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131. Fossil Fuel Subsidy Inventories vs. Net Carbon Prices: a Consistent Approach for Measuring Fossil Fuel Price Incentives

Author:
Jens Bohm and Sonja Peterson
Publication Date:
05-2021
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Different reports including the broadly cited OECD fossil fuel subsidy inventory arrive at high monetary values of fossil fuel subsidies and suggest that phasing out these subsidies has a high potential to increase the efficiency of climate policies. We show that the inventory approach gives misleading information about this potential since there is little correlation with net carbon prices that actually reflect the stringency of climate policies. We use data on net fossil fuel taxation from the OECD´s Taxing Energy Use report and augment it with data on subsidies and emission permits, to calculate national and sectoral net carbon prices for the top six emitters (China, US, India, Russia, Japan and Germany) and for Poland and Sweden, two European countries perceived as examples of opposing environmental policies. Our results show that in high-income countries, subsidies mainly relate to reduced fuel tax rates for certain uses, so that e.g. Sweden, for which the OECD inventory reports subsidies per ton of CO2 26 times higher than the US, has a 770% higher national net carbon price than the US. While Germany and Russia have similar subsidy levels in the OECD inventory, the national net carbon price in Germany is 50 €/tCO2, while producer subsidies lead to a negative net carbon price of -6€/tCO2 in Russia. Our results illustrate that raising taxes on fossil fuels will often lead to higher reported inventory subsidies. Inventory measures thus give little information about the efficiency of climate policy. Our analysis also shows the large differences in net carbon prices across countries and across sectors within countries. Net carbon prices should replace fossil fuel subsidies in the policy debates and become the basis for national energy tax reforms and international agreements on minimum carbon prices.
Topic:
Climate Change, Energy Policy, Environment, Natural Resources, and Fossil Fuels
Political Geography:
Global Focus

132. Curse or Blessing? How cheap oil influences conflict dynamics

Author:
Matteo Ilardo
Publication Date:
03-2021
Content Type:
Policy Brief
Institution:
European Union Institute for Security Studies
Abstract:
When the price of oil goes down, there is often a sigh of relief among oil-importing countries, as cheap oil means a boost for the economy and increased savings for consumers and businesses. As a result, most of Europe tends to notice price shocks only when prices go up: consumers are squeezed while producers accumulate enormous wealth. Yet, for oil-exporting countries cheap oil means increased poverty and tighter budgets – a recipe for instability and conflict. This Conflict Series Brief analyses the effects of the recent pandemic-induced oil price shock on three vulnerable, conflict-affected countries. This is done by testing the two competing theories of the resource curse and of the rentier state, each offering a different interpretation of the oil-conflict nexus: The resource curse theory posits that an abundance of natural resources, and in particular oil, raises the probability, frequency, and intensity of conflict. The rentier state theory sees the presence of oil as having a positive effect on peace, as regimes use revenues to either buy off political opposition or suppress it. The recent price crash and its effects on conflicts in South Sudan, Libya and Iraq provide empirical support to the analysis. This Brief argues that both the stabilising and destabilising mechanisms identified in the two grand narratives are simultaneously at play in oil-rich countries. It shows that oil prices occupy a central role in determining which theory provides the most accurate outcome prediction. As a result, we hope to get a better understanding of the often-counterintuitive role that the resource plays in the onset of civil war. Building on the experience of the 2020 pandemic price plunge, the Brief ends with an overview of the future challenges that cheap oil will entail for producers and for Europe as oil demand peaks and the world moves away from fossil fuels.
Topic:
Civil War, Energy Policy, Oil, War, Natural Resources, and Conflict
Political Geography:
Africa, Middle East, and North Africa

133. How Can Anticorruption Actors Use EITI Disclosures?

Author:
Sebastian Sahla, Alexandra Gillies, and Matthieu Salomon
Publication Date:
02-2021
Content Type:
Special Report
Institution:
Natural Resource Governance Institute
Abstract:
Corruption in the extractive industries represents one of the main obstacles to ensuring that natural resources contribute to sustainable development. The heightened corruption risks across the sector are well documented, with many of the most prominent global corruption cases in recent years involving actors in oil, gas and mining. High-profile corruption scandals have occurred in several EITI countries. In Colombia, a former EITI supporting company has faced investigations over alleged illegal political campaign financing. Two large oil companies and their executives face criminal trial in Italy over a controversial oil deal in Nigeria. In Iraq, a “fixer” company bribed officials to help its clients secure oil industry contracts. EITI reports are silent on these and many other alleged cases of corruption. This has raised critical questions, particularly among civil society actors and academics, about the relevance of EITI in addressing the sector’s most pressing challenges. Although EITI reports rarely speak directly about corruption, they are nevertheless an important resource for anticorruption actors. As the EITI considers how it can more effectively play a role in addressing corruption, the authors of this report aim to shed light on how EITI’s current reporting can help oversight actors understand and address corruption risks. The authors identify best practices in how EITI countries disclose corruption-related information, highlighting the strengths and weaknesses of the initiative and providing insights that can help EITI maximize its relevance to future anticorruption efforts. Based on a review of EITI documents from 17 countries, the authors identify trends in how reporting presents corruption-related information.
Topic:
Corruption, Development, Oil, Natural Resources, Gas, and Industry
Political Geography:
Global Focus

