When Reuters reported that Europe is facing a sharp rise in power bills driven by sky-rocketing gas prices, and all governments are looking for convoluted ways of relieving their respective populations from any pains this coming winter, Atlantic Council comes up with why brown-to-green subsidy swaps in MENA are long overdue. However, MENA states may be able to meet their green ambitions.
Brown-to-green subsidy swaps in MENA are long overdue. Here’s why.
Despite the many improvements on many social, political, and economic fronts over the past few decades, there is significant work—in areas such as wasteful and socially unjust fossil fuel subsidies, air pollution and environmental degradation, youth unemployment, and gender inequalities—to be done in the Middle East and North Africa (MENA) region. While there are significant inter-country or even intra-country variations regarding some of these issues, from a high-level macro perspective, one can identify strong links between these specific issues in the greater MENA.
$2.27 trillion. This is the amount of explicit fossil fuel subsidies paid by MENA governments between 2010 and 2020. According to the International Energy Agency (IEA), MENA economies—led by Iran and Saudi Arabia—accounted for 50 percent of the world’s $4.57 trillion fossil fuel subsidy payments in this period (Figure 1).
Figure 1. Share in total global explicit fossil fuel subsidies between 2010 and 2020 (Percentage)
127,000. This is the number of annual pre-mature deaths in MENA related to ambient air pollution—around 7 percent of all deaths in the region. An important factor contributing to the region’s air pollution is the wasteful usage of fossil fuels, which is incentivized by massive fossil fuel subsidies in the region (Figure 2). Post-tax estimates of fossil fuel subsidies that take into account explicit and implicit costs—social, health, forgone taxation, and environmental costs—hover around 16 percent of the region’s GDP or about $5.4 trillion for the 2010-2020 period.
Figure 2. Change in energy use (kg of oil equivalent) per $1,000 GDP between 1990 and 2014
62 percent. This is the share of total fossil fuel subsidies households in the top two income quintiles receive in the MENA region. Fossil fuel subsidies are ineffective in reducing poverty and inequality and can, in fact, lead to more inequality and poverty in an economy by shrinking fiscal space of governments, increasing budget deficits, and heightening inflation rates.
According to a 2015 International Monetary Fund study, MENA households in the top quintile received about 40 percent of all fossil fuel subsidies, while only 9 percent of these subsidies reached those in the bottom quintile.
Fifteen out of one hundred. This is the share of MENA’s entire female population that have formal jobs. It must be noted that, in many MENA economies, women’s labor participation and employment in informal sectors are larger than the formal sector. Gender-related inequalities in many MENA countries represent themselves in many forms and have deep roots in the region’s culture. While there are significant inter-country variations—for example, female labor force participation rates between the ages of fifteen to sixty-four range from 6 percent in Yemen, to 23 percent in Saudi Arabia and Morocco, and 58 percent in Qatar—overall, the remaining cultural biases against female participation in the labor force and the type of industries and jobs deemed “appropriate” for women to work in have translated to significantly less employment opportunities for women, especially young women, across the region.
Only 10 percent of female youths participate in the formal labor market (Figure 4). Even then, 47 percent of female youth are without a job (Figure 5). In other words, only 5.3 percent of female youths in the MENA region are working compared to 30 percent of male youths (Figures 4 and 5). This is especially worrying, as women’s very low participation rate in MENA’s formal labor force—18 percent for females fifteen and above—has meant that less than half of the region’s adults actively participate in the region’s formal labor market. This creates a significant drag on the economy, especially as the region’s population ages in the next few decades.
Figure 4. Labor force participation rates by gender, MENA vs. World (Percentage), 2020.
Figure 5. Unemployment rates by gender, MENA vs. World (Percentage), 2020.
5.7 million. This is the number of net full-time equivalent (FTE) jobs that could have been created in MENA if half of the region’s 2010-2020 explicit fossil fuel subsidies was channeled to the renewable energy sector. Studies show that redirecting $1 million from fossil fuel subsidies towards the renewable energy sector will create five net FTE jobs in an economy. Considering MENA’s immense solar and wind potential, this number is on the conservative side for the region.
