Decarbonization from the Commanding Heights: Comparing Emerging Economies

• In Event: National Oil Companies and Climate Politics

Abstract

State-owned enterprises (SOEs), such as national oil companies (NOCs) and national power companies (NPCs), play complex roles as prominent political and economic actors in the global energy landscape, particularly in large emerging economies. They can function as monopolies entrenching fossil fuel interests, as policy instruments for the state’s non-financial goals, and as market actors - the so-called “pillars” of state capitalism. However, few studies have investigated whether they accelerate or impede transitions away from fossil fuels to renewable energy sources,and if so, how and why it occurs. This study addresses the question: What are the essential conditions influencing the success or failure of energy transitions in large emerging economies given the major role played by SOEs? We employ a fuzzy-set qualitative comparative analysis (QCA) approach combined with in-depth fieldwork and case studies to uncover causal pathways and configuration of conditions that lead to the success and failure of energy transitions in 18 emerging economies, in which state ownership looms large in the energy sector. The study identifies mechanisms and contextual factors around how SOEs can act as accelerators, remain neutral, or serve as impediments in these transitions.

Emerging economies, including major fossil fuel producers in the Global South, have come to play larger roles in the global climate discourse. As part of this trend, these states have also started advancing their domestic energy transitions, albeit at an uneven pace, using a wide range of institutional configurations, and with varied interactions between state and market. As a broad group of states, they generally maintain high levels of state ownership in their economies. This is a clear indication that large SOEs — including NOCs, coal companies, and electric power companies – will be increasingly indispensable to the transitions. The tensions inherent in these more state-led models are being navigated in interesting and novel ways that demand attention and academic scrutiny.

Notably, the literature addressing questions of institutional configurations for rapid and equitable transitions has focused considerably on the role of the market and private firms in OECD countries, with more recent research on green industrial policies and green developmental states. However, the significance of SOEs as critical energy players and major carbon emitters in global climate governance is large and growing. Yet, their role has not been incorporated into the discourse. SOEs accounted for nearly half of the energy investment globally and the share is particularly high in fossil fuel investment. SOEs are among the world's leading fossil fuel energy producers.

This study answers the following questions: How do SOEs influence the pace and direction of energy transitions in major emerging economies? In what specific contexts do SOEs contribute to the success or failure of these energy transitions? And what explanations emerge for the varied outcomes in these countries? This paper compares the progress of energy transition, as measured by the installed capacity share of wind and solar power, across 18 major emerging economies where state ownership in the power sector is or has been notably prevalent. These countries span a range from low to upper-middle income levels, including China, India, Brazil, Russia, Mexico, Indonesia,Türkiye, Thailand, Nigeria, Egypt, Bangladesh, Philippines, Vietnam, South Africa, Malaysia, Colombia, Saudi Arabia, and UAE.

Drawing from in-depth case studies, we analyze seven key factors that may potentially influence the deployment of wind and solar power and identify causal pathways to success and failure through QCA: (1) SOE sponsorship of renewable projects, capturing the extent to which SOEs invest in wind and solar projects; (2) power sector market concentration, indicating the level of competition within the power generation sector; (3) renewable market concentration, reflecting competition in wind and solar power investment; (4) energy wealth, represented by a country’s fossil fuel endowment and measured by net energy imports; (5) manufacturing supply chain, assessing a state’s commitment to local manufacturing of key renewable energy components; (6) access to debt, reflecting the extent of financing availability for renewable energy development in a country; (7) renewable energy subsidies, capturing the level of government support in wind and solar energy. A novel project-level database containing investor and ownership information for operating wind and solar projects in these 18 countries was created for granular analysis.

This paper presents a comprehensive analysis of the complex role played by SOEs in the energy transitions of major emerging economies and highlights the critical importance of understanding their unique position in global climate efforts.

Authors

• Faris AlSulayman

• Edmund Downie, Princeton University

• Mengye Zhu, Center for Global Sustainability, University of Maryland