According to new research from the Carbon Tracker Initiative, oil and gas exporting economies face a $ 9 trillion hole in public revenue as the world decarbonizes.
11/2/21
According to new research from the Carbon Tracker Initiative, oil and gas exporting economies face a $ 9 trillion hole in public revenue as the world decarbonizes.
The report reveals that the 40 most vulnerable countries could face an average drop in revenues from these fossil fuels of 46% over the next 20 years if global warming remains at 1.65ºC. Many of those facing the greatest losses are also the poorest and least able to adapt their economies.
The energy transition will impact both revenue from direct investment and private sector tax revenue. Among the affected countries, called “petro-states” by the Carbon Tracker Initiative, are the large hydrocarbon producers in the Middle East, Latin America, Africa and Asia.
The main conclusions of the report:
7 countries, including Angola and Azerbaijan, could lose at least 40% of total public revenue;
12 countries, including Nigeria, Algeria, Saudi Arabia, Kuwait and Iraq, could lose between 20% and 40% of their income;
10 countries, including Russia, Iran and Mexico, could lose between 10% and 20% of their income;
More than 400 million people live in the 19 worst affected countries, who could see total public revenues fall by at least 20%, leading to cuts in public services and job losses.
The immediate diversification of these economies is necessary to minimize the worst effects of climate change, such as famine, poverty, and natural disasters. Some countries are already investing in alternative industries, such as renewables and tourism, but others will need strong international support to diversify their economies and avoid social and political unrest.
The report concludes that if oil states avoid investing more in new oil and gas assets, these funds could be used to support decarbonization. A controlled decline in supply coupled with falling demand could support prices while Oil States decrease their dependence on fossil fuel revenues.