Opinion
CoP cop-out: Fossil fuel still has a global advantage
Summary
- The Baku summit on climate change had a depressing end. We’re left in a situation where fossil fuel reliance is less likely to go down, unless rich countries do what’s required to help poor countries adopt clean energy and decarbonize their economies.
You can regard the depressing denouement of the CoP-29 climate conference in Baku, Azerbaijan, as a sort of diplomatic echo of the US election result three weeks earlier. In the US, progressives found themselves blocked by a coalition of traditional Republicans and a faction of working class and non-Caucasian supporters whom they’d regarded, perhaps naively, as their natural allies.
At the UN climate conference in Baku, rich nations found that efforts to reduce their own emissions and fund climate programmes elsewhere in the world bought them little favour with developing countries most at risk of global warming.
Also read: Baku’s climate talks couldn’t escape the impact of Trump’s US victory
Both situations are powerful examples of aspirational politics. Since the 19th century, conservatives have marketed themselves by arguing that their policies were the best way to achieve the wealth and independence sought by working-class voters.
Those opposed to climate action make a similar pitch to low and middle-income nations: Environmentalism is a protectionist plot to keep poor nations poor. Only fossil fuels can provide the development you need to grow wealthy. Rich nations can never do enough to repay the carbon debt they’ve incurred.
It’s a potent argument because there’s a grain of truth to it. Consider the 86 countries the World Bank counts as ‘high income.’ After the traditional colonial powers of Europe, Japan, North America, and Oceania and their immediate neighbours in the Caribbean and Eastern Europe, the largest group is of oil exporters.
Thanks to oil, the Arabian peninsula has the diplomatic clout to make or break climate policies. To countries still climbing the development ladder, the rapid growth of China and India (which together burn 70% of the world’s coal) looks like an attractive advert for a similar fossil-fired road to wealth.
Against that backdrop, global summits, like democratic elections, often come down to judgement calls about which side is most likely to enrich those at the bottom of the heap. Wealthy climate-conscious countries need to accept that they’ve been losing that argument.
Consider the haggling over upgrading the $100 billion in climate finance per year promised at the 2009 Copenhagen meeting to $300 billion a decade hence.
The sum is a pittance compared to the trillions needed, as my colleague Mark Gongloff has written, especially when one considers how little is new funding and how much consists of standard loans. More to the point, it’s also failing to compete with the hard-money allure of fossil-intensive development.
Also read: Climate action must rise above politics before time runs out
Gabon, a central African member of the Organization of the Petroleum Exporting Countries (Opec), is a case in point. With 2.5 million people, it often receives as much foreign direct investment as the Democratic Republic of Congo, home to more than 100 million.
Or take Guyana, the world’s fastest-growing nation. It took in more FDI last year than Taiwan or the Philippines, and twice as much as the entire Caribbean.
Of the $31.3 billion in FDI that went to the 45 least developed countries in 2023, more than a third flowed to seven nations —Chad, Mauritania, Mozambique, Senegal, Sudan, Uganda and Tanzania—which are operating or building petroleum export projects.
What can the world’s rich nations offer as a substitute?
The advantage of petroleum is that oilfields and terminals both borrow money and earn export revenues in US dollars, immunizing them against the currency crises that plague poor countries.
If you used greenbacks in 2021 to finance a wind farm outside Cairo, you’d have been in trouble this year when the Egyptian pound fell to about a third of its value back then. There’s little prospect that your consumers will be able to pay electricity tariffs high enough to cover your interest payments.
The best answer is for rich nations to recognize that climate change is truly a crisis and act accordingly.
A $650 billion issuance in 2021 of the International Monetary Fund’s Special Drawing Rights—an obscure quasi-currency mostly known only to central bankers—played a decisive but unheralded role in cushioning poor countries against the damage from covid. Some $69 billion of the total is now being diverted to climate funding.
What’s needed is a far more dramatic programme for poor countries to buy the vast numbers of solar panels, batteries and wind turbines the world can produce. Those funds might not generate a good return in the strictest financial sense.
Also read: RBI can expect climate risks to emerge as important policy inputs
The benefit the world will get if every country is able to industrialize and grow wealthy on the back of clean energy, however, will be vastly greater. ©Bloomberg
