Powering a Greener, Cleaner, and Sustainable Future
- Keisha N. Blades
- Jun 5, 2024
- 7 min read
Updated: Jun 7, 2024
The potential of renewable energy to drive economic transformation and reduce reliance on fossil fuels.
Train of Thought by: Keisha N. Blades
The era of “global boiling”
Following what scientists confirmed was the hottest month globally on record, we have officially entered the era of “global boiling”, according to the UN Secretary General, António Guterres (United Nations, 2023). This transition from global warming to global boiling is perhaps the alarm bell reminding us that we urgently need to accelerate our transition to a renewables-based energy system (wind, solar, biomass, water geothermal, wave, and hydro). Not only is it the solution to addressing the increasing threat of climate change but it could also strengthen our energy security and provide a roadmap for economic transformation and development for decades to come.
Economic Transformation
Economic transformation encompasses structural changes, where gears shift from low productivity, labor-intensive sectors, to higher productivity, skills and knowledge intensive sectors (UNDP, 2018). This transformative approach to sustainable economic growth promotes job creation, reduces income inequality and poverty, and enhances the overall quality and inclusivity of economic growth. This is particularly crucial for small island developing states (SIDS) in the Caribbean, which often struggle to structurally transform their economies and, as a result, remain especially vulnerable to developmental challenges. Challenges that the Caribbean Development Bank’s working paper “A Policy Blueprint for Caribbean Economies” written by Ram et al (2018), broadly categorizes as macroeconomic, competitiveness and productivity, human development, and environmental.
Energy Security
In addition to the aforementioned developmental challenges faced by developing countries, yet another challenge for SIDS is their high dependence on fossil fuel imports and ability to absorb price increases. From the point of view of SIDS, vulnerability to volatile oil prices remains a major energy security concern and is magnified by an overreliance on energy imports. Caribbean countries, for example, have long been exposed to the volatility that exists in the oil and gas market, in some cases paying almost double for electricity when compared to the United States says David L. Goldwyn (2021), who was the leading State Department energy diplomat in the first Obama administration. In the same breath however, almost all economic activity involves energy as an input, reinforcing the essential role energy plays in economic transformation, development and growth; making it imperative to secure sustainable energy sources such as renewables-based energy systems.
The Job Creation Effect
Renewable energy sources are an important strategic priority for most countries seeking to enhance their level of energy security and structurally transform their economies. The rising demand for clean energy and quality jobs, combined with the positive job creation effects demonstrated by renewable energy, has the potential to generate opportunities that enhance productivity. This is observed within the renewable energy industry where jobs can be created directly and indirectly along the entire value chain, including in the manufacturing and distribution of equipment; the production of inputs such as chemicals; or even in services like project management, installation, operation, and maintenance (ILO, 2014). Many Caribbean territories have made significant progress in adopting renewable energy sources as well as setting ambitious net-zero transition targets with the aim of achieving sustainable development goal 7 (SDG 7: Affordable, Clean and Sustainable Energy). In an effort to embrace renewable energy solutions, the implementation of various projects has created numerous job opportunities and increased the demand for higher skills. This has facilitated the transition of workers from declining sectors to emerging niches in the green economy (OECD, 2014). Opportunities that can foster robust local business ecosystems with the capacity to accelerate transformative, long-term economic growth and development.
Energy Poverty Reduction
Global poverty as we know is one of the most defining challenges of our time and is still a reality for every 10th person in the world (UN, 2022). According to the World Bank (2022), by the end of 2022 the global extreme poverty rate reached 9.3 percent, up from 8.4 percent in 2019. Another alarming crisis facing humanity is the fact that there are billions of people worldwide who lack access to electricity, also known as global energy poverty. According to the International Energy Agency (IEA) (2022), there are currently 2 billion people in the world without access to electricity, mostly in Africa and South Asia. The COVID-19 pandemic coupled with the recent Russia/Ukraine conflict, have exacerbated the energy poverty rates due to inflated energy prices and dwindling household incomes says professional engineer, Dr. Azad Mohammadi (2022). However, the growth of renewable energy consumption and energy poverty alleviation, show a significant positive correlation. In their research, Jun et al. (2022), concluded that renewable energy not only directly alleviates global energy poverty, but also has a significant inhibiting effect on energy poverty by improving energy efficiency in more environmentally sustainable ways than fossil fuels. It provides access to basic needs such as transportation, education, clean water, healthcare, food security, public safety, and economic opportunities. Particularly in rural communities which could gain from the boost in their economies and also have the acreage and farmland to accommodate solar panels and wind turbines, while still farming crops or tending livestock. Bolstering the socio-economic progress of these rural areas could be mutually beneficial by reducing their dependence on fossil fuels while responding to their challenges and aspirations. The prosperity of these communities could have the multiplier effect necessary to advance the process of economic transformation.
Inclusive Economic Growth
Also crucial in addressing the dependence on fossil fuels is the potential of off-grid renewable energy solutions in enhancing the quality of and promoting inclusive economic growth. According to the Organization for Economic Cooperation and Development (OECD, 2014), inclusive growth is economic growth that is spread evenly across society and creates opportunities for all. It underscores the importance of not just growth itself but on the shape and distribution of growth across a population, asking questions about who stands to benefit from growth or rather, who are the people excluded from the benefits of growth. Even more precisely, it is concerned with the extent of income inequality, where income is distributed unevenly across the population. A significant element of inclusive growth is adequate, affordable, and appropriate access to energy services. Furthermore, results from research conducted by Topcu and Tugcu (2020), investigating the impact of renewable energy on income inequality, indicate that an increase in renewable energy consumption leads to a decrease in income inequality. For instance, renewable energy can provide additional income to landowners who host solar or wind farms (least-cost options) on their property or for farmers who generate revenue from growing crops used to produce biofuels. It is evident that providing universal, reliable, affordable renewable energy, empowers the lives of many, thereby triggering economic transformation and by extension, inclusive growth.
