The United Nations has issued a call for substantial investment in clean energy in developing countries, highlighting the crucial role it plays in achieving global climate goals by 2030.
According to the UN Conference on Trade and Development (UNCTAD), developing nations require an annual investment of approximately $1.7 trillion for renewable energy, but in 2022, they only attracted $544 billion in foreign direct investment for clean energy.
UN Secretary-General Antonio Guterres emphasised the importance of private sector investment in renewables in developing countries to meet the world's energy needs and safeguard the environment.
He acknowledged that efforts to combat global warming were already a decade behind schedule and stressed that investing in renewable energy in these nations was not only essential but also the most cost-effective approach to bridge the energy gap.
While international investment in renewable energy has nearly tripled since the Paris climate accord in 2015, the growth has been largely concentrated in developed countries.
The World Investment Report by UNCTAD reveals that 31 developing countries, including 11 least developed countries, have not yet registered a single major international investment project in renewables or other energy transition sectors.
UNCTAD Chief Rebeca Grynspan emphasised the enormity of the challenge and called for a significant increase in investment in sustainable energy systems in developing countries.
To facilitate this, the agency proposed providing debt relief to developing nations, enabling them to allocate fiscal resources for clean energy transition.
The report also highlighted the issue of fossil fuel subsidies, which amounted to a staggering $1 trillion in 2022, eight times the value of subsidies provided to renewable energy.
Such subsidies create disincentives for renewable energy investment and hinder its ability to compete on an equal footing.
Although phasing out fossil fuel subsidies is complex, particularly for developing countries, doing so would encourage greater investment in renewable energy.
In terms of global foreign direct investment (FDI), the report indicated a decline of 12 percent in 2022, reaching $1.3 trillion. This decline was primarily driven by the global polycrisis, including the war in Ukraine, high food and energy prices, and debt pressures.
The tightening financing conditions, rising interest rates, and market uncertainties further affected international project finance and cross-border mergers and acquisitions.
UNCTAD expects downward pressure on global FDI to continue in 2023, with stagnant flows to smaller developing countries and a 16 percent decrease in flows to the least-developed nations.
