Transformation Trend 1: A Broader Focus for the Just Transition
A Historic Opportunity for Equity
The global push towards a clean energy future offers more than just an environmental transformation—it presents an unparalleled opportunity to shape a just, fair, and equitable transition. As we move away from fossil fuels, the challenge extends beyond environmental considerations; it includes ensuring economic and social equity on a global scale. This transformation demands a focus not only on reskilling workers and creating new jobs but also on balancing investment and development between developed and emerging markets.
In this series, we explore how the infrastructure sector will play a pivotal role in ensuring that the benefits of this transition are equitably distributed.
While much of the dialogue on a just transition has centered on jobs, history suggests that reskilling and economic diversification—though critical—may be the easier hurdles. Governments have experience navigating similar disruptions in industries such as manufacturing and technology. However, transitioning to clean energy poses broader challenges, particularly in addressing the disparity in investments and outcomes between developed and emerging economies.
The gap is stark: developed nations are capturing the majority of clean energy investments, while emerging markets lag behind due to unclear regulations, limited decarbonization pathways, and undefined net-zero targets. Addressing these imbalances is essential to achieving global climate and economic goals.
Massive investments are required to scale renewable energy, improve climate adaptation, and develop supportive regulatory frameworks, especially in high-risk geographies. According to KPMG’s report, Turning the Tide in Scaling Renewables, the gap between the capital needed and what is being deployed remains wide. Emerging markets, often marginalized in global investment flows, are witnessing a slower pace of renewable energy adoption, with traditional energy investments still dominating in some regions.
This imbalance not only risks undermining the benefits of the energy transition but also creates barriers for Development Finance Institutions (DFIs) and private investors looking to fund sustainable projects in hard-to-abate sectors like steel and cement in these regions.
Aligning Economic Development with Decarbonization
The global community must recognize that economic growth and decarbonization are not mutually exclusive. Achieving the United Nations Sustainable Development Goals (SDGs) will require the simultaneous promotion of economic development and low-carbon transitions. This entails investing in research and development (R&D), fostering new economic pillars like decarbonization and energy efficiency, and promoting smart infrastructure.
A prime example is the Just Energy Transition Partnership (JETP) in Indonesia, a long-term collaboration aimed at transforming the country’s power sector while driving sustainable development and protecting livelihoods. Such initiatives demonstrate how partnerships can align emission reduction goals with economic growth and social equity.
The coming year will be pivotal in narrowing the divide between developed and emerging markets. Pilot projects must succeed to build trust and serve as blueprints for future collaborations. The formalization of the ‘Loss & Damage Fund’ at COP28 marks an encouraging start, but what the world truly needs is a coordinated ‘Recover & Restore’ approach that accelerates sustainable social change.
The infrastructure sector is poised to play a transformative role in this journey. Investors can influence the flow of capital toward equitable outcomes, developers can diversify supply chains, and regulators can ensure consumer rights and sustainability are prioritized. Collaborative alliances, such as KPMG’s partnership with the WWF and UNDP through the Alliance for a Just Energy Transition, will be instrumental in shaping these outcomes.
Over the next year, governments, multilateral organizations, and infrastructure stakeholders are expected to expand their definition of a just transition. This broader perspective will likely foster increased collaboration across nations, industries, and communities. With more attention directed toward emerging markets, infrastructure investors, developers, and operators will have a unique opportunity to turn principles into practice, ensuring that the energy transition benefits all—not just a privileged few.
Stay tuned for more insights in this series on Emerging Trends in Infrastructure, where we will explore the transformative forces reshaping the sector in 2024 and beyond.
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