Session 12: A practical guide to an equitably managed decline in fossil fuel extraction
Moderator: Sivan Kartha
Changing the Narrative: Thinking About a Just Transition For Coal-Dependent Communities in Colombia
As a middle income economy, Colombia’s greenhouse gas emissions have increased since the beginning of the 2000s, driven mostly by land use changes and industrialization. As other Latin American countries, Colombia boasts a relatively clean energy matrix, highly dependent on hydroelectric energy. However, the country’s second export is coal, of which 95 percent is exported.
Amidst the decline of the coal industry in Global North countries, Colombia and other resource-rich economies face a complicated landscape that raises two key questions: 1) What are the challenges keeping Colombia from transitioning away from coal? 2) How can Colombians begin thinking about a just transition? The situation becomes even more complex when considering that Colombia is undergoing a political and social transition after the end of an over fifty-year-long internal armed conflict. Now that new areas are open for fossil fuel exploration, how can the country converge the sustainability and peace agendas?
The main challenge, beyond the raw economics of coal dependence for revenue, is the strength of development narratives. Traditionally, the mining and extractive sectors have been able to co-opt prosperity and growth-related discussions. However, a recent wave of popular referendums have shaken the current paradigm. Communities all across Colombia have decided to take matters into their own hands, leading led dozens of popular consultation processes to oppose mining in their municipalities.
Popular consultations provide Colombians with an opportunity to assert their autonomy over the land, challenge conventional economic models, and reimagine development at the local level. They mark an unprecedented moment in Colombia’s history and could slowly contribute to a paradigm shift in the country’s political economy. Together with the Paris Agreement and the recently codified Sustainable Development Goals, popular consultations create an opportunity to foster an internal debate about the political economy of Colombia and its high dependence on coal.
Just Compensation for Stranded Fossil Fuels
To meet the Paris Climate Agreement targets the global community will have to strand significant amounts of fossil fuel assets that might otherwise be profitable under business-as-usual scenarios. To act equitably, the Lofoten Declaration, along with a growing body of academic literature, argues that we should focus first on stranding fossil fuel reserves in rich developed countries who have most benefitted from fossil fuels, such as Norway, Canada, Australia, and the United States. Combining equity and economic efficiency suggests that we strand inefficient fossil fuel reserves in such countries first. However, there may be times where equity and efficiency diverge, such as Angola’s deep-sea oil reserves, which are inefficient relative to other fossil reserves available, but hosted in a country who under theories of equity should get preference in developing the remaining fossil fuels compatible with staying within the global carbon budget. Some suggest we can resolve such divergences by stranding the least efficient assets, and then providing compensation to countries, like Angola, who would have been favoured if we had followed a more equitable pathway. In response to such calls for compensation, this paper unpacks some of the ethical challenges around the relatively under-explored question of when compensation for stranded fossil fuel assets can be morally justified. It aims to critically unpack who can ethically justifiably demand compensation, under what conditions, and against what baseline can they claim compensation. Related to compensation, the paper also aims to make a case that under certain conditions, debt incurred to financed fossil fuel assets which become stranded could be classified as morally odious debt. The paper ends by considering how non-ideal theory can help us navigate the ethical quandary posed by the likelihood that adequate funding for morally justified compensation may not be forthcoming.
Constraining supply: a just response to a climate transition?
Many authors have noted the potential economic and political advantages of supply side measures. But what is missing in this debate is an evaluation of the moral advantages of supply side constraints. This paper aims to fill that gap. Considering the moral advantages is important because of the role that moral considerations ought to play in a climate transition. No matter what technologies we choose or policy mechanisms we adopt to achieve a climate transition, each will produce benefits and burdens, and those benefits and burdens (particularly the burdens) will have to be paid for and shared by individuals or groups within society. Sharing benefits and burdens within (and between) societies is a question of distributive justice.
I will argue that adopting supply side measures has the potential to make a climate transition significantly more just. My claim is that, especially in respect of fossil fuel exports, supply side measures have four distinct moral advantages: they target the right agents, allow us to rank our responses, deal with the problem of fossil fuel exports and may deliver an egalitarian dividend.
Climate-constrained fossil fuel production under equity considerations
Issues of equity in climate policy are embedded in the text of the Paris Agreement. Given the need to reduce fossil fuel use and keep significant resources in the ground under agreed climate goals, some have argued that clear equity issues arise that should be considered. The question is who gets to extract the limited level of oil and gas consistent with the carbon budget? This research explores the implications of an equity-based allocation approach on the global production and supply of fossil fuels under a 2°C temperature limit.
Using the model TIAM-UCL, we first apply differentiated carbon taxes on fossil fuel production, based on a level of development (HDI) criteria. High development regions have a high tax implemented on extractives, which is reduced for lower development regions. The resulting quotas for production show an increase in fossil fuel resource use in Africa and Asia, and reductions in OECD countries, relative to a 2°C case without redistributive mechanism. For large producers, particularly in the Middle East, the reduction is much lower due to the lesser impact of the carbon tax, due to producers cost advantage.
The model analysis shows the necessary reductions in fossil production in developed countries required to remain within carbon budget limits. However, this reallocation of production comes at a cost, highlighting a clear trade off here between optimality and equity. It also underlines that this approach to equity is very much producer focused; the increase in costs due to the reallocation is shown to negatively impact those regions without large fossil resources who may be highly import dependent. This is also true for some producing regions that might be better off importing than producing high cost resources. A complex picture emerges that requires consideration of equity from both a production and consumption perspective.