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1. Billion-Dollar Exposure: Investor-State Dispute Settlement in Mozambique’s Fossil Fuel Sector

Author:
Lea Di Salvatore and Maria Julia Gubeissi
Publication Date:
02-2024
Content Type:
Special Report
Institution:
Columbia Center on Sustainable Investment
Abstract:
Mozambique is endowed with extensive untapped natural resources, particularly gas and coal. The country’s gamble on fossil fuel-based economic growth comes with signiicant economic risks and crowds out investments in the country’s enormous renewable energy potential. ◆Mozambique faces a substantial economic risk due to its exposure to investor-state dispute settlement (ISDS) claims by foreign investors in its coal, oil, and gas sectors. The investment protections in the country’s international investment agreements and contracts, combined with ISDS, expose Mozambique to multi-billion-dollar financial liabilities. Even conservative estimations show that potential ISDS liabilities from oil and gas projects would cover almost a decade of Mozambique’s government expenditures for SDGs. ◆ Mozambique’s international investment agreements and publicly available oil, gas, and coal contracts allow foreign investors to bypass the national judicial system and bring multi-billion-dollar ISDS claims against Mozambique. Such claims can result in significant costs for the country, and they also have a considerable chilling effect on any new public-interest regulation in areas such as health, environment, community rights or labor protections. ISDS can undermine attempts to adopt meaningul legislation to transition away from fossil fuels and achieve sustainable development goals. This regime can therefore contribute to locking the country into a high-carbon economy. ◆In addition, multiple stabilization clauses in the analyzed contracts lock the operations into specific legal and fiscal regimes for the duration of the contracts. Stabilization clauses protect investments from unexpected regulatory changes or new fiscal rules. If a host state does introduce such changes, stabilization clauses allow investors to demand measures or compensation that would ensure their same profitability absent such changes. These clauses thus exacerbate the limits to – and chilling effect on – states’ public interest regulation. ◆Mozambique and other countries can take actions to remove ISDS from their contracts and treaties, replacing the mechanism with alternative dispute resolution mechanisms. They can also take steps to terminate investment agreements in force. Home countries of Mozambique’s foreign investors have a responsibility to support such action, especially as they, themselves, remove ISDS from their own treaties.
Topic:
Natural Resources, Gas, Investment, Fossil Fuels, Coal, and Disputes
Political Geography:
Africa and Mozambique

