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Course:CONS200/2025WT2/Energy justice: the positive and negative implications of renewable energy on developing economies

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Introduction

Energy Justice

The transition to renewable energy often presents opportunities and challenges for developing economies, raising concerns for energy justice. Energy justice recognizes injustices within energy systems, where such injustices tend to worsen energy challenges, particularly through different countries’ legal, policy, and regulatory frameworks.[1] Energy justice aims to include environmental and human rights within energy systems, especially when considering the energy challenges that differ between the Global North and Global South. Countries in the North tend to experience energy poverty linked to unaffordability, while countries in the South tend to have less energy access and security before being able to consider affordability.[1] Specifically, the frameworks within energy justice include access and equity to energy, injustice behind energy distribution, and how to adopt renewable energy.

Blue: Global North - High income economies and High Human Development. Red: Global South - Lower income economies and Lower Human Development

Renewable Energy vs. Fossil Fuels

Renewable energy is a non-fossil fuel source derived from clean and sustainable resources such as wind, solar, or water power to improve social, economic, and environmental health to hopefully improve economic development and productivity.[2] However, there may be some important things to consider within developing economies when transitioning to clean energy: challenges for fossil fuel dependent communities, the impact of energy poverty, how economic diversification and workforce transition could work, how the high costs of renewable energy technologies (RETs) may impact communities, and how just transition and policy recommendations would be put in place. As such, the negative and positive impacts of using renewable energy will be explored.

Developing Economies

Developing economies tend to have relatively low per capita resources which undergo a transformation process to increase resources and choices for its population.[3] In other words, the population has access to fewer goods, services, income, education, and health care compared to people in more developed countries and may aim to combat this less access to goods. Renewable energy may have positive implications on developing economies; to analyze and evaluate some additional solutions and recommendations from social, cultural, and economic perspectives, the topics of community values and proper investment capacity will be discussed as a path moving forward. If a community wanted to prioritize their well-being alongside economic growth, relying on renewable energy may be the best path forward, and proper investment capacity should be further explored and prioritized for developing economies.

This infographic shows the amount of energy mixes used by region

Background: Frameworks within Energy Justice

Energy Access and Equity

Developing nations largely rely on fossil fuel energy and invest sparsely into renewable energy.[4] Since developing nations do invest minimally in renewable energy, it is being introduced at a slow and inconsistent pace in these regions. A common characteristic among many developing countries is their reliance on diverse energy mixes, where households combine both renewable and non-renewable sources in their daily lives. For example, using solar photovoltaic (PV) as their source of electricity and use a gas stove for cooking.[4] These inequalities in energy access can cause several challenges and hinder the effective use of renewable energy. A lack of access, along with limited education or training on how to operate or install these renewable technologies can lead to system failures, long-term inefficiencies and stall progress towards sustainable energy solutions.[4]

Recognizing the Injustices of How Energy is Distributed  

Energy distribution is highly linked with the economic development of a country.[4] Countries that are developed have greater access to sustainable energy, while developing countries mainly rely on fossil fuels. Many remote rural areas lack access to energy altogether due to insufficient infrastructure and support. Remote rural areas don’t even have access to energy because they do not have the necessary support.[4] Emerging and developing countries face barriers when trying to implement renewable energy technologies often related to socioeconomics, political instability, and the market uncertainty.[4] Implementing renewable energy also involves high upfront costs, which can take years for emerging economies to recover from.[5] It becomes even more difficult when financial institutions are hesitant to lend money to marginalized communities because these projects are seen as high-risk investments. This perception stems from factors such as limited financial history, small project scale, and a weak market presence within emerging economies.[5] In addition, the uncertainty around potential returns on renewable energy investments in developing countries further discourages lenders from offering support.[5] In order to make renewable energy more accessible, investment risks must be mitigated and loan access must be simplified.[4] This can be done by focusing on financial development in developing nations to get them to a point of financial stability and energy equity.  

