Identifying optimal financial budget distributions for the low-carbon energy transition between emerging and developed countries

Abstract

The decision to transition to low-carbon energy often needs to identify how efficiently to mitigate greenhouse gas emissions and supply energy. The limited studies that account for cost efficiency of energy supply and carbon reduction allow a decision maker to balance energy supply against the corresponding greenhouse gas emissions for a given energy transition. Despite the contributions of these studies, they do not differentiate the analysis based on regions’ or countries’ varying stages of economic and political development and types of energy transitions. The objective of this research is to identify an optimal mix of different types of low-carbon energy transitions between emerging and developed countries. By employing cost efficiency of energy supply and carbon reduction, the optimization problem addresses the multiple objectives of maximizing energy supply to help improve access to electricity and maximizing carbon reduction to reach the Paris Agreement goals. We identify optimal financial budget distributions that maximize the objectives for five low-carbon energy transition scenarios. We find that the overall transition to low-carbon energy sources reduces carbon emissions and meets growing energy demand more cost-effectively in emerging countries than it does in developed countries. These results offer motivation and justification for developed countries to increase resources and to support emerging countries’ low-carbon energy transition efforts from an efficiency perspective. We also find that replacing fossil fuels with nuclear or natural gas in emerging countries is highly efficient for managing carbon reduction and energy supply. Even with the safety concern for nuclear power and natural gas as a temporary solution for the low-carbon energy transition, we show how these two energy sources can still play significant roles as transition options for managing the cost efficiency of carbon reduction and energy supply in emerging countries.