There is a simple equation that predicts whether we will fail in our fight against climate change. The math is straightforward: Global energy demand is outpacing the growth of supply of clean energy capacities. The difference is being made up by burning coal, oil, and other non-renewable sources. Without significant investments over the next decade in renewable energy, many countries, especially those in the Global South will continue to rely on traditional forms of energy to drive their economies and ensure the security of supply.
In 2022, the Global South, which represents 85% of the global population, received only 20% of the world’s clean energy investments, despite many of these countries having abundant wind and solar resources. Sub-Saharan Africa, where 600 million people live without access to electricity, has more than 1,000 times as much renewable potential as energy demand.
Despite the clear demand and abundant resources, investments in African renewables accounted for only 2% of the global total over the last two decades and, with the current average annual investments of just $5 billion, is still falling far short of the $60 billion required annually by 2030.
We know change is needed. Fossil fuels may be unavoidable today–but relying on them to meet a large share of future needs will crash the climate targets that are meant to keep the planet livable. Driving down their use will require a tripling of renewable energy capacity to 11,000GW by 2030, a goal set out earlier this year by the International Energy Agency (IEA) and supported by Dr. Sultan Al Jaber, the chairman of Masdar and COP28 president-designate. This is an ambitious target that can only be achieved by supercharging climate finance.
The private sector will have to provide two-thirds of the finance for clean energy projects in emerging and developing economies (outside China), according to a recent joint report from IFC and the IEA.
For all the perceived complexity, the solution is clear: To increase investment, we need to lower risk–and governments have a key role to play in three key areas.
A long-term vision
No investor is going to do the immense work it takes to structure a project without the likelihood that work can actually be delivered. Governments need to have clear transition strategies, enhanced regulatory frameworks, and a master plan for developing grid infrastructure that integrates supply and demand.
Taking the time to design and implement a compelling and credible energy strategy, making sense at a national and regional level, will provide robust demand signals to investors. The evidence illustrates that this model works–with the success of countries such as Egypt, Uzbekistan, Brazil, India, and several others providing proof of concept.
A reliable and transparent process
Governments across the Global South can support the growth of clean energy deployment by implementing the necessary regulatory frameworks in the form of competitive tenders and auctions to give potential investors the legal certainty and level playing field they need to invest.
This process can be accelerated by implementing mechanisms and incentives that have been proven successful in other markets.
A more collaborative environment
Clean energy is multifaceted. Development processes, infrastructure, creditworthiness, and other risks need to be well understood and managed. IFC partners with the private sector to develop projects and even provides advisory services to support government tenders from beginning to end. The World Bank offers a complementary suite of tools to support public authorities in designing successful clean energy policies and programs.
Similarly, clean energy companies can partner with governments to navigate much of this complexity. Governments can see what has worked before, what has not, and what would be best suited for their country.
As COP28 nears, the need for climate action has never been more urgent. With interconnected threats, solutions must be collective–which is why the president-designate is urging public and private entities to collaborate on climate finance and sustainable growth.
Our choices today will chart our shared course. We can either forge a new path–or risk walking into an uncertain future. COP28 is a pivotal moment, demanding bold reforms. Now is the time for policymakers to be ambitious and define a clear course toward a clean energy future, one that fosters cross-regional partnerships and creates a sustainable value chain with new jobs and skills for the younger generations. Together, we can make climate-smart economies the new global standard.
Makhtar Diop is the managing director of the International Finance Corporation (IFC). Mohamed Jameel Al Ramahi is the CEO of Masdar.
More must-read commentary published by Fortune:
- The ‘Big Stay’ isn’t going away as the labor market stops rewarding job hoppers, according to ADP payroll data
- Freakonomics author: ‘Objections to data science in K-12 education make no sense’
- Why boomers are catching up with AI faster than Gen Zers, according to Microsoft’s modern work lead
- The growing case for doing less: How harmless cancers are being overdiagnosed in America
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
