Energy Transition: A noble agenda that needs to be translated into action

Energy transition refers to the global energy sector’s shift from fossil-based systems of energy production and consumption — including oil, natural gas, and coal — to renewable energy sources like wind and solar, as well as lithium-ion batteries among others. The increasing penetration of renewable energy into the energy supply mix, the onset of electrification and improvements in energy storage are all key drivers of the energy transition. Transitioning to a low carbon economy is key in tackling climate change challenges as stipulated in the United Nations Development Goal 3 and the 2015 Paris Agreement. It is important to note that fossil fuels are the main contributor to climate change as it produces around 60% of greenhouse gases. Renewable energies are key players regarding world energy supply security and the reduction of fossil fuel dependency and harmful emissions to the environment. Regulation and commitment to decarbonization has been mixed, but the energy transition will continue to increase in importance as investors prioritize environmental, social and governance (ESG) factors.

Shift to clean energy challenges

Goal 7 of the UN SDGs emphasizes access to modern energy. Although access to modern energy such as electricity is crucial to addressing other global challenges such as poverty, famine and gender inequality: data shows that 3 billion people, which is more than 40% of the world population, are still relying on polluting and unhealthy fuels for cooking. The figures are worrying in Africa as reports show that 600 million people do not have access to electricity, and around 900 million people lack access to clean cooking facilities. This rampant energy poverty in Africa creates impeccable challenges for energy transition discourse since most people do not have where to transit from and virtually nowhere to transit to. Despite the enormous potential for hydroelectricity, Uganda has one of the lowest electrification rates in the world, with the current access rate remaining low (24%). Research findings show that over 90% of households in Uganda and the sub-Saharan region use firewood and charcoal wood fuel and that this fuel use creates social and environmental hazards. Thus, firewood and charcoal biomass are among the major causes of deforestation in Uganda and the sub-Saharan region.

The transition towards renewables such as solar and wind energy is a critical part of meeting the goals of the 2015 Paris Agreement, which aims to limit the rise of global average temperatures to well below 2 degrees Celsius, and ideally, below 1.5 degrees Celsius above pre-industrial levels. Whereas this would be very desirable to all countries, including Uganda, the means of achieving it remains a big hurdle to jump. Without deliberate and strategic interventions to address energy poverty in Africa and other equally affected economies, energy transition will just be on paper and not in practice.

Another important point is that the global players leading the energy transition debate are also not ready to do so. The ongoing global oil crisis has well underlined this. With the oil prices climbing above $100 a barrel in March, 2022, various oil consumers have pleaded with OPEC to raise oil production faster and help reduce gasoline prices. The demand for energy, including oil and gas, is definitely not following the net-zero trajectory the world is focused on. This implies that global efforts to lay strategies to zero emissions are hugely lacking, and the current fuel crisis has exposed a lack of readiness towards equitable and inclusive energy transition. To achieve climate change goals, the world must dramatically cut the consumption of fossil fuels. But climate change success may put developing countries rich in fossil fuels in an almost no-win situation. Successful action to address climate change would diminish the value of fossil fuel resources in many of the world’s poorest countries.

Dynamics of clean energy financing

If there is no progress in combating climate change by partly embracing clean energy, poor countries are likely to be disproportionately harmed by the floods, droughts, and other weather-related problems spawned by a warming planet and yet mitigation and adaptation interventions are hugely limited. But if there are successful global actions to address climate change, poorer countries rich in fossil fuels will likely face a precipitous fall in the value of their coal, gas, and oil deposits. If the world makes a permanent move away from using fossil fuels, the likely result will be a huge reduction in the value of their national and natural wealth. Leaving oil resources as stranded assets (no exploitation) for poor countries as a means of reducing fossils may be very hard to convince the political class and policymakers, especially in the global south who already view oil revenue as a savior to struggling economies that have recently been strangled by Covid 19 pandemic. If such debate of stranded oil assets does not pick up, there is a need to refocus the debate of asking policymakers to utilize oil revenues to finance clean energy and scale up energy access among the population, which will be useful for the energy transition.

Policy recommendations

Considering that the forth coming petroleum extraction will increase fossil emissions and accelerate climate change risks in Uganda and beyond, there is a need for a plan to utilize petroleum revenues to mitigate climate change impacts. In fact, Ugandan laws, specifically Public Finance Management Act (PFMA, 2015), stipulates that petroleum revenue will be used for infrastructure development and not recurrent expenditure. The law should be reviewed to depict oil revenues that can finance and scale up clean energy access in Uganda.

Global proponents of energy transition should urgently design strategies to solve energy poverty in Africa and improve energy access. This will be good for equitable and inclusive energy transition.

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