Perspectives on the energy transition in emerging markets
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A global challenge with regional nuances
The challenges involved in delivering Net Zero look very different depending on where you are in the world. In the West, one of the primary tasks facing governments is how to create the right policy incentives to accelerate private investment in low-carbon infrastructure. Political leaders in emerging markets have a different set of priorities, from fostering economic development to improving standards of healthcare and education – as well as tackling some of the worst effects of climate change itself.
This divergence has given rise to plans such as the Bridgetown Initiative, through which the government of Barbados is hoping to “reform the global financial architecture” in support of climate investment in developing economies. It also formed the backdrop to COP27 in Egypt, where the just transition – the role of developed nations in helping poorer countries decarbonise their economies – topped the agenda.
The conference ended with a historic agreement to establish a “loss and damage” fund through which Western governments will help vulnerable countries respond to climate disasters. Since then, there has been intense debate around how best to leverage public money to support Net Zero in the emerging markets, culminating in COP28 in the UAE.
Exploring the different perspectives
Allen & Overy is one of the world’s leading advisors in energy, natural resources, renewables and infrastructure. We have been at the forefront of some of the most innovative and impactful transition projects in the world, delivering everything from solar to wind, hydro, geothermal, biomass and waste-to-energy.
In recent years, we have advised on the development and financing of one of the world’s largest carbon capture facilities, as well as a first-of-its-kind green hydrogen and green steel project.
This report features the perspectives of our global team on some of the issues that will define the energy transition in emerging markets. Our authors work in different sectors, geographies and product lines, each giving their own take on a topic associated with their practice. It is a stark reminder that energy transition is relevant to every one of us, even if we might approach, or even define, the problem by looking at it through our own lens.
Taken together, the articles paint a picture of how nations from Africa to the Middle East to Asia are approaching decarbonisation and the individual challenges they face. We address themes from the evolution of carbon markets to the electric vehicle battery sector and the importance of hydrogen and ammonia in the transition agenda across Asia. In Africa, we look at the role of renewables, financing challenges, its hydrogen potential and why there is a real reason for optimism. The report also addresses global themes that will help create a transition pathway that supports economic growth alongside reducing emissions, such as the development of sustainable aviation fuels.
Gulf states prove a nexus for technological development
With the UAE the host for COP28, many of the articles examine what Net Zero means for the Gulf states. We explore efforts to develop carbon capture and storage at scale in Saudi Arabia, the prospects of the region becoming a global producer of green hydrogen, and how the UAE’s construction boom is helping produce some of the cleanest real estate in the world.
Elsewhere, we look at the role of Islamic finance in delivering a just transition, explore the emergence of sustainability-related financial regulation in the UAE, and take a closer look at Net Zero priorities across several post-Soviet states – some of which have vast fossil fuel reserves while others rely on creaking Communist-era infrastructure to deliver their power.
Innovations could deliver global benefits
What is clear is that the energy transition in emerging markets is about more than requests for financial support from richer nations. Indeed, our teams have identified examples of world-leading innovations that have the potential to help developed countries to decarbonise their own economies – including significant investments in CCUS that could turn the Middle East into a global carbon sink and how offshore wind has a key role to play in the energy transition in emerging Asia.
We hope you enjoy the insights in this report. If you would like to discuss any of the issues raised – or another energy transition-related challenge – we would be delighted to arrange a session with our experts.
Explore our insights on emerging markets in Middle East, Africa, Asia
Middle East
- Carbon Capture and Storage challenges and potential in the Gulf Cooperation Council
- Low-carbon hydrogen projects – how do you get from concept to financial close?
- Building a pathway to green real estate in the UAE
- Sustainable lending – a growing role for Islamic Finance and Middle Eastern financiers
- UAE looks to sustainable finance to boost energy transition
- Sustainable aviation fuel on the ascent
- Avoiding disputes in projects aimed at reducing emissions
- Private capital’s moment in the Middle East’s energy transition
Africa
- Decarbonisation in Africa
- Just transition through climate finance: a matter of priority
- Seven thoughts on kickstarting offshore wind in South Africa
- Tax incentives are crucial to South Africa’s energy transition