Key message 3 – New and increasingly affordable innovations can propel developing countries towards a greener growth path.

A new green growth paradigm is increasingly within reach. Rapid technological advancement has reduced energy costs for renewables. Developing countries can leverage this to leapfrog old technologies and begin employing the latest green innovations to reduce their emissions as they grow, wins on both the sustainability and growth fronts. Just as in the early 2000s, when mobile phones entered and exploded (World Bank 2022) across global markets, creating new economic opportunities and efficiencies (Jensen 2007), green technologies can achieve similar aims across a variety of sectors. By virtue of the sheer size and population density of developing countries, the gains in emissions reductions from these green technologies could be exponential.

Opportunities for renewable energy

Access to electricity is one of the key impediments of growth in developing countries. The demand for cheap sources of energy is still unmet, leaving a wide scope for greener, renewable energy alternatives. Green energy technology can thereby not only reduce the costs of production, but also catalyse structural transformation by creating employment opportunities beyond agriculture in developing countries. Bringing in technology and decentralising renewable energy sources can be a means of growing the manufacturing sector and drawing people out of agriculture and into salaried jobs (Meeks et al. 2022). More specifically, spurred on first by generous subsidies in Europe and then later in China, the cost of solar energy has witnessed tremendous technological advancement and propitious price declines, making it one of the cheapest sources of electricity in the world (Lazard 2021). Renewable wind energy technology has also benefited from similar encouragement. Public and private sectors partnerships are needed to engineer and disseminate these innovations, and ultimately bring about systems change.

Such innovations have already begun to disrupt local markets around the globe. Consider the global electrification frontier, defined as the furthest reaches of the traditional electricity grid network that allow households in rural and remote areas to access electricity. Dramatic declines in the cost of off-grid electricity, notably solar, have eroded the global electrification frontier (figure 3). Previously resigned to purchasing expensive diesel generators or waiting for electricity to reach them, households that lack electricity now have a new viable alternative (Burgess et al. 2022). The comparison with the mobile phone revolution is clear: just as households skipped landlines and used mobile phones to access information, rural households today can leapfrog traditional sources of electricity and use solar. Early adopters of new, cleaner forms of energy like solar may therefore encourage growth because it helps more people access modern energy at an increasingly cheaper rate.

Figure 4: Growth of solar power in developing countries

Burgess et al. 2020

Beyond electricity, improvements in technology coupled with adequate regulations can generate declines in pollution while maintaining manufacturing output (Shapiro and Walker 2018). Energy efficiency improvements, such as the famous case of the collapse in the cost of lighting (Nordhaus 1994), deliver more bang for each buck while lowering pollution. Innovations are therefore crucial in greening the future consumption of energy as well as lowering the total amount needed and adapting to clean innovations today will be cheaper than in the future. Diffusing clean technology now is crucial for reducing future cost of competing with dirty technology and mitigating the immediate social cost of carbon. Enabling access to cleaner and cheaper renewable sources of energy can enable developing countries to continue growing, engender structural transformation, and alleviate poverty.