most countries will remain largely fossil dependent for the near future RETs

Most countries will remain largely fossil dependent

This preview shows page 32 - 33 out of 136 pages.

most countries will remain largely fossil-dependent for the near future. RETs cannot yet be considered ‘plug and play’ commodities because they tend to disrupt electric systems (or fuel systems) or depend upon costly system-level changes. Secondly, local capacity for mastering the direc-tion of technological development is often insuffi-cient. Energy technologies are mainly in the hands of large multinational enterprises (MNEs). Due to the logic of capital intensity and increasing returns to scale in energy technology, the international market is oligopolistic. It favours actors that can de-liver complete packages of capital, competence, and finance. MNEs specialise mainly in standardised fossil energy packages. For the reasons mentioned above, such companies cannot be expected to facili-tate technological leapfrogging. 7 Thirdly, the expansion of renewable energy sourc-es is costly, and most developing countries are likely to depend on international sources of finance. Three sources finance energy system investments: public, private, and multilateral organisations. Most devel- oping countries depend on the international capital markets, whose importance in energy finance has increased over the last two decades, and on multi- lateral organisations. Multilateral lending organisa-tions are essentially banks that must respond to market signals and repay debts although they might have the influence to distort prices temporarily. 8 Fourthly, production subsidies for petroleum products, electricity, natural gas, and coal are sig-nificant. In 2011, such subsidies amounted to USD 480 billion, equivalent to 0.7 percent of global GDP, or 2 percent of total government rev- enue (IMF). Energy subsidisation of this kind is seen typically in the South, particularly in oil-pro- ducing economies in the Middle East and North- ern Africa. The subsidies mean that renewable en-ergy is not competing on a level playing field, but their removal is hampered by the vested interests of the beneficiaries of the system. The notion of carbon lock-in is useful for identi- fying the barriers to a low carbon energy transfor- mation, but it also tends to portray the challenge of breaking those barriers as insurmountable. Path dependency is not destiny. History is rich in ex- amples of intentional path creation or shifting (Garud & Karnøe, 2001). Carbon lock-in is not a static state but a dynamic process in which coali- tions of actors with different interests compete over the direction of change, often by exerting influence on institutional change. Lock-in and shifting paths can be overcome if ‘low carbon’ coalitions become sufficiently strong locally and internationally (Schmitz, 2013). Moreover, we observe that the carbon lock-in described above is increasingly being challenged: International think tanks, multilateral organisations, and donor agen-cies are stressing the need for low carbon transfor-mation.
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