Political and business leaders from around the world have outlined the far-reaching geopolitical implications of an energy transformation driven by the rapid growth of renewable energy. In a new report launched today at the Assembly of the International Renewable Energy Agency (IRENA), the Global Commission on the Geopolitics of Energy Transformation says the geopolitical and socio-economic consequences of a new energy age may be as profound as those which accompanied the shift from biomass to fossil fuels two centuries ago. These include changes in the relative position of states, the emergence of new energy leaders, more diverse energy actors, changed trade relationships and the emergence of new alliances.
The Commission’s report ‘A New World’ suggests that the energy transformation will change energy statecraft as we know it. Unlike fossil fuels, renewable energy sources are available in one form or another in most geographic locations. This abundance will strengthen energy security and promote greater energy independence for most states. At the same time, as countries develop renewables and increasingly integrate their electricity grids with neighbouring countries, new interdependencies and trade patterns will emerge. The analysis finds oil and gas-related conflict may decline, as will the strategic importance of some maritime chokepoints.
The energy transformation will also create new energy leaders, the Commission points out, with large investments in renewable energy technologies strengthening the influence of some countries. China, for instance, has enhanced its geopolitical standing by taking the lead in the clean energy race to become the world’s largest producer, exporter and installer of solar panels, wind turbines, batteries and electric vehicles. Fossil-fuel exporters may see a decline in their global reach and influence unless they adapt their economies for the new energy age.
“This report represents the first comprehensive analysis of the geopolitical consequences of the energy transition driven by renewables, and a key milestone in improving our understanding of this issue,” said Commission Chair Olafur Grimsson, the former President of Iceland. “The renewables revolution enhances the global leadership of China, reduces the influence of fossil fuel exporters and brings energy independence to countries around the world. A fascinating geopolitical future is in store for countries in Asia, Africa, Europe and the Americas. The transformation of energy brings big power shifts.”
“The global energy transformation driven by renewables can reduce energy-related geopolitical tensions as we know them and will foster greater cooperation between states. This transformation can also mitigate social, economic and environmental challenges that are often among the root causes of geopolitical instability and conflict,” said Adnan Z. Amin, Director-General of IRENA.
“Overall, the global energy transformation presents both opportunities and challenges,” continued Mr. Amin. “The benefits will outweigh the challenges, but only if the right policies and strategies are in place. It is imperative for leaders and policy makers to anticipate these changes, and be able to manage and navigate the new geopolitical environment.”
The Commission says countries that are heavily reliant on fossil fuel imports can significantly improve their trade balance and reduce the risks associated with vulnerable energy supply lines and volatile fuel prices by developing a greater share of energy domestically. With energy at the heart of human development, renewables can help to deliver universal energy access, create jobs, power sustainable economic growth, improve food and water security, and enhance sustainability, climate resilience and equity. The report was launched by the Commission at IRENA’s ninth Assembly in the presence of ministers and senior policy makers from more than 150 countries.
Small Businesses Adapting to Rapidly Changing Economic Landscape
The World Economic Forum has long been at the forefront of recognizing the strategic importance of sustainable value creation objectives for business. While interest has mostly focused on how large corporations contribute to the global economy and sustainable development objectives, small and mid-sized enterprises (SMEs) are often overlooked as major drivers of economic activity, as well as social and environmental progress around the world.
A new report released today finds factors that previously disadvantaged SMEs can lead them to new opportunities. Nine case studies from multiple industries and regions highlight what SMEs can do to increase their future readiness.
Developed in collaboration with the National University of Singapore Business School, the University of Cambridge Judge Business School and Entrepreneurs’ Organization, the report also finds that SMEs are lagging behind in terms of societal impact. Although there is a clear need to operate in line with sustainability goals, many SMEs have yet to include explicit strategies and performance measurement centred on societal impact.
The top challenges cited by SME executives include talent acquisition and retention (for 52.5% respondents), survival and expansion (43.8%), funding and access to capital (35.7%), non-supportive policy environment (21%), the difficulty of maintaining a strong culture and clear company purpose and value (20%).
SMEs can leverage their size, networks, people and the strengths of technology to support their goals of sustainable growth, positive societal impact and robust adaptive capacity. While it is essential for SMEs and the wider economy to increase their future readiness, they can thrive only insofar as the necessary supporting infrastructure and regulatory frameworks exist.
“We hope this will inspire and encourage SMEs and mid-sized companies to harness their potential in becoming a major driver of sustainable and inclusive economic growth and innovation by focusing on several core dimensions of future readiness,” said Børge Brende, President, World Economic Forum.
“Through this report, the Forum aims to highlight the significant role SMEs can play not just locally but also globally. The New Champions Community is a step towards bringing these smaller companies into the forefront of global discourse around socioeconomic development and engaging them in a community of forward-thinking companies from across the world,” said Stephan Mergenthaler, Head of Strategic Intelligence and Member of the Executive Committee, World Economic Forum.
The report aims to develop a deeper understanding of organizational capabilities and orientations needed for SMEs to successfully generate lasting financial growth, affect society and the environment positively, and develop high levels of resilience and agility.
It relies on robust research methods and combines rigorous primary and secondary research. The takeaways and conclusions presented in the research have been derived from an analysis of over 200 peer-reviewed articles and engagement of more than 300 CEOs and founders of SMEs through surveys and in-depth interviews.
