Summary of Unburnable Wealth of Nations

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The effects of climate change hurt developing countries disproportionately – but so do the policies that seek to curb the rise in global temperatures. Developing countries that rely on their fossil fuel wealth will suffer badly. In this article from the International Monetary Fund’s Finance and Development magazine, three economists from the World Bank and the United Kingdom’s Natural Resource Governance Institute shed light on a rarely discussed consequence of successful climate change action. getAbstract recommends their analysis to development experts and policy makers.

In this summary, you will learn

  • Why international climate change action will decimate the revenues of many developing countries, 
  • Why fossil fuel–rich developing countries are particularly vulnerable to a low-carbon future and
  • What policymakers in developing countries can do to mitigate the consequences of a dwindling demand in fossil fuels.
 

About the Authors

James Cust works in the World Bank’s Office of the Chief Economist for Africa. David Manley is a senior economic analyst and Giorgia Cecchinato a data associate at the United Kingdom’s Natural Resource Governance Institute.

 

Summary

Developing countries whose economies strongly depend on their fossil fuel wealth are vulnerable to a low-carbon future for three reasons: First, decreasing demand for oil and gas will shrink a major source of revenue for governments – money that could fund education, health care and infrastructure projects. Secondly, fossil fuel–rich developing countries are unable to turn their reserves into cash fast enough to accumulate sufficient assets to develop new economic sectors. Third, the political and economic structures of fossil fuel–rich countries often favor fossil fuel consumption and development. Governments in oil-rich countries are often heavily invested in national oil companies with operations at home and abroad. Furthermore, fossil fuel–rich countries commonly subsidize fuels domestically and thus indirectly encourage the use of carbon-based products and means of transportation. Policymakers in fossil fuel–rich developing countries should emphasize four policies:

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