sharing in governance of extractive industries
This DFID-funded Research Paper by Chatham House looks at how extractives-led growth can (or whether it should seek to) co-exist with low-carbon development ambitions in low-income countries. A summary can be found below. We look forward to seeing this work continue as countries at the sharp end of climate and development challenges seek to benefit from their natural resources.
Throughout the commodities boom of the last decade, multilateral banks, donor agencies and investors joined hands in promoting or supporting ‘extractives-led growth’. Their approach assumes that low-income countries with fossil fuel, mineral or metal reserves will be able to deploy them for economic development. The resulting assistance and policy advice has generally had little or no connection to parties’ broader commitment to low-carbon development.Two global factors now seriously challenge the extractives-led growth model. The first is the recent fall in oil prices and the longer-running downward trend in mined commodities prices. With most exporters now facing a period of rising deficits and debt, newer producers such as Ghana and Mozambique must revise their expectations for growth. The second is climate change and the longer-term risks to export markets from action to reduce greenhouse gas emissions.The concept of fossil fuels as ‘unburnable carbon’ or ‘stranded assets’ has little traction in low- to middle-income countries, especially when set against urgent poverty alleviation and infrastructure needs. Yet emissions regulation, fuel subsidy reforms and new technologies, particularly across Western and Asian markets, will affect the prospects for new and prospective exporters.Most countries banking on extractives-led growth have also committed to national visions for green growth and sustainable development. Their 2015 ‘intended nationally determined contributions’ (INDCs) demonstrate ambition to create a range of social goods through climate resilience and emissions management measures. Without careful handling, the political and investment emphasis on extractive-sector development could derail implementation.In contrast to prevailing pressures to develop reserves quickly, donors and advisers should help put back on the table the full range of options available to a country. This includes choices to ‘go slow’, in tandem with boosting local capacity to benefit from investments, business and job opportunities; to integrate extractives development into sustainable economic diversification plans from the outset; and the choice not to extract or expand the sector.To make responsible policy choices, new and prospective producers need better information. This applies not only to their own resources and the full costs of producing them (including social and environmental impacts), but also to deciding whether and how to use resources at home, and to understanding the future risks to export markets for their products given evolving energy and carbon policies globally.Practical conversations regarding low-carbon development aims for extractives-rich low-income countries might best be framed in terms of national goals for sustainable economic diversification. They should place strong emphasis on energy policy and pricing, industrial planning, investment in efficient, resilient infrastructure and the development of skills such as the management of carbon within national oil companies. - See more at: https://www.chathamhouse.org/publication/left-stranded-extractives-...
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