Increasing Energy Distribution within Emerging Economies

To make renewable energy more accessible, investment risk must be reduced, and getting loans needs to be made easier.[4] Risk can be eliminated by focusing on financial development in developing nations to get them to a point of financial stability. Implementation of financial frameworks can help lessen the financial barrier for developing nations by incorporating microfinance, community-based financing, and inventive financing models.[5] By implementing these frameworks, developing nations will be able to generate inexpensive capital that can be used towards renewable energy projects.[5] Financial development is very important for developing nations because it increases the opportunity for those nations to have greater capital, invest more, and put money into renewable energy projects. By helping developing nations develop from a financial standpoint, it will become easier in the long run concerning the implementation of infrastructure and technology for renewable energy because there will be less of a financial burden on the nation to do so, and lenders will be more likely to lend them resources.

Conditional Factors for the Adoption of Renewable Energy  

As of 2021: Map of carbon taxes and emissions trading systems worldwide

Creating a favorable atmosphere that allows for long-term planning and execution of policy can lead to a positive adoption of renewable energy in developing nations.[5] In addition, implementing an environmental tax on carbon emissions and other forms of pollution will also make nations more inclined to choose clean energy alternatives.[5] Taxation on carbon emissions and pollution creates a financial burden concerning energy production stemming from fossil fuels, which will, in turn, make those nations more inclined to choose renewable energy options since they will be a better option both environmentally and economically.[5] Initiatives must also be effective if the implementation of renewable energy in developing nations is to happen sooner rather than later.[5] Ultimately, if renewable energy is to be broadly implemented across developing nations, there needs to be a reduction in financial obstacles, an incentive for innovation, subsidies, tax credits, and public-private partnerships.[5]

Equity and Justice: Negative Implications of the Clean Energy Transition

Although the transition to clean energy brings significant challenges, renewable energy may be essential to fight against climate change. Communities historically dependent on fossil fuel industries, such as coal and oil tend to face unique challenges as the world shifts towards renewable energy; these beneficial transitions have impacted not only communities closely linked to fossil fuel economies but also those experiencing job losses and declines in local tax revenues that fund infrastructure and public services.[6] Marginalized groups, especially those in rural and underserved regions, often lack the political power or financial resources to advocate for their needs during these transitions. This results in slower recovery and minimal support, exacerbating long-standing structural inequalities.[6]

Challenges for Fossil Fuel Dependent Communities

In regions where they rely on coal and oil, research has shown that they are particularly vulnerable to economic hardship as the global demand for fossil fuel decreases; these dependent communities tightly intertwined with the oil extraction industries, such as the manufacturing for combustion engine automobiles, face economic instability as the demand for fossil fuels drop.[7] The reduction of fossil fuels industries and the closure of major power plants has led to a loss of jobs and significant economic downturn in these areas. Moreover, the communities may experience an increase in energy prices, and a disproportionately impacting the low-income households struggling with energy insecurity.[6] In some areas, public services like schools and hospitals have been underfunded as tax revenues decline, creating a cycle of disinvestment that is hard to reverse.[7]

Impact on Energy Poverty

Many people advocate for Energy Justice, including Friends of The Earth, Europe, emphasizing climate and social justice go together.

Energy transition often highlights the critical energy poverty issues. As the price of energy use rises, vulnerable populations with fewer resources face difficulties when paying their energy bills, exacerbating existing economic disparities.[6] Without intervention, households already experiencing poverty may be forced to choose between essential needs such as heating and food. This not only impacts physical health but can also have long-term consequences on mental health and educational outcomes. Policies are necessary when addressing energy poverty, not only policies to promote renewable energy access but also to integrate energy assistance programs, weatherization initiatives and legal protections for vulnerable groups.[6]

Economic Diversification and Workforce Transition

Often when trying to mitigate the effects of the energy transition, challenges arise, such as the lack of economic diversification in fossil fuel-dependent regions. Many communities who rely on coal mining or oil extraction face long-term structural unemployment as there are no alternative industries being established.[7] The lack of effective workforce development and training programs within the old sectors who are being converted can leave these individuals in a difficult spot to transition to new sectors. However, the research around the evaluations of such programs remains limited, indicating a need for implementation of targeted policies to support displaced workers.[6] In addition, partnerships between local governments, educational institutions, and industry leaders are essential to create relevant and accessible training opportunities.[6]

