Utilising Recognition Justice to Bridge Climate and Energy Financing Gaps in the Global South

Abstract

This chapter discusses the critical issue of climate and energy financing shortfalls in the global south. It emphasises the urgent need for investment in electricity and sustainable fuels for millions of underprivileged and vulnerable communities to meet the Sustainable Development Goals by 2030. It envisions that, through recognition justice, energy justice could help bridge this gap by helping realign the global financing priorities to help navigate energy financing deficits in the global south. It argues that recognition justice aims to acknowledge and rectify historical injustices in the energy transition and emphasises the need to prioritise funding for marginalised communities. The article identifies barriers to equitable energy financing, such as high up-front costs, lack of supporting legal frameworks, and state fragility. It concludes that recognition justice can play a crucial role in overcoming these obstacles, fostering a just transition to a low-carbon economy, and ensuring that the benefits of clean energy reach all sectors of society in the global south and that the energy funding needs of the disadvantaged groups are prioritised.

1 Introduction: Climate and Energy Financing Challenges in the Global South

Climate and energy financing shortfalls hinder the energy transition in the global south. Approximately 785 million people globally lack access to electricity,¹ with over 600 million in Africa alone. Sub-Saharan Africans without access to electricity increased to 77% from 74% before the COVID-19 outbreak.² Globally, 2.6 billion people do not have access to safe, clean fuels and technology, and sub-Saharan Africa accounts for over 75%.³

Attaining the Sustainable Development Goals (SDGs) 7 and 13 energy access and climate mitigation targets will require annual investments of over $35 billion by 2030.⁴ Energy financing is concentrated in a few global north countries, and limited access to long-term funding impedes clean energy investments in the global south. Coordination of financing is thus necessary for effective public and private investment in the energy sector.

With significant advancements in renewable energy, electric vehicles, battery storage, green hydrogen, energy efficiency, and carbon capture technologies, the technology required to support the energy transition is accelerating. However, these technologies will require a significant financial investment to scale at the rate necessary to fulfil the net-zero 2050 timelines, with the cost of capital being higher for developing countries.⁵ Energy justice, through recognition justice, could help bridge this gap by helping realign the global financing priorities to support the transition where it is most needed.

2 The Role of Recognition Justice in Navigating Energy Financing Deficits in the Global South

Equitable energy financing in the global south requires global, regional, and national policy approaches that consider its peculiar circumstances. At its core, energy justice through recognition justice seeks to acknowledge the disadvantaged groups of the world, be it regions, countries, or populations and social demographics in the energy transition.⁶ It is thus insufficient to conclude that unequal portions of society will suffer because of the energy system’s distribution of inequities. By pinpointing the origins of inequities, energy justice pushes us to consider whom we should prioritise when considering energy victims.⁷

Recognition justice does not work in isolation and must be embedded in all aspects of the energy transition. The tenets of a just energy transition include procedural, distribution, restorative, and cosmopolitan. Procedural justice is concerned with following due legal processes, while restorative justice concerns remedying the spoils of the energy transition like environmental restoration.⁸ Distributive justice aims for an equitable distribution of the ills and benefits of the transition. In contrast, cosmopolitan justice calls for viewing the energy transition with the view of the entire world and not looking at issues in silos or disintegrated manner. Recognition justice interconnects with all tenets and entails acknowledging and redressing prior wrongs, recognising the rights and knowledge of marginalised communities, ensuring full and equal participation in the decision-making of all stakeholders, and establishing an equitable distribution of the transition’s costs and benefits.⁹

Recognition justice is crucial in mobilising the global north and financial institutions to prioritise and channel energy funds to the global south. A deeper analysis of recognition justice reveals a grounding in the concept of common but differentiated responsibilities and capacities (CBDR-RC) regarding climate financing.¹⁰ CBDR-RC recognises that all countries are responsible for addressing global environmental issues. However, their responsibilities and capacities vary according to their level of development and contribution to the problem.

3 Barriers to Equitable Energy Financing for the Global South

The global south nations are decapacitated by their historical economic, technical, technological, and political limitations, which hinder the energy transition. They frequently struggle to obtain financing to meet their renewable energy aspirations. Many foreign financial institutions hesitate to invest in emerging nations due to the perceived dangers. These include:

• High up-front costs: Renewable energy projects frequently involve huge up-front expenses for infrastructure, technology, and policy alignment, making it more challenging for the nations to attain their energy transition objectives.¹¹

• Heavy reliance on fossil fuels: Economies relying on fossil fuels to drive their economic transformation will find it challenging to transition easily. The financing deficits compel countries to invest in fossil fuel projects with high and volatile costs. Globally, countries need support for seizing benefits associated with phasing down fossil fuels for the greater global public good.¹²

• Lack of supporting legal frameworks: The frameworks may not promote the implementation of renewable energy technology or divestment from fossil fuels, making it challenging to attract investment. Further, with ineffective energy subsidies, nations are frequently relegated to costly and high-carbon energy options.¹³ Countries thus need to plan extensively to mitigate stranded asset risks, refinancing fossil fuel liabilities, and economic and livelihood disruption; and the law can play a big role.¹⁴

• State fragility: This shows in weak governance and institutional systems, corruption, abuse of office, low transparency, and political instability.¹⁵ Instability and conflict on the political level can discourage investment in renewable energy projects and, in some instances, make it harder to implement these projects.

4 Conclusion—Benefits of Addressing Energy Financing Gaps in Achieving Overall Societal Move to a Just Transition to a Low-carbon Economy

Recognition justice strives to redress the historical and ongoing injustices that oppressed populations face in the social, economic, and political realms. In the context of energy financing for the global south, recognition justice is an essential factor in addressing the long-standing systematic disparities in the energy sector advocates for correcting these past and present injustices by prioritising the energy funding needs of underprivileged populations, Small Island Developing States (SIDS) and indigenous and local communities.¹⁶ This could involve directing finance for renewable energy projects to marginalised groups in the global south, as opposed to only wealthy nations or companies.

Solving financing challenges will ensure stable and affordable energy supplies, provide universal energy access, and support overall economic growth in the global south. Securing energy financing for the global south will support broader SDGs and a transition to a low-carbon economy.¹⁷ Developing countries can access and obtain finances for their energy needs, including addressing energy poverty and infrastructural developments. Spill-over benefits will accrue for the other sectors that rely on a functioning energy system, such as employment, agriculture, industry, health, education, infrastructure, research and development, inter alia.

Addressing the financing gaps also buttresses the recognition that industrialised countries in the global north are more responsible for tackling climate change and transitioning to renewable energy sources due to their more significant historical emissions and economic resources. Through recognition justice, policymakers and financial institutions can realign financing approaches to support infrastructural development, capacity building, policy regulation, and technological advancement for the energy transition in the global south.¹⁸

The energy transition in the global south necessitates investing in and promoting renewable energy technologies, pushing for regulations that encourage sustainable environmental practises and economic development, and prioritising energy efficiency measures. The energy transition must be equitable and inclusive, and developing economies should have access to financial and technological assistance. Policy stakeholders at all levels should channel the bulk of climate and energy financing to the most vulnerable nations through mainstreaming recognition justice into global, regional, and national energy transition planning. Recognition justice can thus play an essential role in fostering equitable access to energy funding for the energy transition in the global south by addressing the past and continuing injustices that have contributed to the unequal distribution of energy resources and environmental damage.