France: Invest in skills, digitalisation and the green transition to strengthen the recovery
Swift and effective government support has helped France to rebound rapidly from its COVID19-induced recession. Using the country’s announced Recovery and Investment Plans to invest in education, worker training, and the green and digital transitions should result in stronger and more resilient growth, according to a new OECD report.
The latest OECD Economic Survey of France says that while it is important not to prematurely withdraw support for households and firms, as the recovery gains traction support measures should increasingly be targeted at the most viable businesses and sectors and should favour investment. Professional training and support for workers transitioning to new jobs should be strengthened to ease labour market shortages and address the mismatch between skills and the needs of the business sector.
“France’s response to the COVID-19 crisis has been swift and effective, enabling it to emerge from the health crisis with jobs and household incomes well protected and its economic capacity largely preserved,” OECD Secretary-General Mathias Cormann said, launching the Survey alongside French Minister of Economy, Finance and Recovery Bruno Le Maire. “A rigorous implementation of the government’s Recovery and Investment Plans will help to turn the rebound into lasting sustained growth, building a greener, more digital and more resilient economy.”
After an 8.0% contraction in economic activity in 2020, the Survey projects a strong GDP rebound of 6.8% in 2021 and 4.2% in 2022 as domestic demand resumes. This follows a period of slower growth in France in the decade leading up to the COVID-19 crisis marked by weak gains in productivity and living standards. Low-skilled and young workers face difficulties in accessing the labour market and unequal opportunities have weakened inter-generational social mobility. The pandemic has also exposed a lag among small and medium-sized enterprises in adopting digital technologies.
These structural weaknesses can only be addressed through reforms, the Survey says. It calls for renewed efforts to boost skills to help sustain jobs and productivity growth. A combination of labour market, taxation and spending reforms could lead to a tangible increase in living standards in the years ahead, according to the Survey.
It is particularly important to use the recovery period to improve the fiscal framework and notably the effectiveness of public spending through reviews and better allocation of resources, the Survey says. France’s public spending as a share of GDP is the highest of OECD countries, and the high level of social expenditures, notably on pensions, as well as looming pressure from an ageing population makes it vital to rebalance spending towards more investment. This would support growth and help to stabilise and then gradually lower the public debt-to-GDP ratio.
The government has already pursued important reforms to reduce labour market segmentation and strengthen active labour market policies. Ensuring broad access to retraining and enforcing high quality standards for lifelong training courses would boost employment opportunities.
France has made the transition towards a greener economy a pillar of its recovery plan, and it is vital that this leads to increased private investment in green infrastructure and technology. Greater incentives are needed to drive behavioural changes within businesses and households. To be fully effective, this should extend to all available policy instruments, including regulation and R&D as well as progressively aligning carbon prices across sectors, albeit alongside complementary measures. To avoid unfair impacts on people and sectors, it is essential to support vulnerable households and firms, through targeted measures, for example help-to-buy schemes for clean vehicles and equipment.
People are increasingly worried about inequalities but divided on how to address them
For a recovery from the COVID-19 crisis that is strong, sustainable but also fair, it will be key to tackle inequalities and promote equal opportunities. Yet while there is growing consensus that inequality is a problem, people are increasingly divided about its extent and what to do about it, according to a new OECD report.
Does Inequality Matter? says that most people are concerned about inequality. Four in five people in the OECD feel income disparities are too large in their country. People care about inequality of both outcomes and opportunities, as they perceive high income and earnings disparities as well as low social mobility. Moreover, concern over income and earnings disparities has risen in the last three decades, in line with the increase in income inequality.
People’s perceptions are not disconnected from reality. Along the lines of observed trends in income inequality, people believed, on average, that top earners earned 5 times as much as bottom earners in the late 1980s/early 1990s, while this perceived top-to-bottom earnings ratio has increased to 8 today, after having reached a peak of 10 during the Great Recession. Tolerance for inequality has also increased, though by less. Today people believe, on average, that top earners should earn 4 times as much as the bottom earners, up from 3 times in the late 1980s.
More than 6 out of 10 OECD citizens believe their government should do more to reduce income differences between rich and poor with taxes and transfers. The more people are concerned about inequality and perceive low social mobility, the higher their demand for redistribution.
However, beliefs about effectiveness of policies and determinants of inequalities matter. People are less likely to demand more redistribution if they believe that benefits are mistargeted, and they are less in favour of progressive taxation if they believe that corruption is widespread among public officials, prompting the misuse and misallocation of public benefits.
Demand for more progressive taxation is also lower where people believe that disparities are justified by differences in personal effort, rather than to circumstances beyond people’s control. For example, in 2018 in Poland 25% of people believe poverty is due to lack of effort rather than injustice or bad luck and 54% demand more progressive taxation, while in Germany that figure is 4% and 77%, respectively.
Yet, despite most people being concerned about inequality, they have strongly different beliefs about its extent and what to do about it. Within the average OECD country, one fourth of people thinks that more than 70% of the national income goes to the 10% richest households, contrary to another fourth who think that less than 30% goes to the richest households.
Furthermore, the large heterogeneity of people’s views on inequalities has grown in the last three decades, even among people with similar socio-economic characteristics. There is evidence of growing polarization: in most OECD countries there is an increasing gap between those who believe inequality is high and those who believe it is low. More unequal countries have a more divided public opinion: in Chile and the United States – two among the most unequal OECD countries – the perceptions about the extent of the top richest 10% shares diverge the most.
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