High Costs of Renewable Energy Technologies (RETs)

Oftentimes the high costs of renewable energy technologies (RETs) present major obstacles to the widespread adoption, especially within regions that have limited resources. Although RETs provide many benefits for the future in terms of reducing the greenhouse gas emissions and a reliance on fossil fuels, the upfront capital of these technologies such as solar, wind and hydroelectric power require a large upfront cost. The cost of renewable technologies, including the storage systems can often be provocative for low-income communities or regions that previously heavily relied on fossil fuel for economic stability. These perpetuating energy insecurities and existing economic disparities continue to delay the transition to cleaner energy options. Recent research has shown that although the costs of RETs have decreased in the last recent years, competing with fossil fuel-based energy generation is still a challenge especially when considering the long-term financial planning and regional economic disparities.[8] To overcome these financial barriers, governments and private sectors must work together to offer subsidies, tax incentives, and low-interest financing options tailored to disadvantaged communities.

Just Transition and Policy Recommendations

To ensure a just transition, a multi-disciplinary approach is necessary. To prevent deepening existing inequalities, policymakers must assess the distributional impacts of climate change mitigation and adaptation strategies. Not only strategies such as including renewable energy deployment but also direct support such as energy assistance, social safety nets, and workforce development for the affected.[7] Ultimately, to improve their overall well-being, it is key for energy policies with housing, health, and economic development initiatives to be integrated as they can address the root causes of material hardship for the vulnerable populations.

Positive Implications of Renewable Energy

The use of Renewable Energy comes with possibilities for developing economies. Through the utilization of sustainable energy sources, these countries can promote economic development, build climate change adaptive capacity, and increase energy access to remote parts of the country. These efforts help sustainably in the long-term, while reducing fossil energy reliance and achieving better social and economic outcomes.

Economic Growth

Renewable energy is expected to have a significant impact on the economic growth of developing countries. The following are the most notable:

  • Job Creation: Renewable energy provides jobs in different sectors such as manufacturing, construction, and maintenance. A few months back, The International Renewable Energy Agency (IRENA) reported that more than 12 million people around the world worked in the renewable energy industry in 2022, with an ever-increasing portion existing in emerging markets.
  • Investment Opportunities: The development of renewable energy stimulates inflow of investments from both local and international investors. Green bonds and climate financing projects helped countries such as Brazil and India obtain funding for their bundled investments.
  • Energy Independence: Developing deep regard for independent policies by reducing the dependency on imported fossil fuels, developing national economies gradually increase self-reliance.

Climate Change Adaptation Strategies

Climate Resilience Models can be used as part of strategic planning, to help cities identify their level of resilience maturity, identify suitable policies to implement to develop resilience, and many other ways to guide disaster resilience. Visit Climate ADAPT to understand it further. https://climate-adapt.eea.europa.eu/en/metadata/tools/the-resilience-maturity-model

Developing economies greatly benefit from renewable energy as it helps increase climate resilience.[9] This is specifically important since these countries are already suffering from climate change impacts. These include:

  • Greenhouse Gas Emission Reduction: An increase in using wind, solar, and hydroelectric power translates to lower carbon emissions as these sources contribute to fighting climate change.
  • Disaster Resilience: reliable energy services such as solar microgrids deliver electricity even at periods of harsh weather and extreme events. This is crucial to facilitate crucial operations like hospital functions and emergency services.[10]
  • Sustainable Resource Utilization: Renewable energy sources, unlike fossil fuels, are limitless. This ensures a constant supply of energy with no adverse effects to the environment, making it highly sustainable.[11]

Electrification of Remote Areas:

Providing power in rural and remote areas of developing economies is a major challenge.

Renewable energy gives an opportunity for the region to overcome this challenge by providing:

  • Off-Grid Solutions: Solar home systems, mini-grids, and wind turbines enable electrification in isolated areas without requiring costly grid extensions.
  • Improved Quality of Life: Access to reliable electricity enhances education, healthcare, and economic opportunities, reducing poverty and improving living standards.
  • Support for Local Enterprises: Small businesses and agricultural operations benefit from renewable energy by gaining access to stable and affordable electricity, fostering economic self-sufficiency.