134. Thermal Coal in Colombia: Perspectives and Risks for the Economies of La Guajira and Cesar Departments

Author:
Natural Resource Governance Institute
Publication Date:
04-2021
Content Type:
Special Report
Institution:
Natural Resource Governance Institute
Abstract:
The exploitation of thermal coal in Colombia faces great challenges despite the abundance and quality of the country’s reserves. The main challenges are due to the external context: the downward trend in prices due to the structural drop in consumption due to the rapid substitution of coal for less polluting fuels or renewable sources in the European market, coupled with the great distance to Asian markets, have raised doubts about the economic viability of coal exports from Colombia. Colombia could be one of the first countries to suffer from the contraction in global demand for thermal coal, because its main markets are Turkey (23 percent) and the Atlantic ports in Europe (19 percent), two markets where demand will likely diminish in the short term. The contraction in demand would have various effects on the country’s economy, as it is the second-most important export (after oil), an important source of royalties and one of the main axes of the economies of La Guajira and Cesar departments. This study analyzes the implications of the decline in coal demand for the national economy and for the main producing regions, such as La Guajira and Cesar, which are highly dependent on coal exploitation.
Topic:
Energy Policy, Natural Resources, and Coal
Political Geography:
Colombia and South America

135. Gender and Extractive Governance: Lessons from Existing Legal and Policy Frameworks

Author:
Aubrey Menard and Elizabeth Moses
Publication Date:
07-2021
Content Type:
Special Report
Institution:
Natural Resource Governance Institute
Abstract:
Greater gender equality accompanies economic advancement. However, in countries rich in oil, gas and minerals, economic advancement has not served women and gender minorities as well as men. On the contrary, gender inequality is more pronounced in countries significantly reliant on the extractive sector. The negative impacts of overreliance on the extractive sector appear at both the national level and the sites of major extraction projects. While the gendered issues related to the extractive sector have been broadly acknowledged, efforts to address them are not well developed. This report focuses on gender and governance of the extractive industries, and is part of the larger Gender and Extractives project, funded by the Open Government Partnership (OGP) and the World Bank Multi-Donor Trust Fund, and executed by the Natural Resource Governance Institute (NRGI) in partnership with the World Resources Institute (WRI). It aims to inform a new generation of gendered OGP commitments in relation to the extractive sector, building on the momentum created by the Break the Roles campaign and the growth in attention now paid to advancing gender equality in the extractive sector. The research examined the legal and policy frameworks in 12 OGP countries: Argentina, Canada, Colombia, Ghana, Indonesia, Kenya, Morocco, Mongolia, Nigeria, Peru, Sierra Leone and Tunisia, identifying 62 laws, policies, regulations, guidelines and other official documents that referenced the extractive sector and gender or women.
Topic:
Economics, Gender Issues, Oil, Natural Resources, Governance, and Gas
Political Geography:
Kenya, Indonesia, Canada, Mongolia, Argentina, Colombia, Sierra Leone, Nigeria, Morocco, Tunisia, Peru, and Ghana

136. Diagnosing Corruption in the Extractive Sector: A Tool for Research and Action

Author:
Alexandra Gillies, Sebastian Sahla, Matthieu Salomon, and Tom Shipley
Publication Date:
09-2021
Content Type:
Special Report
Institution:
Natural Resource Governance Institute
Abstract:
NRGI’s corruption diagnostic tool aims to support anticorruption actors as they tackle the complex and sensitive challenge of extractive sector corruption. Drawing on extensive sector-specific analysis, the tool enables its users to: Gather evidence and convene consultations to identify the forms of corruption most likely to negatively impact their country’s extractive industries; Diagnose the causes of these forms of corruption; Build an evidence-based anticorruption action plan, focused on preventing future corruption. The tool prioritizes multi-stakeholder participation, and its flexible approach allows users to adapt the content and process to meet their needs.
Topic:
Corruption, Natural Resources, Regulation, and Industry
Political Geography:
Global Focus

