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Op-Ed

The world’s energy systems are transforming. Here’s how.

There’s a big gap between what’s happening in rich and poor countries

The Washington Post
Editor's Note:

Where do you get your energy — and where will you get it in the future? David Victor breaks down what a new study on major transformations in the world’s energy systems by the World Economic Forum does, along with its major insights. This piece originally appeared in The Washington Post's The Monkey Cage.

Where do you get your energy — and where will you get it in the future? This week, the World Economic Forum (WEF) helped answer those strategically urgent questions when it released a study on major transformations in the world’s energy systems. Electric grids are decentralizing; people worldwide are consuming energy differently than in the past; and governments are trying to slow climate change. Which countries are doing the most to deliver an “energy transition,” as this messy revolution is known?

Here’s what the report does, along with its major insights.

The WEF is trying to measure the transition

Since 2013, the WEF has been issuing these reports and measuring, in different ways, the “energy transition index.” The goal is to provide data that people who track energy issues, including social scientists, can understand and combine in useful ways.

By the WEF’s reckoning, the best way to measure the performance of a country’s energy system is to look at three policy areas in combination: economic development and growth, environmental sustainability and access to secure, modern energy. Unsurprisingly, rich countries that also have relatively clean energy systems — thanks mainly to hydropower and nuclear power — do best, as you can see in the figure below, taken from the report with permission.

Top 10 energy system performers for 2019, based on data and estimates collected in 2018. Source: WEF ETI 2019 report. (David G. Victor/David G. Victor)
Top 10 energy system performers for 2019, based on data and estimates collected in 2018. Source: WEF ETI 2019 report. (David G. Victor/David G. Victor)

The best are best at being green

It is hard to create high-performing energy systems because we expect them to be able to do a lot of diverse things. They contribute to economic growth, which means that all major forms of energy must be affordable while imposing few extra costs on society. They must be clean — something that the WEF team measures mainly by looking at emissions of carbon dioxide, the leading human cause of global warming, and other pollutants. And they must be secure, which is a woolly concept that includes ensuring that people have access to modern electricity and that energy supplies and imports are highly diverse. All else equal, more diversity means more security in case one source is cut off or falters.

The report reveals that the countries with the best energy systems are good enough at everything, but not uniformly great. All those that rank in the top 10 manage to be in the top 30 — if not the top 10 — for producing clean energy.

But their performance in other areas varies much more. For example, Switzerland doesn’t do as well at keeping its energy supplies diverse and therefore secure, instead relying heavily on imports that come from relatively few places.

These patterns don’t usually change much over time because most of what matters for energy performance depends on infrastructure and institutions — forces that are usually slow to change.

The biggest changes in performance since the WEF started measuring in 2014 have come from countries that are improving energy access and security but already had clean energy systems. On the WEF index, it looks as though all these countries are heavy hitters — they bat triples, at least. In reality, they are starting at second base — they are already rich and clean and have strong institutions that make it easier to invest in infrastructure.

There’s a big gap in readiness to shift to climate-friendly energy

For the past two years, the index has been measuring countries’ readiness for the transition to green energy sources. The readiness indicators are complicated — perhaps too complicated — but they try to capture factors such as quality of regulation, openness of investment rules (because energy transition is capital-intensive), human capital and quality of infrastructure. Openness to investment means a country can shop the world for firms that are willing to deploy capital. The quality of regulation depends, in part, on whether countries recognize the need to cut emissions — and can offer policies stable enough so that private firms will invest. Human capital includes factors such as the percentage of the workforce in low-carbon industries and the quality of education.

This measure, however imperfect, suggests that there is a big gap between the parts of the world where institutions could facilitate radical transformation of their energy systems, on the one hand, and on the other, the places in the world where energy systems actually emit the most carbon.

Political scientists and diplomats may need to think about climate change in different ways

Political scientists generally assume that the problem of climate change is a problem of global collective action. That mindset forces attention to strategies for setting and enforcing rules about how to allocate the burden of cutting emissions. The reality is somewhat different. Climate is a leadership and followership game — the leaders are ready for energy transitions, but by themselves they don’t matter unless followers also come along.

This challenges both diplomacy and analysis. For diplomats, the game is no longer about leaders showing how green they are willing to be. Such leaders represent a shrinking proportion of the total share of emissions. For analysts, attention needs to focus less on what leaders do and more on what I call followership — whether other firms and countries follow the leaders. Climate cooperation is a followership game in which leaders should pay closer attention to which factors will determine whether their own green steps inspire action by others.

The WEF report suggests that followership isn’t straightforward. It isn’t so much about attitudes — does a country want to be green — but rather about having the institutions and conditions that make transition to a greener energy system feasible.

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