2. The Prospects of Indonesia’s Nickel Boom Amidst a Systemic Challenge from Coal

Author:
Thibault Michel
Publication Date:
05-2024
Content Type:
Working Paper
Institution:
Institut français des relations internationales (IFRI)
Abstract:
Indonesia is a country that is booming economically and demographically. This not only matters for regional political and energy security, but also increasingly, for the world’s energy transitions, due to Indonesia’s large metal reserves, as well as its equally important coal consumption in industry and for power generation. Over the last 20 years, Indonesia’s economy has been characterized by very dynamic growth, massive increases in its electricity demand, and coal consumption and exports. Hence, its greenhouse gas (GHG) emissions are on a steady growth trajectory, although the country has committed to lowering them by 32% (unconditional) or 41% (conditional) by 2030. With its Organisation for Economic Cooperation and Development (OECD) membership application, occurring in the context of global energy transition requirements and geopolitical confrontations, Indonesia is today at a crossroads. Indonesia has 42% of the world’s nickel reserves, as well as substantial reserves of copper, gold, tin, and, notably, coal. This wealth in natural resources has given the mining industry crucial importance in Indonesia’s economic growth and has recently taken an even more prominent place: Indonesia has managed to become the world’s largest nickel producer within just a few years, as its share in global nickel extraction grew from 5% in 2015 to 50% in 2023. The country is also the world’s third copper ore exporter. Coal and energy transition minerals have progressively replaced oil and gas in Indonesian exports. Between 2011 and 2023, oil and gas exports fell by nearly two-thirds and their share in the national exports decreased from 20% to 6%. In 2023, export revenues from copper were larger than those of oil and equal to gas earnings. Yet, having major mineral deposits and mining activities is no longer considered sufficient by the Indonesian government. So far, the mineral industry’s growth has relied hugely on Chinese investments and on low-added-value activities, especially in pyrometallurgy processing. Diversification of trade partners and expansion into new, entire value chains is, therefore, a key objective for the Indonesian government. Indonesia is seeking to boost trade with the United States (US), the European Union (EU) and even the Eurasian Economic Union. However, negotiations over respective agreements are currently encountering hurdles due to American legislation (the Inflation Reduction Act and Foreign Entities of Concern status), which could seriously threaten Indonesian exports of battery mineral components to the US market while they also face hurdles to entering the EU due to environmental regulations. The second part of Indonesia’s strategy focuses on the development of new industrial segments of value chains: refining facilities, hydrometallurgical processing plants, battery factories, etc. To develop these activities, the Indonesian government is using two main tools: the divestment of foreign companies in local firms and export bans on crude ore exports. Such bans have been introduced for nickel in 2020 and for bauxite in 2023, while they are expected for copper in 2024 and perhaps even later for tin. Indonesia is today also confronted with the negative repercussions of mining activities on its soil, including protests over the lack of safety in its mines and smelters, citizens’ expropriations, the presence of indigenous tribes on mining sites, and, above all, damage to the environment. Such damage also has its roots in the substantial amounts of energy used to feed smelters, which mostly rely on the use of coal. Decarbonizing Indonesia’s economy has thus become a central challenge for the country, where the consequences of climate change are already palpable on the archipelago’s soil, with extreme weather events and the sinking of the capital city – Jakarta – as sea levels rise. To carry out the tremendous transformation towards net-zero emissions while ensuring steady and sustainable development, the country has signed a Just Energy Transition Partnership and prepared decarbonization scenarios within this framework. Key priorities in the coming years include renewable energy deployment, grid development and an early phase-out of coal. Deploying renewable energy sources as well as large and resilient grids is made more difficult by the country’s geography. The archipelago includes 17,000 islands, some of them being undeveloped, hard to access and far away from each other. Furthermore, the levelized costs of solar and wind power are currently high in Indonesia compared with other developing countries, while public subsidies for coal do not favor low carbon generation sources. If the two first points are thus very challenging, the last one appears to be the hardest, considering the Indonesian economy’s tremendous dependency on coal. Concerns are therefore rising about Indonesia’s ability and even willingness to pursue a genuine, albeit differentiated decarbonization pathway. There are also many questions regarding Indonesia’s mineral trade strategy. New bans on crude ore exports are expected to come into force, while new mining and mineral processing operations are under development across the archipelago, as quantities of nickel produced in the country are at historic highs. This extraordinary increase in nickel production, concomitant with a global economic slowdown, has resulted in a sharp fall in nickel prices, with nickel losing half of its value between January 2023 and February 2024. As a result, many producers are finding themselves in danger, especially in Australia or New Caledonia. While there could be a deliberate strategy to flood the markets and neutralize competition, notably by Chinese companies that control 75% of the global nickel supply (mainly from Indonesia but also from the Philippines), the country faces serious dilemmas. Indonesia’s oil and gas production is diminishing, and it increasingly relies on nickel exports and higher nickel prices for its economic stability, with coal also remaining very important. Indonesia’s resource nationalism and industrial strategy, which include attracting foreign investments, notably via its OECD membership pledge, require a credible pathway to reduce the carbon footprint of its electricity generation. Among the pathways towards both decarbonization and the development of industrial battery value chains, three steps could be considered: Deploying renewable energy sources, especially solar photovoltaic (PV) power and offshore wind farms, as well as progressively transferring subsidies from coal to renewable energy sources. Developing a clean battery industry based on high environmental, social and governance (ESG) criteria and on the wealth of Indonesia’s subsoil, which includes most of the metals used in battery manufacturing. Protecting climate and biodiversity by favoring innovative solutions for mining waste management and upholding high ESG standards.
Topic:
Natural Resources, Electricity, Coal, Lithium, Minerals, Energy Transition, and Nickel
Political Geography:
Indonesia, Southeast Asia, and Indo-Pacific