The adoption of renewable energy in developing economies presents many positive implications from economic growth and climate resilience to enhanced energy access. By investing in sustainable energy solutions, these nations can reach long-term prosperity while also contributing to global environmental goals. Strategic policies and financial support will also continue to accelerate this transition, making sure that the benefits of renewable energy are equitably distributed across all communities.

The Path Forward: Recommendations and Solutions

Community Values Within Renewable Energy

In order to ensure developing economies can rely on renewable energy, community engagement and proper investment capacity should be implemented. With the path forward including community engagement and recognition justice, addressing colonization can lead to more productive collaboration between indigenous communities and neo-economics. A recent study looked at the relationship between renewable energy projects and indigenous community well-being in Canada.[12] Through the use of Census data, findings suggest the use of renewable energy is associated with higher levels of well-being.[12] For those who prioritize community well-being, this may be an intriguing factor for contemporary and developing economies to rely on renewable energy; however, a developing economy may prefer to depend on fossil fuels for faster results, resulting in a decline in environmental effectiveness. Assistant Professor and Junior Faculty Fellow at Penn State Institution of Energy and the Environment recognizes how the Global South is reluctant to follow the Global North’s footsteps in the adoption of technology focused on renewable energy since they have not contributed to the majority of the global greenhouse gasses affecting climate change.[13] This reflects a controversial cost of developing economic growth: environmental and community health decreases as economic growth increases. Therefore, the Global South may have valid concerns when considering to rely on renewable energy.

As of 2020, the Renewables vs Fossil Fuels in Europe have changed in response to climate change. Line graphs comparing growth in renewable energy sources compared to reduction in fossil fuel usage in the European Union's electric power production.

Further, transitioning to renewable energy may not be considered a priority due to a community’s lesser development compared to European or Western culture, possibly risking the rise out of poverty— a valid concern as there has been little research done on the effects of renewable energy use in the Global South compared to the Global North.[14] This geopolitical perspective emphasizes the importance of recognizing the impacts on neglected communities of society: those who can be disadvantaged or hesitant to rely on renewable energy systems. Some suggest de-linking the economy and the environment as a place to start, but most research has suggested absolute decoupling is an unrealistic goal.[15][16][17][18] However, the level of economic development measured by GDP does not necessarily indicate better energy justice; environmental and social impact varies based on factors like employment, affordability, and reliability of energy.[14] Focusing on these social factors may influence better environmental outcomes while increasing economic growth; as employment rates increase, affordability of reliable energy may increase, in turn avoiding energy poverty. As such, if a community wanted to prioritize their well-being alongside economic growth, relying on renewable energy may be the best path forward.

Proper Investment Capacity

In order to rely on renewable energy, proper investment capacity may be necessary.[19] This means having enough financial resources, infrastructure, and expertise to make sure the transition is effective. According to the International Renewable Energy Agency, renewable energy capacity must triple to support emerging economies.[19] This means renewable energy sources like solar power needs to be utilized three times more than what is being used now. Additionally, the rate of annual energy efficiency increases must double by 2030.[19] In other words, less waste needs to be produced to get more from the energy we use, such as in homes, factories, and vehicles. In order to do this, an investment of USD 31.5 trillion is needed for renewable power, electrical networks, flexibility measures, energy efficiency, and conservation.[19] However, where this money will come from is the challenge since the climate emergency tends to not be a top priority within economics. This connects to the challenge of de-linking the economy and the environment as an ongoing struggle and debate.

Map of offshore wind farms and connecting power cables in the German Bight as of 2020.

