsshouldchannelgreenfundstodeveloping

economies.Currently,lessthanhalfofgreeninvestments

takeplaceindevelopingcountries.ExcludingChina,which

accountsforone-thirdofgreeninvestments,thatnumber

shrinksto16%.Toreachclimategoals,some70%ofgreen

investmentswouldneedtohappenintheGlobalSouthby

2030.Thiscanonlybepossiblewithinternationalcooperationandtheactiveparticipationofdevelopmentfinance

institutionsandmultilateraldevelopmentbanks.

FinancingtheGreenEnergyTransition:AUS$50trillioncatch|1.Climateneutralityisanunprecedentedfinancialchallenge

08

1.tyisan

unprecedentedfinancial

challenge

FinancingtheGreenEnergyTransition:AUS$50trillioncatch|1.Climateneutralityisanunprecedentedfinancialchallenge

09

1.1.Limitingglobalwarmingto1.5°C

Anthropogenicgreenhousegas(GHG)emissionslikecarbondioxide(CO2),methaneandnitrousoxide(N2O)have

causedmuchoftheobservedglobalwarmingoverthepast

150years.1

Climatechangecausedbytheriseoftemperaturesoverthe

earth’ssurfaceseriouslythreatenstoendangerbiodiversity,

makefreshwaterscarcer,andcausefrequentdevastating

eventssuchasdroughts,floodsandwildfires.

2

Accordingto

theIntergovernmentalPanelonClimateChange(IPCC),limitingglobalwarmingto1.5°Ccould“reducetheprobabilityofextremedrought,precipitationdeficits,andrisksassociatedwithwateravailabilityinsomeregions”.ThisrequiresveryrapidglobalGHGemissionreductionsandreachingclimateneutralitybynolaterthan2050.

3

Energyandindustrialactivitiesareresponsibleformore

than80%ofglobalGHGemissions.

4

Therefore,theprofound

transformationofbothenergysupplyandindustrialprocesses

isanunavoidablesteponthepathtoclimateneutrality.Thekeydecarbonizationleversoftheseactivitiesconsistoflarge-scale

renewabledeployment,

5

electrificationofend-uses(buildings,

industrialprocessesandtransportsector),

6

directandindirect

useofgreenhydrogeninhard-to-abatesectors(e.g.,steelmaking,

e-fuelsforaviationandmaritimetransport)7

andenergy

efficiencyimprovements.6

Moreover,carboncapture,utilizationandstorage(CCUS)willberequiredtodecarbonizeindustrial

activitiesthatusefossilfuelsasfeedstock,andtoproducee-fuelsformaritimeandaerialtransport.

8

Suchatransformationof

theenergy-industrynexusfromahighlyfossil-basedsystem

(above80%ofprimaryenergyandfeedstocksupply)

9

toanearlyfossil-freeworldamountstoatruesocietal,cultural,economicandpoliticalrevolutionwhichwillrequireunprecedentedeffortsandinvestments

.10

1.2.Thestruggletofinancetheenergytransition

BoththeInternationalEnergyAgency

11

andInternational

RenewableEnergyAgency

12

estimatethataboutUS$4

trillion/yearofglobalinvestmentswillbeneededuntil2050toachievenet-zeroGHGemissionsandlimitglobalwarmingto1.5°C.Thisrequiresashiftfromthehistoricalvalueof

US$1.8trillion/yearin2019andcurrentpolicytrajectoryof

US$3.3trillion/year.12

Thus,despitestrongeffortsfromeachsideoftheeconomy,theworldhasbeenstrugglingtokeepupwiththeinvestmentneedsofthetransition.Financingtheenergytransitionhasproven

particularlychallengingindevelopingcountries,whichfaceevenhigherinvestmenthurdlesthanadvancedeconomieswherethe

transitionisalsoslow.10

,13

Moreover,thedevelopingworldwillbemoreseverelyaffected

byclimatechangethanadvancedeconomiesandwillalsobethe

homeofmosthumansthroughoutthe21stcentury.14,15

Thisiswhyfinancingthetransitionindevelopingregionsisarguablythecruxoftheglobalracetonetzero.Thesilverliningliesintheimmensenaturalresourceendowmentofthedevelopingworld,from

preciousrawmineralstomakebatteriestosunbakedplainswheresolarpanelsthrive.Withitsyoungandincreasinglyeducated

workforce,thedevelopingworldhaswhatittakestoleverageitsnaturalresourcesforthetransition.Thequestionnowishowtoresolvethefundingdeadlock.

