Energy transition: urge and necessity
The pause in industrial activity during the pandemic was a chance to rethink how countries, Nepal among them, produce and use energy.
This opinion piece was written during the COVID-19 pandemic. Figures and policy references reflect conditions at the time of writing.
The end of the pandemic will bring a new wave of energy transformation around the world. Heavy use of non-renewable energy has damaged the environment and public health, and the pandemic has slowed it, at least for a while. But once economies return to normal, the environment will face renewed pressure as industries, factories and vehicles restart. If the world learns anything from this period, it should be that protecting the environment, tackling climate change and strengthening public health belong together. The energy transition is the way through.
Why the transition is necessary
Every country should adopt a clean energy policy. The pandemic was not caused by fossil fuels or industrialisation, but the heavy use of coal, oil and other petroleum products has harmed the environment in many ways. Economic activity benefits from these resources while their real cost is ignored, and excessive carbon dioxide emissions are the product of economic practices without an adequate regulatory framework. Non-renewable sources will also run out, which is reason enough to plan for the switch now.
Many countries have already adopted clean energy policies. Meeting the goals of the Paris Agreement, which entered into force in 2016, requires a rapid change in how energy is consumed. That change will not come cheaply. It will disrupt economies, particularly those of OPEC and OPEC+ members such as Saudi Arabia, Iran, Iraq and Kuwait, whose economies depend heavily on oil. These countries will need concrete strategies to absorb the losses and keep their economies stable through the transition.
Demand for energy will rise sharply over the next decade as countries industrialise in pursuit of prosperity. Existing patterns of consumption cannot meet that demand, so new ones will have to be found. Laws already require many development projects to meet conditions of sustainability and environmental protection, and those rules are likely to become stricter.
The initial cost of renewable energy and its infrastructure remains a challenge and will be for some time. More than a billion people still lack access to energy, whether cooking fuel, electricity or transport, and developing countries racing to grow need more of it. Current capacity may not meet that demand. This is why environmental, energy and economic experts keep urging a shift to cleaner sources. Most governments have been slow to respond, though some have acted.
What the leading countries did
Sweden tops the World Economic Forum’s Energy Transition Index, followed by countries such as Norway, Switzerland, Finland and Denmark. Strong political commitment, investment policies that attract green investors and, above all, a strong regulatory framework allowed them to build sustainable energy systems.
To secure a sustainable, affordable and reliable energy future, a country first needs to commit to the transition, then needs a stable plan for the period during and after it, and finally needs economic policy that moves in step, because the energy transition is as much about the economy as about the environment.
Hydropower is the most established renewable source and a suitable alternative for many countries; because it emits little carbon once built, it can help meet future demand. Wind and solar power are other options for addressing global warming. The transition is also a matter of public health: according to the World Health Organization, around seven million people die every year from the effects of outdoor and household air pollution. The pandemic exposed the weaknesses of health systems even in the most developed countries.
There is an economic case too. Environmental degradation and the effects of climate change already disrupt economic activity. For an economy to sustain itself in the long run, the switch to renewable sources is necessary.
Environmental policy and how well it works will increasingly determine economic growth. China, the world’s largest manufacturer, is also its largest emitter of carbon dioxide. In recent years it has taken environmental damage seriously and invested heavily in wind turbines and hydropower. Of roughly 425,000 electric buses in use worldwide at the time of writing, more than 400,000 were in China. The United States, despite being the largest oil producer and a strong economy, had not taken comparable steps to change its consumption. Because the transition brings new energy laws that may create difficulties for foreign investors, such legislation should be designed with a framework that keeps investment attractive.
Nepal’s case
For Nepal, the energy transition is a necessity. Rich in water resources, Nepal has great potential for hydroelectricity that could reduce its energy dependence on India, from which it imports petrol and diesel worth about Rs 250 billion a year. Nepal also ranks among the countries with the most polluted air. The need to move to renewable energy is therefore pressing. The government’s decision at the time to impose an 80 percent customs duty on electric vehicles was a step backwards. Even so, the post-pandemic period is likely to move the transition forward.