Therefore, if only half of 2010-2020 explicit pre-tax fossil fuel subsidies ($1.14 trillion) were directed towards subsidizing the renewable industry in the region, it could have created 5.7 million net jobs in the region over the past decade, according to my calculations. These millions of extra jobs would have been the jobs of the future: all green and the majority in high tech. This would have helped jump-start the region’s high-tech startups, employ the educated and tech-savvy youth of the region, and reduce overreliance on public sector employment. This is critical because, with limited revenues and rapidly rising populations—two-third of the region’s population is below the age of thirty-five—and expenditures, many governments in MENA—especially those in larger countries—have failed to keep up with the growing demands for jobs, resulting in high unemployment rates, especially among the youth.
Channeling all or a portion of fossil fuel subsidies towards the renewable energy sector—also known as brown-to-green subsidy swaps—will not only create much-needed jobs in the region, but will also promote energy efficiency and reduce air pollution and the many costs associated with it, including illnesses and premature deaths. The positive social effects of such massive job creation in MENA’s green and high-tech sector will also be significant. For one, the renewable energy industry is more gender equitable. Available data suggests that, globally, women account for 22 percent of the oil and gas industry workforce, while this number jumps to 32 percent in the renewable energy industry.
This impact would be more pronounced in MENA because almost the entire oil and gas industry in the region is male-dominated. Hence, subsidizing the oil and gas industry simply translates to subsidizing industries that are overwhelmingly male-dominant and less female-friendly, exacerbating and reinforcing the cultural barriers for female employment in the MENA region. Therefore, reducing fossil fuel subsidies and increasing the growth of the renewable energy sector in MENA would translate to even more employment opportunities for young women in the region compared to world averages.
Moreover, reducing fossil fuel subsidies would have tremendous savings for the MENA region in terms of environmental, health, and other implicit costs associated with subsidizing fossil fuel usage. For example, reducing 2010-2020 explicit fossil fuel subsidies by half would have resulted in about $2 trillion in savings for MENA economies—or about 6 percent of the region’s total economic output in 2010-2020.
Poorer households would be the major beneficiary of these savings; studies show that poorer populations depend more on the environment for their livelihood and shoulder the lion’s share of the health, economic, and environmental costs of fossil fuel subsidies.
Thus, in the medium to long run, reducing fossil fuel subsidies will benefit the poor much more than it can hurt them, leading to improvements in MENA’s increasing levels of multidimensional inequality. In the short run, any reforms to fossil fuel subsidies will lead to price increases across the economy, negatively impacting the poor. In response, governments must enact targeted social protection policies that would mitigate negative short-run impacts of fossil fuel subsidy reductions or removals.
To conclude, reforms in fossil fuel subsidies can help address many challenges and could result in many benefits for the MENA region. However, such reforms have faced serious obstacles in the region and have often led to social unrest and public resentment in various countries. Social unrest and violent protests in Iran in November 2019 and Lebanon in 2021 are cases in point. On the other hand, in 2006, Indonesia successfully eliminated most gasoline and diesel subsidies and channeled the resulting savings to finance economic and social development.
Considering their many environmental, economic, and social benefits, following Indonesia’s model of brown-to-green subsidy swaps could help reduce public resistance against such reforms, while also paving the path for a more energy-secure future in MENA and other regions. Of course, this will not be an easy reform process, but leaders in the MENA region must take it seriously and start looking into the details considering the specific political-economic environments of their countries.
Figure 6. Potential benefits of reducing/eliminating fossil fuel subsidies
Amin Mohseni-Cheraghlou is a macroeconomist with the GeoEconomics Center and an assistant professor of Economics at the American University in Washington. Follow him on Twitter: @AMohseniC.
Middle Eastern energy partner NewMed Energy has entered into a Memorandum of Understanding (MOU) with Enlight Energy regarding exclusive collaboration for a fixed term on the initiation, development, financing, construction and operation of renewable energy projects in the Middle East and North Africa.