Governments,andespeciallydevelopingcountries,cannotsingle-handedlyfundtherequiredinvestmentstogettonet-zeroGHG

emissionsby2050.Theprivatesectormustbemobilized.Asmuchoftherequiredtransformationconsistsofhighlycapital-intensivetechnologicalchanges,projectdevelopers,especiallyindevelopingcountries,arelimitedbyfinancialconstraints.Indeed,funding

maynotalwaysbereadilyavailableforgreentransitionprojects,particularlyinplaceswhereinvestmentsfacehigherrisksorfornewtechnologieswithoutaproventrackrecord.Consequently,unlockingabundantandaffordablefundingforthetransitionwillrequirepolicyandmarketactorstoworktogethertoovercomekeyinvestmentbarriers.

FinancingtheGreenEnergyTransition:AUS$50trillioncatch|1.Climateneutralityisanunprecedentedfinancialchallenge

10

1.3.Objective

TheFinancingtheGreenEnergyTransition–AUS$50-trillioncatchstudyaimstounderstandthekeybottlenecksthathindertheinvestmentsrequiredtoreachnetzero.

Theprojectconsistsofanidentificationofthekeyfinancial

facilitatinginstrumentstohelpacceleratethetransition,a

mappingofthegapsregardingthepracticalimplementationof

thesefacilitatinginstruments,atechnology-andgeography-

differentiatedassessmentofthesefinancialinstrumentsbasedonmodeling,andastakeholderreturnonexperienceanddepictionofafutureprojectfinanceecosysteminserviceofsustainability

andclimatetargets.Moreprecisely,theoverarchinggoalofthisprojectistofindandlistouttoolsforincreasingthebankability

ofgreenprojects,especiallyindevelopingcountries,tofacilitate

privatecapitalflowstowardtheenergytransitionbyansweringthefollowingquestions:

?Whataretheexistingfinancialtoolstoincreasethebankabilityofsustainableprojectsandmakethemmoreattractivefromaninvestorperspective,andhoweffectivearethey?

?Whatismissingfromtheexistingspectrumofsolutionsandwhyaretheinvestmentsnottakingplaceattherequiredscaleorpace?

?Howdoesagreenprojectfinancingenvironmentlookandhowdodifferentactorsinteractinsuchanenvironment?Whatarethepracticalandinstitutionalinefficienciesinfinancingsuch

projectsandhowcantheybeovercome?

?Whatarethepotentialnewinnovativefinancialinstrumentstopromoteglobally,andwhataretheregion-specificrequirementsforhelpingtoacceleratethetransitiontowardnet-zero?

?Whatcanpublicandinternationalorganizationsdoascatalyzersofprojectfinance?Whatcanpolicymakersdotohelpeasethetransitionandguideprivatefundstowardclimatetargets?

Toanswertothesequestions,Deloitte’sFinancingtheGreenEnergyTransitionstudyassesses:

01.thestateofplayoffinancialfacilitatinginstrumentsandtheirregionalandtechnologicalspecificities,and

02.theprojectfinanceenvironmentandsomeofitscomplexitiesandsuggestionofapracticalcomprehensivesustainable

financeecosystem.

Thefirststepisthereforetounderstandthestateofplayandtheexistingfinancialinstrumentsinserviceofclimate.Giventhattheenergy-industrynexusisthekeycontributortoglobalwarming(80%ofglobalanthropogenicGHGemissions),thisreportaimstocreatesuchknowledgeandintroduceregionalandtechnologicalconsiderationstothisanalysisofthestateofplayalongwith

missingpiecesofthegreenenergytransitionfinancepuzzle.

