Hooked on Oil
A report last month by the European Council on Foreign Relations concluded that rich countries will have to help plug the financial holes. The EU’s Green Deal, in particular, it said could have as great an effect on regional geopolitics as on the Earth’s climate. The bloc produces less than 10% of global CO₂ emissions, but neighbors such as Algeria, Azerbaijan, Russia and Turkey depend on its market to buy a large share of their exports. Many of these are carbon intensive and vulnerable to the EU’s planned carbon border tax.
And there’s no guarantee that making nations more energy self-sufficient will reduce conflict. Oil is the most actively traded commodity on the planet, and any steep decline in demand would reduce those interactions. “What we know is trade is a good thing,” says Goldthau at the Institute for Advanced Sustainability Studies. “When states are interdependent they have a lower appetite for conflict.”
Back at Rand, senior policy researcher Benjamin Preston has divided the world into three categories. The first consists of countries such as Iceland, which already made the transition and have little more at stake. The second are the export-dependent petrostates that have most to lose.
The third and least-studied cohort is the array of countries in between that are both producers and consumers of fossil fuels. The temptation for these hybrid cases will be to decarbonize their own economies, while maximizing revenue from exports of oil, gas and coal, Preston says. That’s a wild card with potential to impact both international politics and the duration of the transition.
Take China, which has installed more solar capacity than the rest of the world combined, but is also exporting even more coal-fired generation capacity. In one case, it literally dismantled an aging plant in Hunan province to reconstruct in Cambodia. Australia, another solar success story, recently opened a new coal mine to supply India, and greenlit the development of another $1 billion facility aimed at the Asian market.
The U.S., meanwhile, is hardly shutting down the fracking industry that for more than a decade has boosted its economy. Meghan O’Sullivan, director of Harvard’s geopolitics of energy initiative, has argued that shale also gives the U.S. significant foreign policy freedom. The added supply reduced potential for blowback from oil-price effects when America levied sanctions against Iran, blocking its oil from the global market.
As renewables expand, jobs and revenues in the U.S. and other hybrid nations will become increasingly dependent on decisions that other countries make about whether to go on importing their fossil fuels, according to Rand’s Preston. That’s unlikely to fast-track a more peaceful renewable future. The trick, he says, will be to “enable safe landings for all the countries that have this kind of dependency on existing fossil fuels, but without shutting down the transition altogether.”
-With assistance from Akshat Rathi and Laura Millan Lombrana.
This article was provided by Bloomberg News.