Equity in Climate Financing: Spotlight on the Energy Transition

Sharma, A., Johnstone, I., & Firdaus, N. (2023). Equity in Climate Financing: Spotlight on the Energy Transition. Working Paper. College Park, MD: Center for Global Sustainability, School of Public Policy, University of Maryland. 36 pp.

• Climate finance mobilization for low-carbon energy is currently inadequate and could increase the debt levels of developing countries. We found that the total volume of climate finance flows from developed to developing regions for the electricity sector is lacking, creating a barrier to the global low-carbon energy transition.
• Equitable climate finance in the future requires changes to the status quo. Our analysis shows that the responsibility of developed countries to provide climate finance increases considerably when equity is considered the guiding principle of climate finance flows.
• Just Energy Transition Partnerships (JETPs) promise to accelerate low-carbon energy transition but could increase the debt burden as observed in the case of South Africa. South Africa’s JETP aims to accelerate its transition away from coal. But, the finance package is overwhelmingly loan-driven, and grant-based financing makes up for less than 5% of the total package, which could increase the debt-stress of South Africa in the pursuit of just energy transition.
• Learnings for the global stocktake. Three key lessons reinforce the opportunities for the global stocktake to address current deficiencies in low-carbon energy financing.