The collaboration entails the development of solar projects, wind projects, energy storage and other relevant renewable energy segments in several target countries, including Egypt, Jordan, Morocco, the UAE, Bahrain, Oman and Saudi Arabia.
As part of the Joint Venture, NewMed will utilise its business connections in the aforementioned target countries, with active involvement from Yossi Abu, CEO of NewMed Energy Management Limited. The Enlight Corporation will provide the joint operations with professional design, development and management services in the interest of promoting the Joint Venture.
In view of the MOU, NewMed intends to convene a general meeting which will include on the agenda a proposed resolution that will allow it to act and make investments in renewable energy projects in an aggregate investment amount of $100 million.
Control during the projects’ construction and operation stages will be held by Enlight. The MOU stipulates provisions with respect to the parties’ rights to appoint board members of the Co-Owned Corporations based on their holding rates and it also stipulates that Abu will serve as Chairman of the Board of the Co-Owned Corporations in the first 24 months.
Under the MOU, it has been agreed that resolutions of the Co-Owned Corporations will be adopted by a majority vote, subject to certain minority interest protections to be granted to NewMed. Provisions have also been specified with respect to the manner of financing of the operations of the Joint Venture and the investments in projects to be made thereunder, based on the relative share of each of the parties.
The term of the parties’ exclusive collaboration will be 3 years as of the date of signing of the detailed agreement. This may, under certain circumstances, be extended up to a term of five years as of the date of signing of the detailed agreement. Following the expiration of the Term of Exclusivity, the collaboration will continue with respect to projects that shall have commenced prior to the expiration date.
UN Sustainable Development Goal 7 aspires to ensure access to affordable, reliable, sustainable and modern energy for all by 2030. But in Africa, around 600 million people continue to live without access to electricity. Seeking to reach as many of these people as quickly as possible, African governments are signing agreements with foreign firms to deliver off-grid solar products to millions of households.
British firm Bboxx, for example, has an agreement with the government of the Democratic Republic of the Congo to deliver solar home systems (SHSs) to 10 million citizens by 2024. SHSs consist of one or more panels, usually installed on household roofs, capable of providing up to 300 watts of power. This is sufficient to power laptops, televisions, LED lights, and – in certain models – refrigerators and cooking.
Underpinning this process is the belief that expanded access to off-grid solar can drive economic development by strengthening household income. According to the African Energy Commission, the process will “lift hundreds of millions of people” out of poverty.
Do these claims stand up to interrogation?
Increased income, increased risk
In a recent study, Patrick Lehmann-Grube, an independent researcher, and I reviewed 56 papers that focused on how access to off-grid solar energy impacts household income in Africa. Initially, the available evidence appears to provide strong support, with almost all the papers finding a positive effect.
This was largely based on the finding that SHSs enabled local stalls and kiosks to stay open longer by operating beyond nightfall. The testimony of a Kenyan fruit and vegetable seller is typical. After the addition of a SHS, she reported being able to add “two more hours of trading each day”. Across the studies, additional work hours allowed household income to increase by around US$20–£40 (£17-£33) per month.
Workers’ greater capacity for self-exploitation
Existing studies generally cite working longer hours as a marker of economic progress. Yet this finding is ambiguous since increased income here is achieved through a greater capacity for self-exploitation. Given the physical limits to the length of a working day, these observed increases can only lead to a limited economic gain.
For economic development to be strengthened and sustained, it must be incorporated into a process of increased productivity. This should be achieved by an increasing output per unit of labour time – not simply via people working longer hours or more people working – and supported by an accumulation of capital.
Existing studies tend not to focus on these dimensions, leaving the true economically transformative nature of off-grid solar products unclear. The low energy capacity of SHSs should, nonetheless, caution against any great enthusiasm that they can generate such transformative economic progress.
Short-term gains, long-term losses?
The shift of energy provision via SHSs away from centralised public governance and towards a privatised model has in many instances also shifted the financial burden of maintenance onto local communities. Several studies noted that the maintenance costs for off-grid solar products often surpass what rural households and communities can afford.