Further, strong energy planning may be a key factor in de-risking renewable energy investments. [19][20] A review paper exploring different policy recommendations for developing economies emphasizes how the decentralisation of energy production may increase access to energy and energy rights alongside a means to end the use of fossil fuels.[20] This may include giving communities access to more low-carbon energy sources, like solar or wind power, instead of coal, perhaps for the first time. However, some governments or organizations may not set up energy systems properly, leading to energy poverty and harming groups that are already at a disadvantage.[20] In Germany, it is suggested policy implications of wind energy may positively contribute to an economy through expansion in the country’s gross domestic product, but with the consequence of negative shocks to wind energy consumption negatively affecting economic growth.[21] Energy could be unfairly distributed alongside improper monitoring in this case. Overall, with energy planning typically based on Western ideals, not enough research seems to happen in the best interest of developing economies, leading to less knowledge on the impact of energy justice. As such, proper investment capacity should be further explored and prioritized for developing economies in order to rely on renewable energy.

Conclusion

With energy justice aiming to include environmental and human rights within energy systems, the negative implications behind relying on renewable energy will hopefully improve. Since developing nations largely rely on fossil fuel energy and invest minimally in renewable energy, it is being introduced at a slow and inconsistent pace in these regions. However, the use of fossil fuels is a short-term solution that creates a long term problem for the climate and economy; developing economies relying on renewable energy may promote economic development, build climate change adaptive capacity, and increase energy access to remote parts of their countries. In order to ensure developing economies can rely on renewable energy in a responsible manner, community engagement and proper investment capacity should be implemented. The use of renewable energy may be associated with higher levels of well-being; however, the controversial cost of developing economic growth where environmental and community health decreases as economic growth increases is a continuous challenge. Introducing proper investment capacity may help this, yet the cost of increasing renewable energy capacity is extensive. The climate should become prioritized within economics moving forward to reduce the risks of utilizing renewable energy in developing economies.