3. The economic case for climate finance at scale

Author:
Patrick Bolton, Alissa M. Kleinnijenhuis, and Jeromin Zettelmeyer
Publication Date:
06-2024
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
It will be impossible to contain the global temperature rise to 1.5 to 2 degrees Celsius above pre-industrial levels unless emerging market and developing economies (EMDEs) decarbonise much more rapidly. This policy brief examines the economic case for advanced-country financial support for replacement of coal with renewable energy sources in EMDEs. Such conditional financial support is necessary in the sense that an exit from coal consistent with keeping the global temperature rise to between 1.5°C and 2°C will not happen without it, desirable from the perspective of the financier countries, and financially feasible. Although the global economic benefits of phasing out coal are very large, the costs of exiting coal generally exceed the benefits to EMDEs. However, the collective economic benefits to advanced countries greatly exceed those costs. These net benefits are positive even for small coalitions of advanced countries (G7 or G7 plus EU). The fiscal costs of financing the coal exit in EMDEs (without China) are modest as a share of G7+EU GDP at about 0.3 percent of GDP per year, assuming public-sector participation in renewable energy investment costs through blended finance of around 25 percent. Although providing climate finance to EMDEs is economically desirable and feasible from the G7 perspective, it is not happening at the necessary scale, partly because of incentives and political-economy challenges. Advanced countries are more likely to be willing to commit financing to climate action outside their borders if they have more control over how this money is spent. Developing countries are reluctant to phase out coal unless sufficiently large financial support is forthcoming for renewable investments that are consistent with their development goals. These problems could be overcome by tying renewable finance to a coal phase-out. Already-existing Just Energy Transition Partnerships with South Africa, Indonesia and Vietnam are prototypes of this approach. They should be scaled up, with sufficient grants to pay for coal closures and the social transition in coal communities, by explicitly conditioning funding on a coal phase-out and through a stronger governance structure to implement these deals.
Topic:
Climate Change, Emerging Markets, Climate Finance, Renewable Energy, Coal, Carbon Emissions, and Emerging Economies
Political Geography:
Global Focus

4. Hitler and the German Coal Industrialists: Passing the Keys to A Kingdom

Author:
Karsten Heinz Schönbach
Publication Date:
11-2024
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
Ever since the publication of Henry Turner’s German Big Business and the Rise of Hitler, most historians in both Germany and the United States have dismissed the idea that support from German major industry played a key role in bringing Hitler to power. This consensus is wrong, as I have shown in a series of works that began with my doctoral dissertation at the Free University of Berlin and now extends to more than ten different works, including two books. These works rely extensively on archival resources that were either inaccessible or only selectively open to earlier researchers. This paper analyzes in detail one of the most crucial episodes in Hitler’s rise to power – one that previous historians, particularly Turner, have profoundly misjudged thanks in part at least to the shortcomings in the documentary sources available to them. This is the history of the political relations between Hitler, the NSDAP leadership, and the German “coal industrialists” in the period from 1926 to 1933 and the key role these firms played in supporting and financing the eventual Nazi triumph.
Topic:
History, Business, Coal, Industry, and Adolf Hitler
Political Geography:
Europe and Germany