Yet most studies focus on the short-term impact, usually within a couple of years of a household or firm gaining access to off-grid solar. Short-term income gains will prove fruitless in the future, however, should communities be unable to assure maintenance of the equipment.
Several studies also documented the recent introduction of a pay-as-you-go model. The model aims to extend low-wattage solar products to income-poor rural African households, who are often unable to afford the full upfront cost. Already, pay-as-you-go solar firms are beginning to push a range of other products to their clients, such as irrigation pumps and appliance leasing.
This strikes a further note of concern, as studies on financial technology (or fin-tech) services have demonstrated their frequent association with rising indebtedness. Indebtedness constrains rather than liberates households, a process hardly conducive to economic development.
Can off-grid solar still drive economic development?
One solution to the limited economic impact of increased access to SHSs would be to focus on the provision of mini grids. Capable of powering entire rural communities or urban suburbs, research demonstrates that they support a far larger range of activities, extending into productive and industrial use.
Another avenue will be through developing domestic capacity in the design and manufacture of off-grid solar power. This carries the potential to generate productive employment and help stimulate a shift towards industrial development.
Existing studies have proved adept at identifying households who appear to have financially benefited from access to off-grid solar through increased income. But they have been less well attuned to the downsides.
Alongside rising indebtedness, these include the more general processes of polarisation, marginalisation and exclusion that inevitably accompany any process of capitalist economic development.
If, as Brazilian economist Celso Furtado once wrote, capitalist development is “a process of reshaping social relations founded on accumulation”, future research would do well to focus on how social relations are being reshaped by off-grid solar expansion – and with what consequences.
In the summer of 2022, cascading climate risks and options for resilience and adaptation in the MENA are evident for all to witness. A write-up by Cascades.eu deserves to be looked at again, and every word in it is worth this trouble. It is a report on the southern face of the Mediterranean Sea and its northern facade.
This report assesses the current situation and future projections of possible and likely biophysical climate impacts in the MENA region, based on a literature review, news articles and CASCADES climate impact data analysis.
Cascading climate risks and options for resilience and adaptation in the Middle East and North Africa
Climate change is a shared challenge for the MENA and European regions
The societies of Europe and the Middle East and North Africa (MENA) are historically, socially and economically intertwined. Climate change presents a shared and urgent challenge. Stretching from Morocco in the west to Syria in the north, Iran in the east and Yemen in the south, the MENA region covered by this report comprises 19 countries and is home to an estimated 472 million people, with a fast-growing young population. Conditions are diverse with some nations registering among the highest national income per capita in the world (e.g. Qatar, Kuwait, UAE) while others are low-income, conflict-affected societies, where human displacement and extreme poverty are rife (e.g. parts of Syria, Iraq, Yemen, the Occupied Palestinian Territories and Libya).
The MENA region is exposed to physical climate impacts that threaten human life and political stability on several fronts. Water and agricultural production are particularly sensitive to the extremes of global warming, given the region’s already arid and semi-arid climates. Sea level rise threatens rapidly expanding urban and industrial coastlines over the next century and most cities are ill-prepared for the ravages of cyclones, sand storms and flooding. Humidity may become the most serious challenge to human life, especially for coastal cities.
The Middle East and North Africa (MENA) region covered by this report
Climate change is already interacting with more immediate threats from armed conflict, environmental degradation, corruption and social and gender inequalities. Such compound conditions have worsened the humanitarian fallout from flooding in war-torn Yemen and facilitated extremist militant recruitment in drought-affected northern Iraq. Across the region, the role of long-term environmental mismanagement in worsening the impacts of climate change is brutally clear.
How communities and governments respond to evolving climatic conditions will affect the severity of effects that cross borders and continents, ‘cascading’ into European societies. As witnessed with forest fires in Lebanon in 2019 and recent water shortages in Iraq, Iran and Algeria, government failure to deal with environmental stress can trigger violent, potentially revolutionary, protests. Figure 1 illustrates variation in the capacity to cope with and adapt to climate threats. While all countries are challenged by their levels of fresh water relative to population and none are ranked as politically ‘sustainable’, some have a larger economic cushion to enable adaptation than others. The countries towards the right of the figure, affected by war and economic crisis, are the most vulnerable.