137. National Oil Companies and Energy Transition in the Middle East and North Africa

Author:
Laury Haytayan, Patrick Heller, David Manley, and Ben Potter
Publication Date:
02-2021
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
As the world looks toward an energy future that is less reliant on fossil fuels, governments in the Middle East and North Africa (MENA) region must adapt. The petroleum sector is a major employer in the region, the primary source of fiscal revenue, the dominant generator of exports and the source of energy that powers economies. With the pace of energy transition uncertain, a growing number of oil companies are revising downward their long-term assumptions about fossil fuel consumption and prices, and private capital has been progressively moving away from the sector. This transition creates opportunities for cleaner and more reliable energy for citizens in the MENA, a region rich in renewable energy potential. MENA governments and their national oil companies (NOCs) recognize the need for adaptation. Several countries have launched vision statements or reform plans aimed at diversifying NOC portfolios, increasing efficiency and reducing their exposure to market decline. This briefing derives from in-depth research and interviews on the challenges and reform plans of three MENA NOCs (Saudi Aramco, Qatar Petroleum and Algeria’s Sonatrach) and draws out implications for other NOCs in the region. The authors seek to inform the strategies of governments and NOCs on how to manage NOC portfolios and the evolution of state-NOC accountability mechanisms and hope that nongovernmental analysts and civil society organizations will use this briefing as a tool to help understand and scrutinize public reform plans.
Topic:
Energy Policy, Oil, and Natural Resources
Political Geography:
Middle East and North Africa

138. The East Mediterranean Gas Forum: Regional Cooperation Amid Conflicting Interests

Author:
Mona Sukkarieh
Publication Date:
03-2021
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
The discovery of sizable natural gas reserves off the coasts of Cyprus, Egypt and Israel over the past decade has revealed a promising resource potential in the Eastern Mediterranean and at the same time challenges in converting part of this potential into exploitable commodities. The discovery of gas resources in the Eastern Mediterranean added a new layer of complexity to a region already marred with decades-old conflicts. Amid increasingly competitive gas markets the East Mediterranean Gas Forum (EMGF) offers a platform to coordinate efforts among the various players in the region to lower costs and improve regional integration. The author of this paper starts by providing a quick overview of the EMGF, its objectives and internal working mechanisms, and its first efforts to assess– with the aim of improving– prospects for monetization. The author then explores the geopolitical dynamics with a focus on mapping perceptions of threats emanating from various regional actors, as these dynamics have played a role in the establishment and membership of the Forum. In the third and last part, the author focuses on bringing offshore Eastern Mediterranean gas to market.
Topic:
Regional Cooperation, Natural Resources, and Gas
Political Geography:
Israel, Egypt, Cyprus, and Mediterranean

139. Qatar Petroleum and the Extractive Industries Transparency Initiative: Implications for State Companies in the Middle East and North Africa

Author:
Kaisa Toroskainen
Publication Date:
04-2021
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
In many resource-rich countries, state-owned enterprises (SOEs) play a major role in collecting taxes and payments, selling oil, and contributing to government revenue from extractive industries. In the Middle East and North Africa (MENA) region, SOEs often control the end-to-end value chain of extraction. This briefing explores how becoming an Extractive Industries Transparency Initiative (EITI) supporting company can facilitate transparency of SOEs from non-EITI implementing countries in the MENA region. The EITI is a global standard to promote the open and accountable management of extractive resources. Fifty-four countries currently implement the EITI and commit to a set of disclosures along the extractive industry value chain as defined in the EITI Standard. Beyond national EITI implementation, extractive companies can become EITI supporting companies by committing to a set of expectations to advance sustainable development, transparent management of natural resources and by supporting the initiative financially. In this briefing, the author has provided an overview of how becoming an EITI supporting company has supported Qatar Petroleum (QP) in improving reporting and transparency, with a view of providing relevant lessons to the EITI and other SOEs in the MENA region. The briefing concludes with recommendations to the EITI, QP and other SOEs in the MENA region.
Topic:
Oil, Natural Resources, and Industry
Political Geography:
Middle East, North Africa, and Qatar

140. Opportunities and Challenges for Senegal in Oil and Gas Production: Lessons Learned from Other New Producers

Author:
William Davis and David Mihalyi
Publication Date:
05-2021
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
Senegal, with significant reserves of natural gas, appears to be on the verge of becoming a significant hydrocarbon producer. This resource wealth presents the country with opportunities, but also risks. NRGI's new paper reviews the recent experience of other “new producers”, mainly in Africa, and attempts to draw lessons for Senegal on how to make the most of its hydrocarbon resources, taking into account both the changing context due to the coronavirus pandemic and the ongoing transition to renewable energy. Countries face a number of challenges in managing revenues from natural resources. This brief focuses on some of the challenges affecting countries as they prepare for production from oil and gas finds. First, international experience has shown that a number of countries have succumbed to the “presource curse, where overoptimism regarding the future benefits from the sector undermines government policies and ultimately leads to disappointing outcomes. As such, it is important to manage public expectations around what the finds will mean for the economy, and resist pressure to embark on unsustainable borrowing, public spending or investment plans based on overly-optimistic forecasts of the revenues that will flow from these resources. There are also challenges around putting in place an appropriate governance framework to prevent revenues from being lost to tax avoidance/evasion and mismanagement. In the context of the coronavirus pandemic, these challenges are particularly difficult, as countries grapple with fears of losing out on investment, and weigh whether to use resource wealth to finance temporary spending needs to stabilize the economy.
Topic:
Oil, Natural Resources, Gas, Renewable Energy, COVID-19, and Revenue Management
Political Geography:
Senegal and Africa