Suborna Barua* and Shakila Aziz**
This book chapter is forthcoming in the book titled "Growth Nexus in Era of Globalization: New Directions and Future Prospects", Elsevier, the Netherlands (2020).
The world is gradually progressing towards sustainable energy transition, albeit slowly. Being the growth center of the world economy, emerging economies generate a significant environmental impact while achieving faster economic growth. Most emerging economies in the world prioritize growth over the environmental quality which makes them a major demander and consumer of fossil-fuels.
This chapter provides an assessment of five major emerging economies in Asia based on the available literature and data from a number of sources including the International Renewable Energy Agency, British Petroleum, and the World Bank. The five selected emerging economies are India, Bangladesh, Indonesia, the Philippines, and Vietnam.
The assessment shows that there is a negative association between economic growth and the share of renewables in total energy consumption. It reflects the secondary or perhaps no priority of the countries on sustainable energy transition.
In all the five economies, energy demand and consumption keeps growing to fuel faster economic growth. However, the share of non-renewables in energy consumption do grow at a fewer rates compared to total energy consumption (Figure above).
Furthermore, all five economies continue supporting fossil-fuel energy more than renewables, as prices keep declining for fossil-fuels encouraging more non-renewable energy consumption.
As a reflection of assigning lower priority on renewable energy, the World Economic Forum shows that all five countries are ranked poorly in the 2020 global energy transition ranking.
A key reason for overlooking energy transition in the emerging economies is the lack of financial and economic capacity, owing much to their extensive reliance on overseas development assistance and public sources and minor participation from the private sector.
To overcome funding barriers, the paper calls for utilizing the private financial market-based sources (such as stock market, banks, asset managers, investment banks) to finance energy transition. As a ray of hope, the countries already have some green financing mechanisms for facilitating environment-friendly investments. Yet, they are utilized in a very limited scale.
The chapter offers some potential green finance mechanisms that could be useful for the economies to make financial markets the key source of energy transition financing; for example, green equities, green bonds, green private equity, and green mortgages.The chapter ends with outlining some challenges that needs to be addressed by emerging economies in general in making green finance work for sustainable energy transition.
The trends and patterns of the five emerging economies contradict their commitment to the sustainable development goals (particularly SDG-7: Affordable and clean energy for all). All countries, particularly the emerging ones, need to realize that sustainable energy transition is not an option anymore, it is a necessity for the global good.
* Suborna Barua is Assistant Professor, Department of International Business, University of Dhaka;
** Shakila Aziz is Assistant Professor (Finance), School of Business and Economics, United International University
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