At the same time, climate change policies and rapidly changing costs of technology will alter oil- and gas-dominated trade relationships with MENA countries. Europe’s demand for petroleum imports is set to decline and new regulations for green growth and alignment with the Paris Agreement goals will affect imports and foreign investment. As Figure 2 shows, most countries would not be able to sustain their current economies for long with oil prices below
$50/barrel. These present both challenges and opportunities for MENA countries and several are pursuing long-term visions for economic diversification, the success of which will depend on new investment and trade relations.
The MENA region already imports more than 50 per cent of its food and will require increasing foreign exchange to meet growing demand. Meanwhile, sensitivity to food price rises due to, for example, droughts in other parts of the world, is high.
Figure 1. MENA country variation in renewable freshwater availability, socio-political stability and spending capacity
Figure 2. Oil and gas dependence in selected MENA exporter countries
Climate resilience strategies, green economic diversification and investment in long-term adaptation are critical to achieving sustainable peace and prosperity in the region. The European Union (EU) and European countries can harness existing relationships, investments and capacities to contribute to this effort. These range from the EU’s evolving neighbourhood partnerships, humanitarian assistance and development bank lending to traditional bilateral diplomacy, trade agreements and engagement with UN bodies. The EU is already extending the principles of its Green Deal to partnerships in its Southern Neighbourhood with reinvigorated commitment to green transition and climate resilience through the Agenda for the Mediterranean. With a fast-changing combination of conditions intersecting with climate change, EU institutions and businesses will need to both learn lessons from the past and anticipate new realities on the ground.
The purpose of this report
This report assesses the current situation and future projections of possible and likely biophysical climate impacts in the MENA region, based on a literature review, news articles and CASCADES climate impact data analysis.
The authors adopt a water–food–energy nexus perspective, given that this resonates with environmental interests in the region. However, this concept remains open to new understandings that put a greater emphasis on ecosystems and well-being – for example, air quality, biodiversity and nutrition. Irrigation for crops and agricultural processing, water for energy, energy for potable water as well as oil and gas revenues to pay for food imports are some of the dependencies that climate change is challenging in the region. These are also some critical areas offering opportunities for resilience-building.
Scenarios illustrate ways in which climate impacts in the MENA could compound other stresses and cascade, with effects that cross borders and affect Europe and European interests. Figure 3 shows a generic example of cascading risks. We highlight five subregions: Iraq (with relevance for Iran and Syria), North Africa, the Jordan Valley, the Nile and the Gulf Cooperation Council countries. Sister CASCADES studies on the Euphrates–Tigris Basin and North Africa, which are referred to in this study, provide more insight. The purpose of the scenarios is to enhance understanding of how resilience and adaptive actions might help to mitigate risks and limit the scope of harm that climate impacts could set in motion.
Figure 3. An example of climate-related risks in the MENA that can cascade across borders
Research benefited greatly from a series of interviews and workshops with regional experts. There are significant geographical, climatic and political differences between the subregions and within several countries. As such, this can only be a broad-brush introduction to the changes taking place and their interactions with ongoing resource and societal issues. The views and opinions of experts in the region have shaped the report’s discussion of vulnerability and resilience factors, the scenarios for the future and the recommendations.
Climate impacts are damaging human security in the MENA, yet resilience to climate change has been low on most public and political agendas. Climate change, particularly in the form of drought, flooding and storms, is already threatening lives and economies. The water and agricultural crises in Iraq are a case in point. Authorities and people in the region have generally not considered climate change and environmental health urgent issues, given more immediate threats of war, poverty, unemployment and human rights abuses. However, this is changing. In Oman, for example, cyclone devastation has spurred greater attention to disaster risk reduction (DRR) preparation for climate change. Civil society, particularly in parts of the Levant and North Africa, is increasingly vocal on environmental issues, often tackling them through a heritage conservation, local economy or social justice lens.
