After four days of enjoying too many 25-dirham coffees, Finance Day couldn’t have come soon enough for ECO.
The combination of low financial resources and serious coffee habits have left ECO wondering about how the same thing can have so many different prices in different parts of the world.
Have no doubt, while ECO loves coffee, we’re not here for the coffee, but for urgently scaling up ambition so the world will not get hotter. At least this is the mandate of the Mitigation Work Programme.
We are here to agree to phase out fossil fuels equitably, and to both double energy efficiency and at least triple renewable energy before 2030. But also in this necessary endeavour, we need to face the reality that not only coffee but items necessary to make the energy transition happen, such as solar panels and wind turbines, have very different prices in different parts of the world.
And even if the underlying price is the same, the value of the money needed to buy these items is very different in different parts of the world. For example: countries with cheap capital currently have interest rates of 3-5%. So, if a windmill costs 1 million dirham, it will have an annual cost of about 40,000 dirham in China, Europe or the US. But in countries with expensive capital, the interest can be four times higher. So here the annual cost of building the same 1-million-dirham windmill will be about 160,000 dirham.
Not surprisingly, it is generally the developing countries that face expensive capital. How is this fair? ECO says it is not. This is clearly a huge barrier to make the energy transition happen – and it makes it seem more profitable to remain dependent on fossil fuels instead of transitioning to renewable energy. Experts from all over the world agree with us! In the Global Dialogues, the higher cost of capital in developing countries was identified multiple times as a key barrier.
ECO is of the opinion that this needs to be spelled out. Dear MWP negotiators, use the opportunity at hand and make identified key barriers and solutions, such as tackling differing capital costs, visible to all in your decision text. This signal is needed to solve these barriers. Let’s ensure the price of coffee and energy is affordable to all!