Too many of the power plant projects in developing countries are fired by natural gas, rather than renewable energy, resulting in higher projected carbon emissions than what would be needed to keep the earth’s temperature rise under 1.5°C, according to Stanford Law School lecturer and scholar-in-residence at Stanford’s Steyer-Taylor Center for Energy Policy and Finance Jeffrey Ball.
Ball’s recent publication focuses on energy power plant infrastructure development projects in developing countries, which he spoke about during a Thursday event hosted by Stanford’s Sustainable Finance Initiative.
The paper, co-authored by Angela Ortega Pastor M.A. ’21, David Liou J.D. ’23 MBA ’23 and Emily Dickey ’23, focuses on how developing countries can meet carbon emission goals through new power plant initiatives. Ball said that he wanted to write the paper to gain a deeper understanding of who funds the power plant projects, where the projects are being implemented and — in the near future — why these projects are being funded. He also hopes to uncover how domestic and multinational financiers can redirect this flow of money into more environmentally impactful solutions.
In his paper, Ball argues that the political economies of each country are the main hurdle in decarbonizing the world’s energy infrastructure. Ultimately, decarbonization is a question of influence and capital, as “companies and citizens that have profited from high-carbon activities will need to see new avenues of profit in low-carbon pursuits,” Ball wrote. According to Ball, understanding this dynamic is the gateway to understanding and fixing mechanisms that will generate investment in sustainable infrastructure.
While investment can take the form of redirecting funds from government spending, the real money lies in the profit-driven private sectors.
“If the private money doesn’t follow them, the public money isn’t going to have done much,” Ball said during the event.
Ball contended that substantial investment should be put into renewable energy, as too many power plants in developing countries rely on natural gas. According to Ball, 52% of the new electricity generation that got financial backing in the three years “is too carbon-intensive,” he said. Although it is less damaging than coal, natural gas is still a serious contributor to emissions.
Ball also addressed misconceptions about the contribution of carbon emissions from the developing world, and he reminded the audience that “China and India are not the only relevant countries to climate change,” he said.
Carbon-dense infrastructures are found across many developing countries, including Vietnam, Mexico, Pakistan, and South Africa as dynamic players to focus on, according to Ball. Beyond this, financial institutions from Japan, China, and South Korea are significant financiers in the power plants in emerging economies, “but significant funds have also been coming from banks, utilities and other companies in the countries themselves,” Ball wrote in an op-ed for the New York Times.
The data in Ball’s paper is drawn largely from 2018-2020 data from World Bank’s Private Participation in Infrastructure Database and State Participation in Infrastructure Database, which is not publicly available. Through analyzing the financial commitments made globally for powerplant investments in developing countries in the 3-year period, which Ball said “preceded this stampede of net-zero [pledge] announcements,” Ball and team were able to see how past financial commitments support these claims.
Ball elaborated on why the data from this period is so important:
“If you, company X, are telling me that you’re going to go net-zero and you’ve suddenly gotten religion on climate change, fine. I want to know what you’ve actually been spending your money on for the last three years,” he said.
However, Ball still thinks too little data are disclosed today. Without the proper data to analyze the flow of capital, it is difficult to pinpoint the institutional patterns that impede progress in a net-zero future, according to Ball. Ball and his team urged policymakers to “press for more-sufficient data,” as “such data-driven pressure is a prerequisite to a 1.5C pathway for the world,” he wrote. Without declaring how they are truly funding different climate solutions, pledges are nothing but a “happy talk,” Ball added.
“There are so many big promises about net-zero emissions,” Ball said. However, carbon dioxide emissions “are not intensifying in their decline, they are actually still rising.”
Ball also has little hope in the prospect of decarbonization and net-zero goals developing into a non-tariff trade barrier. He contended that it is unlikely that there will be a global political will to impose a predatory trade policy disguised as climate sanctions “if those countries are deemed of economic importance around the world.”
Although the implementation of higher net-zero standards can be economically costly to developing countries that have to transform their infrastructures and industries, Ball believes that there will be enough support globally for this adjustment to happen.
Ball concluded with an emphasis on assistance needed to shape the political economy and incentives within developing countries to stimulate change in investments in sustainable infrastructure.
“You cannot just sit in Glasgow and decree that the United Nations or a club of wealthy developed nations will write a check for $100 billion,” he said. “You have to get into these economies and start to change signals.”