The two upcoming climate summits (COP27 and COP28) to be hosted by Egypt and the UAE, and the Saudi-led Middle East Green Initiative provide platforms for stronger cross-regional coordination and international partnerships.
Over the next 30 years, current water use, agricultural and building practices will become untenable; beyond 2050, liveability in the MENA region will be determined significantly by our global emissions trajectory. Irrespective of mitigation, cumulative emissions mean that the current warming trajectory will continue until at least around mid-century. While there are fewer long-term projections focusing on a 1.5°C scenario, this would suggest a far less damaging prospect for MENA countries than 2°C+, given existing aridity and coastal exposure. The extent of coastal land mass loss through sea level rise in this century will largely be determined by these trends.
Local and regional treatment of the environment is integral to climate risks. In all cases, local human developments and practices such as the density of population, overgrazing and monocropping, urban development on floodplains, damming of rivers, land reclamation and destruction of natural barriers such as mangroves and deforestation affect the vulnerability and severity of impact of climate-related events. At the same time, governance factors such as lack of transboundary water management systems, insufficient rule of law and military occupation affect a society’s ability to take resilience and adaptation measures.
Without effective measures, climate impacts will compound local vulnerabilities and have severe consequences for human lives, livelihoods, economies and security in the region. For example, in the absence of radical changes in water management and food production methods, competition among water users will grow and food security will diminish. While poorer and conflict-affected countries remain the most vulnerable, richer ones also face high risks.
Transition risks will be at least as important as physical climate risks for economies depending on oil and gas export revenues. The sensitivities of failing public services including water provision and electricity, combined with higher food prices and declining ability to pay for imports, could lead to political instability (as shown in Figure 3).
Cascading risk scenarios show how climate impacts in the MENA could affect EU interests, including the prospects for peace, development and business investments, expatriate workers, migration flows, human rights and the demand for international humanitarian aid. They also suggest how things might play out differently depending on national, regional and international factors, which will determine the ability to cope with and adapt to climate stresses. Three broad medium-term meta scenarios – stagnation, fragmentation and cooperation – suggest different outcomes (see Figure 4). The actions of major powers, including the EU, will strongly influence how these factors evolve. More concerted, thoughtful diplomacy is essential to reduce conflict and to address shared environmental issues.
Figure 4. Meta scenarios for 2025–2035 which would affect countries’ ability to respond and adapt to climate change
In early 2022, the Sixth Assessment Report (AR6) of the Intergovernmental Panel on Climate Change (IPCC) made clear that the window of opportunity for climate resilient development is closing and will require transformative adaptation measures. This report identifies urgent priorities for the MENA region in the areas of improving water management, regeneration of landscapes and infrastructure resilience. National stakeholders and their international partners cannot address these effectively without acting within the wider political and economic context to strengthen sustainable peace and good governance.
Firstly, climate resilience and adaptation projects must include co-benefits that meet immediate country needs and align with national aspirations.
Secondly, given the transboundary nature of many of the risks we discuss above, planners should consider how measures might promote greater cooperation. This could be through knowledge sharing and technical exchanges, infrastructure that benefits more than one country, cross-border community land restoration and joint early warning systems and DRR cooperation.
Thirdly, deepening engagement with local cultural and religious understandings will be important in fostering stronger, long-term public awareness and more equal partnerships for environmental resilience.
Exploring future scenarios can improve understanding of how climate impacts might interact with societal dynamics, and suggest how investments might foster better conditions for long-term adaptation. For example, a particular challenge noted by regional experts was the lack of enablement at municipal, civil society and micro- to-medium-sized enterprise levels. The immense human capacity of the region, fully inclusive of women and youth, will be essential to address climate and environmental challenges nimbly, and with greater co-benefits for societal well-being.
