State-Owned Companies Are Key to Climate Success in Developing Countries, but Are Often Overlooked in the International Dialogue

When it comes to climate, state-owned enterprises are and will remain major actors in energy and other sectors that are central to the low-carbon effort. Credit: IPS.

When it comes to climate, state-owned enterprises are and will
remain major actors in energy and other sectors that are central to
the low-carbon effort. Credit: IPS.

By Philippe Benoit
WASHINGTON, Sep 16 2020 (IPS)

Later this month, government officials and climate stakeholders
will once again converge on New York City (this time virtually) for
Climate Week and the United Nations meetings.� And while there will
be much discussion about the important role that actors such as
private businesses, civil society and cities will need to play in
the climate change effort, there will once again be relatively
little discussion about one key cohort: government-owned
companies. 

Although these companies are not prominent in many of the OECD
countries that to date have dominated the climate change dialogue,
they are major drivers of greenhouse gas emissions, particularly in
emerging economies and other developing countries. To meet the
global warming goals of the Paris Agreement, these government-owned
companies must receive greater attention in climate
discussions.

Globally, government-owned companies (also referred to as
state-owned enterprises or “SOEsâ€) annually emit
over 6.2 gigatons of carbon dioxide-equivalent in energy sector
greenhouse gases
.  This is more than all the emissions of the
United States, or of the combined total of the  European
Union and Japan
.  In China, the world’s highest emitting
country, its state companies are responsible for over half of
national energy emissions.

The importance of state-owned enterprises to the climate effort
is not only about emissions, it is also about the low-carbon
alternatives they provide.  Governments own over half of the
world’s zero-carbon utility-scale electricity generation

SOEs are often controversial, generally viewed as inefficient by
the development community that has sought to reform or even
eliminate them — but when it comes to climate, these companies
are and will remain major actors in energy and other sectors that
are central to the low-carbon effort.

SOEs are important players in the power sector that is
responsible for 40% of
global energy emissions
.  These companies are particularly
weighty in many of the developing world’s power systems,
notably in coal generation
  that is
key to reducing emissions
.

Whether it is the larger emerging economies of Brazil, China,
India, Indonesia, Mexico or South Africa or many smaller poorer
developing companies (or even some advanced economies, such as
France), government-owned companies are the lead players in
electricity.

Oil and gas companies generate 15% of total energy GHG emissions
through their own
production and other operations
, and provide the petroleum
products burnt by others.   While many of the best-known companies
are private sector ones, such as ExxonMobil, Shell and BP, most of
the world’s oil reserves are owned by
national oil companies and their governments
,  and the
world’s most profitable company in 2018 was state-owned Saudi
Aramco
.

Governments also own some of the
largest coal mining companies in the world
.  These oil, gas and
coal producers present a particular challenge for the low-carbon
transition because their corporate purpose is intertwined with
fossil fuel production.

SOEs are also very present in heavy industry (such as steel,
cement and chemicals) which uses large amounts of fossil fuels and
produces correspondingly high amounts of emissions.  Many of the
world’s urban transit systems are also major consumers of energy:
from Latin America to Asia, and even in New York City and other
major U.S. cities, the buses and other transport that people ride
and which produce emissions are owned by government entities (often
cities and regional organizations).

The importance of SOEs to the climate effort is not only about
emissions, it is also about the low-carbon alternatives they
provide.  Governments own over half of the
world’s zero-carbon utility-scale electricity generation
.

Similarly, state-owned cement and steel companies in India and
elsewhere are developing energy efficiency and other low-carbon
technologies to reduce their emissions, and many urban transit
systems are reducing their carbon footprints by acquiring electric
buses and making energy efficiency investments.

Moreover, the state plays a major role in funding both high- and
low-carbon projects.  While much media attention is given to
announcements by leading private international banks, state-owned
banks are amongst the world’s
largest financial institutions
.

In many emerging economies and developing countries throughout
Asia, Latin America and Africa, state-owned development and
commercial banks are major sources of funding for energy projects,
including smaller-scale low-carbon investments by the private
sector.

One specific and often overlooked class of state-owned banks
that plays an important role in the energy transition is
multilateral financial institutions, such as the World Bank, the
Asian Development Bank and the Inter-American Development Bank. 
These organizations are not generally viewed as SOEs, but they are
— it is merely that they are owned by several national
governments simultaneously.

And, finally, SOEs play a critical role in adaptation and
resilience.  Many of the world’s electricity transmission and
distribution systems are owned and operated by government
entities.  State Grid Corporation of China is the largest with over
1 billion customers.

Even as countries have moved to liberalize their power markets
to promote private sector participation in generation, the
electricity grid often remains under state control (e.g.,
in the form of an independent system operator
).

The government also plays a central ownership role in many
natural gas and other energy networks.  When hurricanes hit or
rivers flood roads and towns or high winds knock down transmission
lines, it is often up to government entities to get the energy
system running again.  As the prospect for extreme weather events
increases, SOEs will face a growing challenge to deliver resilient
energy systems.

From emissions to low-carbon alternatives, from power to oil and
gas and coal, from heavy industry to transport, from financing to
resilience, state-owned enterprises are critical actors in the
climate change effort.  They are also in many ways a class unto
themselves, albeit a diverse one.

Their government ownership distinguishes them from the private
sector actors that have generally been targeted in the
conceptualization of climate policy tools (such as carbon taxes and
other liberalized market-oriented instruments).  Given the
importance of state-owned enterprises in driving emissions, more
thought and attention need to be paid to developing SOE-tailored
tools to effectively engage them in climate action.

 

Philippe Benoit is Managing Director for Global
Infrastructure Advisory Services 2050 and has written extensively
on the issue of state-owned enterprises and climate.  He was
previously the Head of the Energy Environment Division at the
International Energy Agency and Energy Sector Manager for Latin
America at the World Bank.

 

The post
State-Owned Companies Are Key to Climate Success in Developing
Countries, but Are Often Overlooked in the International
Dialogue
appeared first on Inter Press Service.

Source: FS – All – Ecology – News
State-Owned Companies Are Key to Climate Success in
Developing Countries, but Are Often Overlooked in the International
Dialogue