References

  1. ↑ 1.0 1.1 Agbaitoro, G., Hulme, K., & Wewerinke-Singh, M. (2024). Energy justice discourse: Global South perspectives. Journal of Energy & Natural Resources Law, 42(3), 251–254. https://doi.org/10.1080/02646811.2024.2368985
  2. ↑ Jaiswal, K. K., Chowdhury, C. R.,Yadavc, D., Verma, R., Duttae, S., Jaiswal, K. S., SangmeshB, & Karuppasamya, K. S. K. (2022). Renewable and sustainable clean energy development and impact on social, economic, and environmental health. Energy Nexus, 7. https://doi.org/10.1016/j.nexus.2022.100118
  3. ↑ Behrman, J.R. (2001). Developing Economy. International Encyclopedia of the Social & Behavioral Sciences. 3566-3574. https://doi.org/10.1016/B0-08-043076-7/02307-X
  4. ↑ 4.0 4.1 4.2 4.3 4.4 4.5 4.6 4.7 Ahmed, M. M., & Shimada, K. (2019). The Effect of Renewable Energy Consumption on Sustainable Economic Development: Evidence from Emerging and Developing Economies. Energies, 12(15), 2954. https://doi.org/10.3390/en12152954
  5. ↑ 5.00 5.01 5.02 5.03 5.04 5.05 5.06 5.07 5.08 5.09 Rehman, A., Zakia Batool, Qurat Ul Ain, & Ma, H. (2024). The renewable energy challenge in developing economies: An investigation of environmental taxation, financial development, and political stability. Natural Resources Forum. https://onlinelibrary.wiley.com/doi/10.1111/1477-8947.12418
  6. ↑ 6.0 6.1 6.2 6.3 6.4 6.5 6.6 Carley, Konisky, S., & D. M. (2020). The justice and equity implications of the clean energy transition. Nature Energy, 5, 569-577. https://www.nature.com/articles/s41560-020-0641-6
  7. ↑ 7.0 7.1 7.2 7.3 Gabriel, C. A. (2016). What is challenging renewable energy entrepreneurs in developing countries? Renewable and Sustainable Energy Reviews, 64, 362-371.https://www.sciencedirect.com/science/article/abs/pii/S1364032116302349?via%3Dihub
  8. ↑ Timilsina, G. R. (2021). Are renewable energy technologies cost competitive for electricity generation? Renewable Energy, 180, 658-672. https://www.sciencedirect.com/science/article/abs/pii/S0960148121012568
  9. ↑ Khosla, R., Kamat, A. S., & Narayanamurti, V. (2020). Successful clean energy technology transitions in emerging economies: Learning from India, China, and Brazil. Progress in Energy, 2(4). https://iopscience.iop.org/article/10.1088/2516-1083/abb52b
  10. ↑ Sovacool, B. K., & Griffiths, S. (2020). The politics of renewable energy in developing countries: Insights from Latin America and the Caribbean. Energy Policy, 141. https://www.sciencedirect.com/science/article/abs/pii/S0301421520302056?via%3Dihub
  11. ↑ IRENA. (September 2022). Renewable energy and jobs – Annual review 2022. Retrieved April 8, 2025, from https://www.irena.org/publications/2022/Sep/Renewable-Energy-and-Jobs-Annual-Review-2022
  12. ↑ 12.0 12.1 Zapata, O. (2024). Renewable energy and well-being in remote Indigenous communities of Canada: A panel analysis. Ecological Economics, 222. https://doi.org/10.1016/j.ecolecon.2024.108219
  13. ↑ Doumon, N. (June 11, 2024). Transitioning to renewable energy: Challenges and opportunities. PennState Institute of Energy and the Environment. Retrieved April 3, 2025, from https://iee.psu.edu/news/blog/transitioning-renewable-energy-challenges-and-opportunities
  14. ↑ 14.0 14.1 Apergi, M., Eicke, L., Goldthau, A., Hashem, M., Huneeus, S., Oliveira, R. L., Otieno, M., Schuch, E., & Veit, K. (2024). An energy justice index for the energy transition in the global South. Renewable and Sustainable Energy Reviews,192. https://doi.org/10.1016/j.rser.2023.114238
  15. ↑ Hubacek, K., Chen, X., Feng, K., Wiedmann, T., & Shan, Y. (2021). Evidence of decoupling consumption-based CO2 emissions from economic growth. Advances in Applied Energy, 4. https://doi.org/10.1016/j.adapen.2021.100074
  16. ↑ Hickel, J., & Kallis, G. (2020). Is green growth possible? New Political Economy, 25(4). 469–486. https://www.tandfonline.com/doi/full/10.1080/13563467.2019.1598964
  17. ↑ Vaden, T., Lähde, V., Majava, A., Järvensivu, P., Toivanen, T., Hakala, E., & Eronen, J.T. (2020). Decoupling for ecological sustainability: A categorisation and review of research literature. Environmental Science & Policy, 112, 236–244. https://www.sciencedirect.com/science/article/pii/S1462901120304342?via%3Dihub
  18. ↑ Parrique, T., Barth, J., Briens, F., Kerschner, C., Kraus-Polk, A., Kuokkanen, A., & Spangenberg, J.H (2019). Decoupling debunked: Evidence and arguments against green growth as a sole strategy for sustainability. European Environmental Bureau. Retrieved March 13, 2025, from https://eeb.org/wp-content/uploads/2019/07/Decoupling-Debunked.pdf
  19. ↑ 19.0 19.1 19.2 19.3 19.4 IRENA. (13 January 2025). Driving innovative financial support for emerging economies. Retrieved April 8, 2025, from https://www.irena.org/News/articles/2025/Jan/Driving-Innovative-Financial-Support-for-Emerging-Economies#:~:text=Renewable%20energy%20capacity%20must%20triple,%2C%20and%20conservation%2C%20by%202030.
  20. ↑ 20.0 20.1 20.2 Lacey-Barnacle, M., Robison, R., & Foulds, C. (2020). Energy justice in the developing world: a review of theoretical frameworks, key research themes and policy implications. Energy for Sustainable Development, 55, 122–138. https://www.sciencedirect.com/science/article/abs/pii/S097308261930777X?via%3Dihub
  21. ↑ Solarin, S. A., & Bello, M. O. (2022). Wind energy and sustainable electricity generation: evidence from Germany. Environment, Development and Sustainability, 24, 9185–9198. https://doi.org/10.1007/s10668-021-01818-x
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