PwC and the B20 Indonesia Environment, Sustainability, and Climate Task Force recommend accelerating a just and affordable transition to sustainable energy, while ensuring energy security

Bali, 1 September 2022 - Energy is a key component of all human and economic activity. Ensuring a secure and affordable energy supply is crucial for global economic growth, which has raised millions out of poverty. However, this comes at a cost. The continuing dependence on fossil fuels for primary energy supply has resulted in a steady increase in carbon dioxide (CO₂) emissions, contributing to global warming and climate change.

In 2019, CO₂ emissions accounted for about 74% of global greenhouse gas emissions, and energy use accounted for about 93% of CO₂ emissions. For that reason, accelerating the transition to sustainable forms of energy is becoming ever more urgent if the world is to achieve its goal of limiting climate change.

Nonetheless, it is essential that the energy transition does not interrupt the ongoing economic growth agenda in the developing world, which is dependent on secure and affordable access to energy. Developed countries with their higher per capita incomes, energy consumption and emissions, have a role to play in supporting developing countries in their energy transition journeys, particularly through providing access to financing, technology, and human capital.

According to PwC’s report Net Zero Economy Index: Code Red to Go Green, in 2020 the rate of global decarbonisation – the reduction in carbon intensity or energy-related CO₂ emissions per dollar of GDP – was 2.5%. This rate represents a slight improvement from the previous year’s rate of 2.4%. However, due to the slow pace of the energy transition, the required average annual global rate of decarbonisation to achieve the Paris Agreement goals is growing year on year. Currently, the required global rate is higher than the 11.7% set out in the 2020 report and more than eight times faster than the global average over the course of the twenty-first century to date. This has been further exacerbated by the recent increased demand for fossil fuels to maintain energy security as a result of geopolitical conflict.

Halving emissions this decade and delivering net zero by the middle of the century will require collaboration between sectors and across industries. Businesses are calling on governments, especially those of G20 countries, to set “bold and courageous commitments, policies and actions” to accelerate the transition and stimulate further action from the private sector, emphasising that public-private collaboration is vital, and welcoming transformative policy change.

During the B20-G20 Dialogue held on 30 August 2022 in Nusa Dua, Bali, Indonesia, the B20 Indonesia Energy, Sustainability and Climate Task Force (ESC TF) presented three actionable policy recommendations for G20 governments to implement to support businesses in driving the change needed for the energy transition: (1) enhance global cooperation on accelerating the transition to sustainable energy use, (2) enhance global cooperation on ensuring a just, orderly and affordable transition to sustainable energy use across developed and developing countries, and (3) enhance global cooperation on consumer level access to clean, modern energy. Each of these policy recommendations proposed specific policy actions to be taken by the G20 as a whole while keeping in mind the principle of Common But Differentiated Responsibilities (CBDR) in each country’s energy transition journey.

During her opening speech, Nicke Widyawati, Chair of ESC TF, said that the task force she is commanding is currently focused on sustainable energy transition, energy security and global cooperation between developed and developing countries. The energy transition, continued Nicke, is on the agenda of all countries and must be supported for the purpose of meeting the targets of sustainable development goals.

“The energy transition will certainly change everything that has been established so far, from the use of fossil fuel-based technologies, markets and financial products that must be directed towards green financing, green economy and energy supply chains, new business models, sustainable good governance, and consideration of the political economy of the country and the region," said Nicke who is also the President Director and CEO of PT Pertamina (Persero), Tuesday (30/8/2022).

B20 ESC TF, continued Nicke, has formulated three recommendations that will be discussed as priority themes, namely Accelerating the Transition to Sustainable Energy Use, Ensuring a Just and Affordable Transition and Global Cooperation to Improve Energy Accessibility.”  She hopes that, through the G20-B20 Presidency, Indonesia can invite all stakeholders to collaborate to ethically and morally ensure the world is successful in meeting sustainable development targets that are inclusive and equitable.

Sacha Winzenried, Team Leader for PwC as Lead Knowledge Partner to the B20 ESC TF and Energy, Utilities & Resources Lead Advisor at PwC Indonesia, noted, “To close the decarbonisation gap, we need all actors in the economy to raise their game. Getting the energy transition right, meaning executing the transition process at an accelerated pace, without economic and social disruption, and ensuring that no one is left behind, is critical to securing and maintaining the social and political licence needed for such a monumental change.”

The developed countries of the G20 have a dual responsibility. They must accelerate their own transition, and at the same time, support the acceleration of the transition in developing countries through support for the development of institutional capacity and structures, governance frameworks for power markets and related sectors, maturity and depth of power markets, and the private sector participation models possible which will accelerate the transition in developing countries as a matter of commercial viability itself in due course. This is crucial to ensuring the acceleration and broad-basing of the energy transition, without which we, collectively, will not be able to avoid the continuing impacts of climate change.

As PwC’s Inventing Tomorrow’s Energy System report stated, addressing energy transformation challenges will require strong state orchestration, at least in the early stages during the development of markets and strategic infrastructure. But, neither the government nor the private sector can manage the transition to net zero and the new energy landscape alone. What is needed is a collective response—the state and the market working together in new ways is crucial.