FinancingtheGreenEnergyTransition:AUS$50trillioncatch|1.Climateneutralityisanunprecedentedfinancialchallenge

11

Theoverarchinggoalofthisprojectisto

findandlistouttoolsforincreasingthe

bankabilityofgreenprojects,especiallyindevelopingcountries,tofacilitateprivate

capitalflowstowardtheenergytransition.

FinancingtheGreenEnergyTransition:AUS$50trillioncatch|2.Towardaclimate-neutralworld

12

2.-

world

FinancingtheGreenEnergyTransition:AUS$50trillioncatch|2.Towardaclimate-neutralworld

13

2.1.Adynamicbutinsufficientpolicyenvironment

Theyear2015markedaturningpointforglobalclimate

policywith195partiessigningtheParisAgreementandthe

UNadoptingits17SustainableDevelopmentGoals(SDGs).16

However,thefollow-upontheselandmarkagreements

hasbeendisparatearoundtheglobe,withsomecountriesdoublingongreenenergypoliciesandothersstagnating

since.17

Themeasureofthisprogressarethenationally

determinedcontributions(NDCs),whichParisAgreementsignatoriesshouldupdateeveryfiveyears.

AsofOctober2023,177countrieshaveupdatedtheirNDCs

.18

Ofthose,107countriesrepresentingover80%ofglobalGHG

emissionshaveoptedformoreambitiousemissionsreduction

targets.Theseincludehistoricalemitters(advancedeconomies)

andpotentialfutureemitters(emergingcountries).AlthoughthereportingproceduresoftheParisAgreementaremandatory

forsignatories,theachievementofitsobjectivesisnot.19

Hence,

theParisAgreementiseffectivelynon-binding.Thisiswhy

NDCs,aswellasbindingnet-zeroGHGemissiontargetsarekey

tosecuringclimateobjectivesagainstthetidesofgrowthand

crises,particularlywhenfossilfuelsubsidiesbecomepolitically

attractive.Forinstance,therecentenergypricecrisisforced

governmentstodeployvastsubsidyplans

20

toprotectconsumers

whoweretrapped21

intheirdependencyonincreasinglyexpensivefossilfuels.

Besidestemporarilyboostingfossilfuelsubsidies,theenergypricecrisishasalsoinducedaparadigmshift,placingenergysecurity

andstrategicdependenciesatthetopofpolicymakers’agenda.

22

This,alongwithasharpriseinfossilfuelprices,hasreducedthegapineconomicattractivenessbetweenfossilfuelsandgreentechnologies.Beforetheenergycrisis,economicgrowthwas

largelyplannedaroundtheexpansionoffossilfuelconsumption.

Thehistoricalrealityofdevelopedcountrieshavingbuilttheir

economiesonthebackoffossilfuelsmadeitparticularly

challengingtoaskdevelopingcountriesnotto.However,today,cleanenergiesareenteringthefrayasaviablealternativegrowth

model.EvenifGHGemissionsandeconomicdevelopmentweredeeplycorrelatedinthepast,

23

somedevelopedeconomies

managedoverthepastfewdecadestodecoupletheireconomicgrowthandGHGemissions.

24

Themainreasonsforthis

observationareadecreaseincarbonintensityoftheenergymixoftheseeconomiesaswellasadecouplingofenergyuseandeconomicgrowth.

25

Explainingthisdecouplingonlybytheoffshoringofproductionoverseaswouldhavebeenprimarilytrueintheearlyyearsfollowingthisobservation.However,as

consumption-basedmethodologyisshowingnow,sincemid-

2000s,itisnotthemaindriverofthisdecouplinganymorefor

mostadvancedeconomiessuchastheUK,EuropeandNorth

Americancountries.

26

Cleanenergies,notablyrenewableenergies,havealreadymanagedtochangethestoryastheybecome

increasinglyattractive.Notonlyaretheycatchingupwithfossilfuelsintermsofcosts,buttheyalsoofferagreaterdegreeofstrategicautonomy.Thisisespeciallyrelevantforcountriesthathavehistoricallybeenhithardbyfossilfuelsupplyshocks.

Globaltidesshiftinginfavorofclimate