5. The Persistent Consequences of the Energy Transition in Appalachia’s Coal Country

Author:
Eleanor Krause
Publication Date:
03-2023
Content Type:
Policy Brief
Institution:
Belfer Center for Science and International Affairs, Harvard University
Abstract:
The persistence and intensification of earnings, employment, and opportunity gaps across place has become an increasingly salient feature of the United States economy over the past several decades.1 This economic divergence has occurred alongside a remarkable transition away from coal-fired electricity that is expected to continue as lower-carbon energy sources become more economically viable. While essential to minimizing the damages of climate change, the shift poses significant challenges to the relatively rural and distressed communities traditionally reliant on this resource. Indeed, many historically coal-dependent communities in Central Appalachia have long been characterized by deep poverty, limited employment opportunities, and high rates of public assistance, and recurrent adverse shocks to coal employment over the past several decades have amplified many of these qualities, potentially elevating the risks associated with the energy and economic shifts ahead. How have Appalachia’s coal-dependent communities adjusted to historical and contemporary declines in demand for coal, and how do these shocks – and their consequences for the educational composition of affected communities – influence the capacity for future generations to adapt to new challenges? In this policy brief, I present estimates of how Appalachia’s coal country has adjusted to recent declines in coal mining employment (“coal shocks”), and I demonstrate how this adjustment process is, in part, dictated by the persistent consequences of historical employment shocks in Appalachia. The evidence suggests that recent coal shocks (i.e., declines in coal employment occurring between 2007 and 2017) have been relatively painful for affected communities, causing large reductions in local population sizes, declines in local employment counts, declines in earnings, and increases in the rate of government transfer receipt. All of these adjustment costs are more severe in counties with a history of “selective migration” induced by shifting employment opportunities in the 1980s. That is, the estimated effect of recent coal shocks on population sizes, employment, earnings, and transfer payments is significantly larger in counties that lost greater numbers of their college-educated adults in the 1980s thanks to historical employment shocks in proximate labor markets. The upshot is that coal-dependent communities may demonstrate little resilience to recent coal shocks in part because of the persistent consequences of historical shocks, which fundamentally altered the educational composition of affected communities. By dramatically reducing the number of college-educated individuals living in a community, adverse shocks have the capacity to put places on a pathway of decline that makes it more difficult to adapt to economic shifts in subsequent generations. These insights preview the potentially damaging implications of future contractions in the coal industry, revealing the need for greater empirical investigation of the types of policy efforts that might ameliorate the painful local adjustment costs associated with the energy transition going forward.
Topic:
Climate Change, Employment, Coal, and Energy Transition
Political Geography:
North America, United States of America, and Appalachia

6. From coal to consensus: Poland’s energy transition and its European future

Author:
Szymon Kardas
Publication Date:
09-2023
Content Type:
Policy Brief
Institution:
European Council on Foreign Relations (ECFR)
Abstract:
Poland’s economy, including its energy sector, is still heavily dependent on fossil fuels, including coal. In recent years Poland has significantly developed its renewable energy potential, reduced carbon dioxide emissions, and rolled out energy efficiency measures. Yet challenges remain, attributable to the government’s failure to devise a coherent national energy strategy and its insistence on picking fights with the EU over “sovereignty”; together, these weaken Poland’s influence over European energy policy. Poland has the potential to carry out an ambitious energy transition, considering its renewable energy potential, plans for nuclear power, and public support for change. Whatever the results of the 2023 parliamentary election, the government should aim to forge a cross-party consensus in favour of the energy transition and give it a strategic weight comparable to Poland’s accession to the EU and NATO.
Topic:
Climate Change, European Union, Renewable Energy, Coal, Carbon Emissions, and Energy Transition
Political Geography:
Europe and Poland

7. Café Evropa: The future of energy in the Czech Republic - how to further reduce dependence on fossil fuels?

Author:
Barbora Kociánová
Publication Date:
05-2023
Content Type:
Research Paper
Institution:
Europeum Institute for European Policy
Abstract:
As part of the Café Evropa debate series, a debate was held on the topic The future of energy in the Czech Republic - how to further reduce dependence on fossil fuels? Is the Czech Republic succeeding in diversifying its resources and reducing its dependence on fossil fuels? Will the Czech Republic be energy independent from other countries if it moves away from coal? You can read a summary of the outputs of each guest in the report written by our intern Barbora Kociánová.
Topic:
Fossil Fuels, Coal, Energy, and Debates
Political Geography:
Europe and Czech Republic

