Supporting good governance will help, not hinder, the transition from extractives to clean energy in low- and middle-income countries.
This summer, the British charity Cafod lambasted the UK Government for allocating a small portion of its foreign aid budget to helping low- and middle-income countries manage fossil fuels. Research commissioned by the charity showed that the UK has spent £680 million of aid on fossil-fuel related projects in the last ten years — and spending actually went up after signing the Paris climate agreement. This sum, about one 200th of total aid spending over that period, made headlines. But behind these figures are a few rather uncomfortable truths.
Firstly, I am not here to champion fossil fuels and extractive industries. They are dirty, dangerous, and addictive. I have seen first-hand some of the world’s poorest countries trying to manage these resources, grappling with some of the most powerful corporations in history – almost always a David and Goliath mismatch. And I have seen the damage that extractives can do to a country’s economy, environment, and political system.
But what do we expect from countries like Tanzania, Kenya, Mozambique, Sierra Leone, Uganda, Malawi, Ghana – all of whom have discovered or produced oil or gas in the last decade? These countries have an average income per person of around USD 1000 (one 40th of the UK). They are desperate for sources of revenue to pay for infrastructure and public services, like education and healthcare that they know will help lift the country in the long term.
Aid agencies are spending money to help producer countries manage their extractives, as this is an urgent challenge. Extractives — especially oil and gas — pose a serious threat to the stability and integrity of a country when it has weak institutions, where often these resources do not translate into economic success. This effect – known as the “resource curse” – could hold back many of the countries that donors are trying to help. If oil dissolves the institutions and stability of a country, all the other donor investments and work put into improving things like education, health, and employment will go to waste. And a transition to clean energy will be much more difficult. In other words, governance matters.
Meanwhile, we are all too happy to preach de-carbonisation from a wealthy-country vantage point which was, to an almost shocking extent, built on fossil fuels. This point has been made many times before, but it is difficult to overstate the extent to which the rich world got rich exploiting natural resources – first in our own back yard, and then in the rest of the world’s back yard, often contributing to the political and economic mess such countries find themselves in. It makes all the criticism a bit, well, rich.
The Cambridge professor, Ha-Joon Chang, once called the donor world bad Samaritans because we tell poor countries to “do as we say, not as we did” when it comes to industrial development. But just telling countries to stop producing extractives won’t work anyway, because they will still do it. Sometimes the desire to tap extractives is about corruption and capturing immense wealth. But even governments and leaders with good intentions won’t listen; they need the money, are fully aware of rich world hypocrisy, and are willing to take the risks.
Where Cafod are right, and which we all agree on, is that we are in a climate emergency. And they are right that some of the money the UK has spent abroad on extractives could be better spent. But what is really happening here? The truth is that the part of the world responsible for approximately 85% of today’s carbon emissions, the vast majority of cumulative historical emissions, and on whose de-carbonisation the survival of the planet depends – high and upper-middle income countries – isn’t doing nearly enough at home due to entrenched interests and political gridlock.
It’s much easier to wag the finger at low- and middle-income countries because we have some leverage over them through aid budgets, rather than tackling our own addiction, or China’s for that matter. What Cafod appear to want is for the UK to use that power to bend aid recipients to do what we don’t seem to be able to. At best, the critique is laudable but misdirected anxiety about the looming climate emergency. At worst, it is a symptom of an asymmetry where rich countries dictate what poor countries should do, a relic of an older system that is rightly dying out.
Cutting support to extractives — meaning the better governance of extractives — would be foolish. I’m no advocate for digging up more oil, but given these countries are going to extract one way or the other, it is in the UK’s interest to invest aid and support in helping them avoid the resource curse, and minimise the negative impacts of extractive industries.
None of this this means that the donors should encourage fossil fuel extraction. Where possible, the UK and others should help countries move to a low-carbon growth pathway, and continue to increase its budgets for renewables. But cutting support to the governance of extractives would only make it harder for the UK to maintain the right sort of relationship as a partner to governments who are making tough decisions about their development, or to support countries to further their energy transition and lay the economic foundations and infrastructure needed for clean energy.
De-carbonisation is a challenge that the whole world has to face together. But criticising the developing world over de-carbonisation distracts from our own failure to do enough. We in the rich world have to shoulder most of that responsibility and step up. We need a bit of realism and historical perspective — to check ourselves before pointing the finger — if we are going to win over developing nations who have the most to lose.