Thanks to massive cost reduction, renewable energy can now be used by developing countries in their industrial growth strategies, which was unthinkable until recently. Renewables can help countries expand manufacturing and create jobs, reduce local pollution, increase energy security and reduce import costs from fossil fuels. Oh, yes – and they reduce greenhouse gas emissions.
The necessity to align industrial development strategies with climate change mitigation provides a chance to bring a fresh perspective to both issues. Energy has not been a central concern in industrial development strategies in the past. This was for the simple reason that it was always assumed that countries would industrialize using fossil fuels – in the same way that Western countries had relied on fossil fuels in the 19th and early 20th centuries, followed by East Asian countries as they likewise depended on coal, oil and gas in the second half of the 20th century.
Renewable sources are now within reach of almost all industrializing countries, or will be so within a few short years. This changes everything
But a coal-driven industrial pathway does not look so attractive in the 21st century, especially when being pursued at the scale envisaged by China, India and other industrializing giants.
One fresh perspective is that renewable energy sources can now be factored into development strategies. This was not even feasible just a few years ago because of concerns that costs were greater than those associated with consuming fossil fuels. But as China and other emerging giants have placed more and more emphasis on renewable sources – with a focus on water, wind and sun – so they have driven down the costs, with global repercussions. Renewable sources are now within reach of almost all industrializing countries, or will be so within a few short years. This changes everything.
Countries that elect to pursue industrial development utilizing renewable sources as well as conventional fossil fuels can expect to draw major advantages from such a choice. As opposed to the energy insecurity faced by countries sourcing energy solely from fossil fuels (geopolitical tensions and price instability) countries that raise their reliance on renewables actually enhance their energy security.
Renewable energy can be harvested from wind and sun using devices that are the products of manufacturing, which can in principle be performed anywhere. By shifting some of their energy dependence to renewables, countries can raise their involvement in manufacturing (with its skills development and local employment generation), while reducing local particulate pollution and reducing import cost burdens from fossil fuels. Involving themselves in the manufacturing processes that produce renewables devices thereby creates conditions that favour local job creation, encourage exports and facilitate integration in global value chains. It becomes, in other words, an important aspect of their industrial development strategy.
A focus on renewables is a national development strategy that makes economic sense in its own right
Such a fresh perspective on industrial development and climate strategy is now feasible because China and other industrializing giants have been driving down the costs, along well understood learning curves, for individual manufactured devices like photovoltaic solar cells and wind turbines. Countries can benefit from the use of renewable energy strategies by importing these devices and shifting their own power generation activities away from fossil fuel dependence towards greater reliance on renewables.
And they can go one or several steps further by becoming involved in the manufacturing activities themselves, as may be seen in the cases of China, India, Brazil and South Africa already.
This fresh perspective reveals a convenient truth. The more that industrializing countries pursue strategies focused on renewables, the more they reduce their own and the world’s carbon emissions. There is by now almost universal agreement that mitigation of climate change calls for the substitution of fossil fuels by low-carbon alternatives – as emphasized in successive reports by the Intergovernmental Panel on Climate Change and other scientific bodies.
But if renewables are viewed solely as means to reduce carbon emissions, then this brings an emphasis on their costs, and on international negotiations to develop cost-sharing mechanisms. This places developing countries in the position of having to pay for the carbon pollution created by the wealthy countries.
A focus on renewables as means to enhance energy security and resolve local particulate pollution problems by contrast can be viewed as a productive engagement with the global manufacturing economy – and at the same time as a fortunate side-effect of a carbon-reducing strategy which will help to mitigate climate change. It is not a strategy viewed solely in cost terms, calling for international strategies of cost burden sharing. Instead it is a national development strategy that makes economic sense in its own right.
The missing factor in traditional industrial development strategies was the utilization of countries’ own renewable resources which were considered marginal to the cost-effective mainstream. Now the costs have been brought down to the point that these resources can and should be factored in to development strategies. As countries accordingly shift the leading edge of their strategies away from fossil fuels towards harvesting renewables, they enhance their own prospects and contribute to mitigation of a global problem. This is truly a win-win strategy which has been made possible by cost reduction, achieved through the manufacturing learning curve – itself one of the key targets of UNIDO development goals.
John Mathews is Professor of Strategic Management at Macquarie University in Australia and author, most recently, of Greening of Capitalism: How Asia Is Driving the Next Great Transformation (recommended!). This article was part of a new publication from UNIDO (United Nations Industrial Development Organization), Promoting Climate Resilient Industry, presented on 7 December at the COP21 climate summit in Paris. This article was first published at Energy Post.