New oil and gas discoveries fuel debate of growth vs climate change

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Fossil fuel discoveries in poorer nations could unlock a windfall — but they are also fanning climate concerns

“Don’t make the mistakes that we’ve already made in the past.”

That was U.S. Climate Envoy John Kerry last month, warning resource-rich African nations to think twice before investing in long-term fossil fuel projects.

But what Kerry calls mistakes helped power the West’s growth. So why not ours? That’s the question being asked by many poorer countries with newly discovered energy resources in Africa and beyond. The West’s attempts to find alternatives to Russian oil have only made this debate more urgent, as the Ukraine War forces everyone — rich and poor — to rethink the costs and benefits of exploiting fossil resources as the planet warms.

Indeed, the reality of climate change is already setting in with horrific effect, triggering crushing droughts and devastating floods across Africa and beyond. It’s why Kerry, speaking on the sidelines of a summit with African environment ministers in Senegal, added that the priority now was to “be as green as possible.”

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“Help us move forward in a way that will not make the problem worse than it already is,” he said.

The message sounds straightforward enough. Even if the world were to stop emitting greenhouse gases tomorrow, sea levels would continue to rise and rainforests would continue to disappear, possibly for centuries, as Grid has reported. The urgency for action on climate change is unquestionable.

But the other side of the story was highlighted just days before Kerry’s remarks by Mo Ibrahim, the billionaire Sudanese-British businessman.

“As is so often the case, the Global North has been applying a double standard,” Ibrahim wrote in a Project Syndicate essay.

His point, in summary: It’s all well and good for the rich world to lecture others on fossil energy — but what about the needs of poor countries with newly discovered oil and gas reserves? “While Africa is being discouraged from using its own energy resources to pursue industrialization, many signatories to the COP26 agreement [on climate change, signed at the last international climate summit] continue to expand fossil-fuel use at home,” he wrote.

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Ibrahim and many others also point out that Africa accounts for the world’s smallest share of carbon dioxide emissions: around 3 to 4 percent vs. 18 percent for North America and 17 percent for Europe. Meanwhile, Africa suffers some of the worst effects of the climate crisis. Research by Ibrahim’s charitable foundation shows that climate-related effects could push an additional 39.7 million people in sub-Saharan Africa into extreme poverty by 2030. This as, continentwide, temperatures in Africa increase faster than the global average. As a result, up to 86 million Africans could be displaced from their homes and forced to move to new communities within their own countries by 2050, according to a recent World Bank analysis.

At the same time, the continent’s need to grow and develop is critical: Today, more than 600 million people across Africa still lack access to electricity. In per capita terms, sub-Saharan Africa — excluding South Africa — consumes a mere 180 kWh of power a year. Europe? 6,500 kWh. Usage in the United States stands almost double that, at 13,000 kWH, according to the African Development Bank.

Yet — from the point of view of these countries — the rich world offers lectures, when the need of the hour, many say, is a reality check.

Ibrahim argues for a position adopted by several African nations: that gas should be treated as a transition fuel. The idea: Countries heavily dependent on coal, the dirtiest of fossil fuels, should at minimum be allowed to exploit less-polluting resources such as natural gas before moving entirely to renewable sources.

“Africa needs time and investment to develop a diverse energy mix that includes renewables alongside natural gas — a relatively less-polluting fossil fuel that is abundant on the continent,” Ibrahim said. Without this time and investment, it “cannot achieve its development goals without closing its energy gap.”

When even “tree-huggers” must be practical

To be sure, this debate — between the imperatives of growth and the global push to fight an ever more urgent climate crisis — isn’t limited to the African continent; countries far beyond are grappling with similar choices. A recent example is the small nation of Guyana, in South America, which is on track to earn more than $1 billion this year from oil exports. For many, it’s a worry — the country is already highly vulnerable to climate change, with a long Atlantic coastline. But for others, the profits from the country’s oil boom are critical for developing what is also one of the poorest nations in the region.

Debates such as the one playing out in Guyana will be in the spotlight at the next big international climate summit; the COP27 meeting in November takes place in Egypt, a middle-income nation that is heavily dependent on fossil fuels and is seeking to increase its oil and natural gas production.