The report makes six recommendations for EU approaches in the region. The EU should:
Take advantage of its role as a major trading partner of the region to push for regional peace and cooperation through alignment with its European Green Deal. The EU’s Agenda for the Mediterranean (AfM) , launched in 2021, aims to do just this. As cooperation and investment packages develop, careful thought should be given to creating policy coherence across the five key policy areas, and with member states.¹
Provide climate change modelling tools to support national and local scenario building and assist with monitoring and early warning systems for climate-related hazards. Emerging and existing programmes such as Copernicus² and I-CISK³ could be usefully extended or deployed through partnerships to improve local knowledge production.
Explore ways in which remedial and post-conflict rehabilitation work can help address humanitarian needs while fostering long-term environmental resilience. This could include assessing and supporting local action to remediate conflict-affected environments and encourage green infrastructure.
Build climate resilience in cities and subnational areas of the MENA region by developing technical skills to address climate-related issues and manage the water–energy–food nexus. This would build on the ‘human-centred’ approach of the AfM, targeting solutions-oriented capacity building at the municipal and community levels.
Pay close attention to the effectiveness of mechanisms to scale up sustainable finance and disburse funds, taking into account the respective capabilities of centralized bureaucracies versus local agencies and other actors in the area concerned. Greater inclusion of civil society, women, youth and vulnerable groups in consultation and decision- making can help improve accountability.
Use financial instruments for climate resilience and adaptation to empower local actors and build better national to subnational linkages. EU partnerships could, for example, help to scale up projects initiated by civil society organizations that have proven successful by linking them up with the relevant government authorities and making follow-up funding conditional on co-created plans for implementation.
These are: 1) Human development, good governance and the rule of law; 2) Strengthen resilience, build prosperity and seize the digital transition; 3) Peace and security; 4) Migration and mobility; and 5) Green transition: climate resilience, energy, and environment.
Copernicus is the European Union’s Earth Observation Programme.
Innovating Climate services through Integrating Scientific and local Knowledge (I-CISK) is an EU-funded project running from 2021 to 2025.
The supposedly ongoing Energy Transition would most probably be jeopardised in the developing countries as demand for all fossil fuels is projected to grow by two-thirds by 2050. The reasons are that the electric vehicle revolution would have difficulty reaching, let alone solving the climate crisis and creating opportunities for developing countries.
Achieving an equitable energy transition would fail short unless the interests of developed and developing countries are better aligned.
Can the electric vehicle revolution solve the climate crisis and create opportunities for developing countries?
Electric vehicles (EVs) are confidently expected to decarbonize road transportation, contribute substantially to the net zero agenda, and so help to solve the climate crisis. But as Ben Jones points out in a recent WIDER Working Paper, a rapid growth of global supplies of minerals and rare metals is a prerequisite. This in turn opens new prospects for mineral-abundant countries, many of which are less developed economies.
Tony Addison, former Chief Economist of UNU-WIDER, and myself explored these prospects in a series of high-level UN Roundtables over the course of 2021 — an opportunity to communicate our ideas to many critical stakeholders in all continents. Here, and in a related blog, I lay out the opportunities, and risks, that took centre stage during these discussions.
But, there are doubters and their doubts do have some substance.
There are several complicating factors that can compromise the promise that EVs are said to offer. These risks should be considered carefully before any country — and particularly any developing country — puts too much skin in the game.
First, there are the high costs of installing sufficient accessible charging points, especially in countries with low levels of electricity access (access levels below 40% are quite common). Second, there are question marks about battery longevity and the costs and technical challenges of both replacements and recycling. Third, the engineering complexities and the task of upskilling mechanics trained on conventional internal-combustion engines (ICEs) need to be considered. Fourth, the greater weight of EVs caused by their heavyweight batteries is a particular concern for low-income countries that already struggle to maintain road infrastructure.
And finally, charging EVs with largely coal-fired power — which would especially be the case in the most populous countries of India and China — will not much reduce carbon emissions.
Indeed, a substantial share of today’s global reserves of the key metals needed in quantity for the transition to clean energy are located in lower-income countries. Examples include 68% of lithium, 47% of manganese, 34% of nickel, 40% of platinum, 70% of titanium, 41% of zinc, 46% of copper, and 68% of cobalt.