Economic Diversification
More and more, the contribution of new sustainable energy technologies is also being seen from an economic diversification perspective. A perspective that hit home during the COVID-19 pandemic for many countries whose economies were heavily dependent on revenue generated from tourism. Structural weaknesses exposed poorly diversified economies and highlighted the urgency to strengthen economies that could withstand external shocks. As a result, economic diversification is increasingly seen as essential for economic growth and development. For instance, in the context of the financial services sector, green financing supports the development and construction of renewable energy infrastructure on public lands, representing a significant capital investment in a country’s overall portfolio of modern infrastructure – ensuring attractive investment opportunities and decades of use and value from these projects. In the context of the manufacturing sector, there exists a positive relationship between growth in the sector and gross domestic product, with the absorption of large numbers of workers from the agricultural and informal sectors into productive jobs. The pervasive role of renewable energy in supporting growth in both sectors is recognized as indispensable and essential to driving productivity in a sustainable and resilient manner.
Bridging the Gap
As efforts are made to rise to the challenge of powering a greener, cleaner, sustainable future, the pressing importance of renewable energy technologies in the economic transformation-fossil fuel dependence reduction nexus is undeniable. From the perspective of economic transformation, it is seen as the panacea for addressing overriding challenges such as inequality, poverty, and stagnated economic growth and development. From the perspective of reducing fossil fuel dependency, renewable energy is seen as a strategic pathway to diversify away from vulnerable products, markets, and jobs, towards income sources that are low emission and aimed at increasing economic resilience (UNFCCC, 2018). Certainly, there have been concerns and setbacks on the journey towards the transition from fossil fuels, however energy executives believe that the net-zero transition is still happening despite these setbacks. “These are bumps in the road, but the momentum is still very strong toward the energy transition” says Scott Mackin, managing partner at Denham Capital, a sustainable infrastructure fund based in Boston. This is encouraging since the benefits of building renewable energy capacity appear to be far reaching and outweigh the obstacles. With the right policies and incentives, the transition to clean energy stands to boost economic transformation while reducing fossil fuel dependence.
References
Goldwyn, D. L. (2021, November 22). It’s time to refresh the Caribbean Energy Security Initiative. Retrieved from Atlantic Council: https://www.atlanticcouncil.org/blogs/energysource/its-time-to-refresh-the-caribbean-energy-security-initiative/
ILO. (2014, August). Green jobs and renewable energy: low carbon, high employment. Retrieved from International Labour Organization: https://www.ilo.org/wcmsp5/groups/public/---ed_emp/---emp_ent/documents/publication/wcms_250690.pdf
Jun, Z., Dong, K., Dong, X., & Shahbaz, M. (2022, March). How renewable energy alleviate energy poverty? A global analysis. Retrieved from Science Direct: https://www.sciencedirect.com/science/article/abs/pii/S0960148122000052
OECD. (2014). Inclusive Growth? Retrieved from Organization for Economic Cooperation and Development: https://www.oecd.org/inclusive-growth/about.htm
OECD. (2014). OECD Multilingual Summaries; Job Creation and Local Economic Development. Retrieved from Organization for Economic Cooperation and Development: https://www.oecd-ilibrary.org/sites/f3317d43-en/index.html?itemId=/content/component/f3317d43-en
Ram, J., Frederick, R., Ramrattan, D., Hope, K., & Elliot, W. (2018, May). A Policy Blueprint for Caribbean Economies. Retrieved from Caribbean Development Bank: https://www.caribank.org/sites/default/files/publication-resources/A%20policy%20blueprint%20for%20Caribbean%20economies.pdf
Russu, C. (2022, October 31). Energy poverty and prices on the rise. Consequences and Solutions | Experts’ Opinions. Retrieved from Development Aid: https://www.developmentaid.org/news-stream/post/151874/energy-poverty-and-prices-on-the-rise
The World Bank. (2022, November). Understanding Poverty. Retrieved from The World Bank: https://www.worldbank.org/en/topic/poverty/overview
Topcu, M., & Tugcu, C. T. (2020, May). The impact of renewable energy consumption on income inequality: Evidence from developed countries. Retrieved from Science Direct: https://www.sciencedirect.com/science/article/abs/pii/S0960148119317963
UN. (2022). Poverty. Retrieved from United Nations Global Compact: https://unglobalcompact.org/what-is-gc/our-work/social/poverty
UNDP. (2018, November 01). Structural Transformation in Africa: Shifting Gears. Retrieved from United Nations Development Program: https://www.undp.org/ethiopia/blog/structural-transformation-africa-shifting-gears
UNFCCC. (2018). Economic Diversification. Retrieved from United Nations Framework Convention on Climate Change: https://unfccc.int/topics/resilience/resources/economic-diversification
United Nations. (2023, July 27). Secretary-General's opening remarks at press conference on climate. Retrieved from United Nations:
Disclaimer
The information provided on this blog is for general informational purposes only. All content and opinions expressed here are those of the author and do not reflect the official policy or position of any other agency, organization, employer, or company.
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