8. Gender and Just Transition: Envisioning a Gender-transformative Pathway to Energy Transition in India’s Coal States

Author:
Suravee Nayak and Ashwini K. Swain
Publication Date:
04-2023
Content Type:
Working Paper
Institution:
Centre for Policy Research, India
Abstract:
Entrenched gender biases and injustices in the coal political economy cannot be wished away with the ongoing shift from coal to renewable energy. Rather, the energy transition must seek to unwind these entrenched patterns in the 20th century energy system while creating an equal role for and participation of women in the 21st century energy system. To do so, just transition planning must proactively engage with gender questions in coal communities and envision a gender-transformative pathway to the transition in India’s coal states. Analysing the forms of exclusions faced by women in coal economies, this brief argues that women face four structural barriers – entry barrier, distribution barrier, wage barrier and representation barrier – that are consequential for their social and economic status and agency. The combined effects of these barriers, the masculine nature of the coal industry and existing social norms marginalise women in India’s coal communities and confines them to three observed patterns of engagement: 1) social reproductive labour, 2) informal casual labour and coal scavenging, and 3) formal but menial labour in coal mines. The ongoing shifts in our energy foundations offer an opportunity to unwind the gender inequities and injustices of the coal economy and envision a gender equal energy future. In this direction, the brief suggests four immediate steps to engage with the gender question as part of just transition planning. Recognise women labour force in the coal economy through an intersectionality-informed analytical and assessment framework. Ensure women’s representation in just transition planning at different tiers of governance and decision making. Promote gender inclusive economic diversification in coal regions, with particular attention to women- centric and women-led economic opportunities. Treat women as change agents in the energy transition harnessing their potential role in smoothening the disruptions of the transition.
Topic:
Political Economy, Women, Coal, Inclusion, Gender, and Energy Transition
Political Geography:
South Asia and India

9. Carbon Capture, Utilization, and Storage: Technologies and Costs in the U.S. Context

Author:
Jonathan M. Moch, William Xue, and John P. Holdren
Publication Date:
01-2022
Content Type:
Policy Brief
Institution:
Belfer Center for Science and International Affairs, Harvard University
Abstract:
The Biden administration has set a goal of reaching net zero economy-wide greenhouse gas emissions by 2050.1 Carbon capture, utilization, and storage (CCUS)—a suite of current and emerging technologies that remove carbon dioxide emissions (CO2) from energy or industrial processes and then either sequester the carbon underground or use it for production of a variety of fuels or products2—is very likely to be a key technology on most of the plausible paths for reaching this goal. Among various applications of the technology, CCUS in combination with natural gas powerplants can be used to provide firm baseload electricity or could serve as backup for intermittent renewable power in place of multi-day electricity storage.3 Additionally, CCUS could be used to decarbonize hard-to-electrify industrial processes4 and to provide synthetic fuels for decarbonizing nonelectric energy uses.5 The key barrier to CCUS filling these various roles and living up to its technical potential is high costs relative to current incentives: despite current U.S. government support through tax policy, CCUS is not economically competitive today in most of its applications. Unless and until it becomes so or is required by law, it will not achieve widespread deployment.
Topic:
Environment, Science and Technology, Natural Resources, Coal, Carbon Emissions, and Energy
Political Geography:
North America and United States of America

10. How Will Coal Sanctions Impact on Russian Economy?

Author:
CESD Research Team
Publication Date:
04-2022
Content Type:
Working Paper
Institution:
Center for Economic and Social Development (CESD)
Abstract:
The Western Alliance has approved a new package of sanctions against Russia. The most notable of the sanctions is the suspension of coal exports from Russia. What does this mean for Russia, and how can the European Union compensate for this ban? Yesterday, the European Commission posted a decision on sanctions on its website, which means that the ban will come into force. This means that from today, European companies will not be able to conclude contracts to buy coal from Russia. The contracts signed in the previous period must be completed by August.
Topic:
Sanctions, European Union, Economy, Exports, Coal, and Russia-Ukraine War
Political Geography:
Russia and Europe