A recent WIDER Working Paper by Ericsson and Löf ranks 40 lower-income countries that have some potential to take advantage of their endowments of these and other metals. The deeper analysis of this potential in their study is suggested reading for anyone who wants to learn more.
However, the realization of the alleged potential of EVs for developing counties will be far from plain sailing. Here are some of the risks for developing countries hoping to take advantage:
To make EVs renewable, they need to be charged using renewable energy. It is not clear that the additional renewable energy needed will keep pace with demand for EVs, and this will strain global critical metal supplies even further.
Environmental lobbies and governments might well go cold on EVs, as they did previously on diesel vehicles. The overall carbon-reducing credentials of EVs are already under question because of the substantial emissions and other environmental harm associated with the mining and processing of their metallic inputs.
Some of the countries most richly endowed with critical metals are also well-known for unacceptable human rights practices in their mining sectors. The DRC is perhaps the leading example. It provides almost 70% of the global supply of cobalt — a critical battery metal — with an estimated 15–30% of this produced in small-scale artisanal mines that use child labour and environmentally disastrous methods. The discussions at the 2021 UN Roundtables revealed this to be a matter of universal concern.
Another word of caution for resource-endowed developing nations
It is a common political assumption that the mere presence of a critical mineral resource justifies large investments in downstream processing to enhance national value-added. But this can be a seriously misleading assumption. Experience confirms the inherent problems of building viable domestic processing: certainly no developing country can assume that a rich endowment of any critical mineral will lead inexorably to the eventual emergence of a commercially-sustainable industrial output based on those minerals. In a related blog, I probe more deeply into some of the challenges faced to develop such national value-added, using Bolivia’s efforts to capitalize on its extremely rich endowment of lithium as one example.
Strategies for harnessing the potential in developing countries
Many low- and middle-income countries that are already highly dependent on extractive resources have learned how difficult it is to cope with the inherent instability of the prices and the markets in which these resources are traded. The WIDER working paper by Ericsson and Löf referenced above confirms that a large sub-set of those countries have the potential to significantly increase their mining output to meet the new demands for the global energy transition. But, partly for the reasons articulated above, prospects for doing so face uncertainties which are probably even more acute than encountered in the past.
What strategies can help address such uncertainties?
Two modest suggestions can be offered. First, acting on good evidence is vital. High-quality data on mineral endowments is needed — not only their volumes, but also whether they are of marketable quality, commercially viable, and at what price? The geological record underpinning such data is merely the first part of this requirement. Further, all potential supplying countries need to be very well informed about global trends in both EV uptake and above all competing suppliers.
Second, it is important to develop a deep and regularly updated awareness of the market and its uncertainties, and use this to maintain a grounded macroeconomic forecast. This includes the need to be cautious about increasing tax rates on mining products when, in the short term, there are high prices and bullish forecasts of future demand. These are rapidly changing markets; today’s competitive positions can easily disappear.
Alan Roe is a Non-Resident Senior Research Fellow at UNU-WIDER. He has written extensively in both books, academic journals and for other outlets including the first full-scale statistical analysis of flows of funds in the UK. His publications have also included early papers on interest rate policies in developing economies and on the particular problems of monetary management in Africa.
Originally posted on Walk Memory Lane: Couscous (North Africa) In the North African nations of Algeria, Mauritania, Morocco and Tunisia, people understand couscous better than most. The dish originated here, and in 2020, UNESCO recognized not only the dish itself, but also the knowledge associated with how couscous is produced. Couscous is a cereal, thus…
Originally posted on Bean's Books and Beyond: Apparently this was a top seller throughout Covid, but I didn’t read it then or in high school or college. Glad I finally got to it and glad Project Lit book club At SJHS chose it for its first book this year. Here’s my review on Insta:…
Originally posted on agnellusmirror: “How like kingdoms without justice are to robberies. Justice being taken away, then, what are kingdoms but great robberies? For what are robberies themselves, but little kingdoms? The band itself is made up of men; it is ruled by the authority of a prince, it is knit together by the pact…
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