The World Bank has proposed a comprehensive framework for the energy transition in low- and middle-income countries (LICs and MICs) involving the deployment of renewable energy and energy efficiency technologies and the phasing down of coal-fired power generation.

The World Bank estimates that LICs and MICs will need to invest approximately $1.3 trillion per year in renewable energy and energy efficiency by 2030, which is more than four times the current level of investment.

These countries must create enabling policy and regulatory frameworks to mobilize this capital, enhance their institutional and technical capacities, leverage concessional finance and blended finance instruments, and attract private sector participation.

According to a BloombergNEF report, global investment in energy transition reached a record $755 billion in 2021.

Phasing down coal-fired power generation

The second step focuses on phasing down coal-fired power generation, which is the most carbon-intensive source of electricity and accounts for about 40% of global power generation.

The World Bank estimates that LICs and MICs collectively host 89% of the global coal power capacity that needs to be retired or repurposed before the end of its technical lifetime, putting an estimated $1 trillion in capital costs at risk by 2040.

To manage this challenge, these countries must adopt clear and credible coal phase-out plans, align their policies and incentives with their decarbonization goals, assess their coal assets’ financial viability and environmental performance, and explore options for repurposing or decommissioning them.

Energy transition impacts

The third step in the framework addresses the energy transition’s social and economic impacts, which may affect millions of workers, communities, and consumers who depend on the coal sector or rely on affordable electricity.

The World Bank emphasizes that the energy transition should be just and inclusive, ensuring no one is left behind. These countries must design and implement comprehensive social protection measures, such as income support, skills development, job creation, and social dialogue, to achieve this.

They will also need to ensure that electricity tariffs are affordable and reflect the true cost of service delivery while providing targeted subsidies or lifeline tariffs for low-income households.

A report by International Renewable Energy Agency called for a significant change in the energy transition to meet the 1.5°C target. Despite reaching a record $1.3 trillion investment in energy transition technologies in 2022, global investment must reach $5 trillion annually to stay on track