The world’s poorest oil-dependent countries are set to take the biggest hit in the transition away from fossil fuels, according to a report titled ‚Beyond Petrostates: The Burning Need to Cut Oil Dependence in the Energy Transition‘ published on Thursday (11 February) by Carbon Tracker, a London-based not-for-profit think tank researching the impact of climate change on financial markets. The study found that the forty nations that are the most heavily reliant on fossil fuel income could face a $9 trillion gap in government revenues over the next two decades if oil demand drops in line with tightening global climate policy and technological advances.
The 19 worst affected countries, with a combined population of 400 million, could see total government income drop by 20%, leading to job losses and cuts in public services. Among those, generally speaking, the poorer the country, the larger shortfalls it is projected to face. “Many of the countries set to suffer the most from revenue losses are also the poorest. In some cases, they also have large and rapidly growing populations, for example in Nigeria and Angola,” reads the report. The world’s biggest oil and gas producers, including the US, the UK, the Netherlands, China, India and Brazil, are also looking at major drops in revenue, but have diverse economies that are less dependent on fossil fuels. The report could thus be seen as a “wake-up call” for fossil fuel reliant countries and international policymakers who base their planning on industry and OPEC forecasts.
The study argues that helping developing countries through the transition is in the international community’s interest as world nations strive to meet the demands of the Paris Agreement. “Understanding the scale of the challenge and which nations are most vulnerable will help policymakers focus their efforts. Cushioning the landing for hundreds of millions will deliver better outcomes for both climate and human development,” said Andrew Grant, co-author of the report. According to Mike Coffin, the report author, there is no one-size-fits-all approach to reducing reliance on fossil fuels, but developed countries can provide technical and financial support or assistance for tax or legal reforms. “The EU could also look to help accelerate efforts already in progress by the World Bank and the IMF and help the poorest oil-dependent countries share some of the gains from the energy transition,” Coffin added.