Several environmentalists acknowledge the paradox and accept the fact that these poorer countries should not be barred from extracting their underground wealth. As Seon Hamer, a climate expert at the University of Guyana, told Grid, as important as it is to tackle climate change, the need for development in countries such as his can’t be ignored. “I cannot be an out-and-out tree-hugger,” he said. “I have to be practical. This is something we need. The hope is that with the development of the oil and gas industry, we can invest more in renewables.”

Hamer’s argument is echoed by several policymakers in lower-income but resource-rich countries around the world: that the choices aren’t, as he puts it, mutually exclusive. The reality of a warming planet and what it means for countries such as Guyana is undeniable, but so is the need for investment to both spur growth — and, ultimately, to drive a shift to renewable technologies.

“As people devise policies for the future, they should try to avoid the kind of extremes of seeing everything as black and white,” Jack Goldstone, a professor of public policy at George Mason University, told Grid. “No fossil fuel anywhere is unfair to countries that have resources they could commercialize. Every country is different. Some countries may have access to hydropower, like Ethiopia. Some might be better suited to solar. It’s important to develop polices that are both flexible and nuanced.”


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The Ukraine angle

The fallout from the Ukraine War is playing into this debate as well.

The conflict has driven richer countries to cut their dependence on Russian energy supplies. As Grid has reported, it has also driven up energy prices — sending many European countries back to oil and coal, making investments in fossil fuel projects more lucrative for energy companies and for poorer countries that sit on these resources. For wealthier nations, the war has sparked a hunt for new sources of energy.

The picture was very different last year. At the 2021 COP meeting, the U.S., Canada and 18 other countries committed to stop all public financing of fossil fuel projects abroad. They were joined by five major development banks, including the European Investment Bank — whose president said last month that the institution would stick to the pledge despite pressure from African nations.

“We as a European public institution should not invest in assets that one day will be seen as stranded asset,” the multilateral lender’s president, Werner Hoyer, told the Financial Times.

Among those who criticized the global pledge was Senegal’s president, Macky Sall, who said that the drive to cut off financing was coming “just as several African countries are preparing to exploit their significant gas resources.” The move, he warned, “would deal a fatal blow to our economies as they seek to emerge.”

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The war in Ukraine has come as an unexpected boost for the likes of Sall. Europe is now in a race to find alternatives to Russian energy supplies. The result: Private players are looking to feed an increasingly desperate demand from the West — and they are looking to Africa.

International energy firms are now considering investments of around $100 billion in new energy projects in Africa, from Namibia and South Africa to Uganda to Tanzania, according to figures complied by Reuters. So much, you might say, for climate goals.

The irony was not lost on Ibrahim. “Now, because of the war, [the developed countries] are running to Africa and saying ‘Oh, can we have more gas?’” Ibrahim said at a climate conference in London in early October. “We are not allowed to use our gas. But half our gas is sent to Europe. This kind of stupidity cannot continue.”

For cash-strapped governments, meanwhile, higher global energy prices have made new fossil fuel projects appear ever more attractive. And here the economic imperatives run directly into environmental ones. Case in point: The Democratic Republic of Congo (DRC), which over the summer began to auction oil and gas blocks — in other words, areas of land earmarked for drilling — that extend into critical tropical peatlands.

The peatlands — essentially, a type of wetland — are a kind of natural carbon capture and storage device: They absorb vast amounts of carbon, keeping it out of the atmosphere and thus helping in the fight against climate change. One 2016 estimate suggested that the Congo Basin was a storehouse for as much as 30 billion tons of carbon — or several years’ worth of global emissions.

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The DRC moved to auction its resources for drilling despite a pledge last year by its president, Félix Tshisekedi, to protect its rainforest, which is part of the basin.

The move prompted outrage by climate groups — and ultimately pressure from the U.S. to abandon some of the oil blocks earmarked for sale. Kerry visited Kinshasa, the DRC capital, in early October and said the U.S. had “clearly described our interest in protecting the forests. We have asked for some blocks to be removed from the auction.”

