Decarbonisation and world poverty

The spectre of dangerous climate change throws up many challenges. This post concentrates on just one of them – albeit one which has received too little attention. We know that if dangerous climate change is to be avoided, the majority of the world’s fossil fuel supplies cannot be burned. If we are committed to avoiding temperature rises in excess of 2ºC, for example, an estimated two thirds of proven fossil fuel reserves must go unused by 2050. To these reserves must be added all anticipated supplies which are not yet commercially available.

If there is widespread agreement that our dependence on the world’s most valuable commodity must be radically curtailed, this simple fact throws up a series of important questions. Politically, the most pressing question is how to ensure that the world adheres to the available ‘carbon budget’ by leaving most supplies unexploited. The earliest attempts to curtail fossil fuel use aimed to depress demand, for instance by way of carbon taxes, or compulsory cap-and-trade mechanisms. Increasingly, though, attention has shifted to measures which would restrict the supply of coal, gas and oil. In principle – since there are far fewer extractors of fossil fuels than there are consumers, and since extraction is immobile – supply ought to be easier to monitor and control than demand.

But an important moral question is how to manage any losses generated by the ‘decarbonisation’ of the global economy. Leaving the oil – and the gas, and the coal – in the soil will have major consequences for a number of actors. Unless they manage to diversify first, fossil fuel companies may have billions of dollars wiped off their stock market valuations. Thousands of people employed in the oil, gas and coal industries could lose their jobs. Indeed a whole series of people in peripheral industries – right down to people running cafes and general stores in mining towns – might do so too. Shareholders, and ordinary pension holders, might be exposed to significant losses, given that many investment funds maintain large holdings in fossil fuel industries.

Finally – and of particular interest from the point of view of debates on global justice – fossil-fuel exporting countries stand to lose out on a significant source of revenue. On one estimate, the overall revenues foregone when these assets are ‘stranded’ could total tens of trillions of dollars globally. Moreover, some of the greatest losses are likely to occur in sub-Saharan Africa, North Africa, and Latin America, since developing country exporters are particularly likely to have untapped – or even unexplored – supplies. For instance, it has been calculated that 73% of the coal found in Central and South America, and 90% of African supplies, must go unexploited if we are to meet a 2ºC target. The countries of the Middle East and Africa, meanwhile, may have to leave their entire unconventional gas reserves underground.

The economic consequences could be dramatic. Consider a simple comparison. According to the OECD, annual oil revenues flowing to Nigeria alone are more than triple the Overseas Development Assistance flowing to the whole of Sub-Saharan Africa. To be sure, fossil fuel wealth has often turned out to do disappointingly little for the ordinary citizens of developing countries, and in some cases it has locked countries into cycles of bad governance and civil strife. Nevertheless, it has also spurred periods of remarkable economic growth. For the taps to turn off now could generate an economic shock that poor countries are ill-equipped to weather.

The world has rightly focused on how the transition beyond carbon can be brought about. But we also need to make sure it is a just transition. It cannot be a transition which leaves some mired in poverty. As a result, we need to give serious attention to side-policies which would offset morally troubling losses of development opportunities. As well as being morally pressing, doing so will be politically important too. The chances of stabilising our climate are all the slimmer if parties to any agreement feel that their legitimate grievances are not being addressed. It is likely that ‘Only a global climate deal that compensates losers and is perceived as equitable by all participants can impose strict limits on the use of fossil fuels in the long term.’

The vitally important question to which we are only now shifting our attention is: what policies should accompany decarbonisation, so as to make the transition away from carbon a fair one? Assuming that these policies will have a cost, who should pick up the tab, and on what basis? These are important questions for both theorists and policy-makers. I was recently lucky enough to be involved in an excellent conference on just such questions, on the island of Lofoten in Norway – a country which famously relies on oil and gas sales for much of its wealth, but is now thinking seriously about the post-carbon future. It is to be hoped that this conference is a sign that the question about decarbonisation and poverty will be taken up much more widely.