Whose Transformation, Whose Cost? Climate, Energy and Equity

This session examines the costs and benefits of transformation through the lenses of climate, energy and distribution.

The tension between energy security and climate goals presents one of the most difficult trade-offs in investment decisions today. While geopolitical risks prompt countries to secure their energy supplies, climate commitments require an acceleration of low-carbon investment. Pursuing both objectives at the same time creates a need for large-scale, long-term financing.

Who will provide this financing, and who will benefit from the transformation, remain open questions. Economies facing high costs of access to capital may also be among those most affected by climate risk. This creates a risk that the green transition will deepen existing inequalities rather than reduce them. With well-designed policies, however, the green transition can also become a source of growth, creating new opportunities for investment and employment.

Another dimension of transformation concerns the existing stock of physical capital itself. Power plants, industrial facilities and transport infrastructure are built for decades of use and can lock an economy into a carbon-intensive structure. As climate policies become more stringent, some of these assets face the risk of losing value before reaching the end of their economic lives. Extreme climate events also pose a direct threat to physical capital. New investments must therefore be designed both to be low-carbon and to withstand climate shocks. Yet the investor’s calculus does not always coincide with society’s. Because costs associated with carbon emissions and the loss of natural capital are often excluded from private calculations, the benefits of transformation are also unevenly distributed. The market, therefore, cannot on its own guarantee either sufficient low-carbon investment or an equitable distribution of costs and benefits. This session treats the protection of natural capital and the equitable distribution of the costs and benefits of transformation as integral parts of the investment equation, rather than as external considerations.

The session is expected to address the following topics:

• The trade-off between energy security and climate goals
• The relationship between physical capital and the environment: carbon-intensive capital stock, stranded asset risk and the climate resilience of infrastructure
• The investment gap and sources of financing for transformation
• The distribution of the costs and benefits of the green transformation across countries and social groups
• Creating value within ecological limits and the growing importance of natural capital