For the DRC, the economic potential is immense. The precise profits will be known only once the fossil fuel blocks are explored. But the country estimates that it could eventually produce as much as 1 million barrels of oil a day. At current prices, that could net the country tens of billions of dollars a year. And the GDP of the Democratic Republic of Congo? Just shy of $50 billion, as of 2020.

Solutions — a green path to compromise

So what’s the way out — for these countries and for the world?

In South America, Ecuador came up with a novel idea, back in 2007: The country had discovered lucrative oil reserves under a sprawling national park and offered to leave these in the ground if the rest of the world contributed to a trust fund as a way of offsetting lost oil revenues.

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The fund’s target? $3.6 billion by 2024. It hardly got off the ground. By 2013, it had reportedly raised a grand total of around $13 million. Less than 1/100th of 1 percent of the goal. The proposal was abandoned.

The other big idea in this space is to make use of so-called climate mitigation funds; typically, money donated by relatively rich, large-scale emitters of CO2 to poorer nations who emit less but suffer more of the consequences of climate change. More than a decade ago, the richest countries in the world promised to provide $100 billion a year by 2020 to help poorer counterparts adapt to climate change. That fund, too, has fallen well short. The goal now is to meet the target by next year.

Against this backdrop, many poorer nations are asking how exactly they can avoid tapping their natural resources.

George Mason University’s Goldstone said one way forward for many countries is to develop their fossil energy resources — but to do so only for export.

“If a country has gas reserves and it wants to develop them for countries that already have a gas infrastructure and need gas, I think that’s fine,” he said. “The problem is when a country develops gas and uses it itself, that usually requires a pipeline infrastructure for power plants and consumers to use the fossil fuel.”

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It is, in many ways, an elegant solution. “The rest of the world is not going to get off gas and oil instantly. So if a country wants to get money out of the resources that it has, then I think it’s fine to sell it to existing customers,” Goldstone explained. “Once you start building a domestic economy that depends on oil or gas or coal, you’re looking at 30 years or 50 years for that capital investment to be played out.”

An example — with several caveats, not least the fact that it began from a position of wealth — of where this might lead to comes from the rich world: Norway is on the one hand a country that has an almost entirely renewables-based domestic electricity system. It also leads the world when it comes to switching to electric vehicles: More than 65 percent of the passenger cars sold in Norway in 2021 were electric. The country is also, however, a major oil and gas exporter. In recent months, as Europe attempts to cut its dependence on Russian energy supplies, Norway has seen its exports spiral upward — so much so that this year, the country expects to earn around $90 billion from its petroleum industry, up more than $60 billion compared with last year.

Hamer, from the University of Guyana, says the idea is good in theory — but the economic needs of many low-income countries mean that some development of fossil fuel resources to service domestic needs would still be required. Norway didn’t have such needs when it began the transition to greener sources of energy. “This idea has been discussed [here in Guyana],” he told Grid. “But there are also questions about energy security. If we have these resources, and we develop a local infrastructure, we are also building energy security for ourselves for the transition period” as they move toward to renewables.

The shift to greener sources of energy can’t happen overnight, he said, “We have to be realistic.”

What this means for many, including Hamer, is for wealthy nations to find new ways to provide countries such as Guyana with the incentive to drive growth — but without drilling into the ground. What they need, Hamer argued, is cash — cash to build their domestic industries and to lift their people out of poverty.

Ultimately, Kerry and Ibrahim are both right. The planet is in peril — and cannot handle new polluters at a moment when it must drastically cut back on global CO2 emissions. But as a matter of basic fairness, it is hard to argue with Ibrahim and others speaking for poorer nations looking to capitalize on their natural resources. Why should those who made billions from the reserves under their soil be permitted to stop poorer nations from doing the same — with little or no subsidy for holding back?

This is what this debate boils down to — and it was articulated in stark fashion earlier this month by Ève Bazaiba, the DRC’s environment minister. Speaking at a pre-COP27 conference, as the U.S. was pressuring her country to rethink its plans, she underlined the dilemma she and her people faced. In the Democratic Republic of Congo, three-quarters of the population lives on less than $2 a day.

“As much as we need oxygen,” she said, “we also need bread.”

Thanks to Lillian Barkley for copy editing this article.