concept

resource-rich countries

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Sources

Energy asset stranding in resource-rich developing countries and ... frontiersin.org Frontiers Jun 10, 2024 10 facts

claimThe climate and development economics literature identifies international compensation payments as part of supply-side climate policies and economic diversification as two policy measures to address the implications of climate policy and asset stranding for resource-rich countries.

claimIn many resource-rich countries, a 'social contract' exists where governments provide benefits and subsidies funded by fossil fuel revenues in exchange for the population's acceptance of the existing political order and adverse socio-economic conditions.

claimExamples of benefits provided under the 'social contract' in resource-rich countries include gasoline subsidies (McCulloch et al., 2021; Houeland, 2022), high levels of public employment in the fossil fuel sector, and direct cash transfers.

claimManley et al. (2017) argue that elites in resource-rich countries lack the incentive to transition from fossil fuel businesses to renewable energy options because they profit from fossil fuel revenues, which allow them to accumulate wealth and power.

claimResource-rich countries with export sectors focused on fossil fuels face significant challenges in diversifying their economies because the potential gains from diversification are perceived as too uncertain and distant compared to the immediate profits from fossil fuel exports.

claimMeasures such as just energy partnerships and green hydrogen production can only be effective if they include fair benefit sharing and improvements to institutional problems like the lack of rule of law in resource-rich countries.

claimFriedrichs and Inderwildi (2013) assert that revenues from fossil fuel exports in resource-rich countries tend to be concentrated among a few elite individuals or corrupt governments, resulting in significant inequality in income and wealth distribution.

claimDutch disease, characterized by currency appreciation and reduced competitiveness in non-resource sectors, acts as a hurdle for resource-rich countries attempting to diversify their economies away from fossil fuels.

claimEconomic diversification in resource-rich countries is easier to achieve when the population has access to education.

claimFossil asset stranding in resource-rich countries is a multi-faceted problem that extends beyond the issue of interrupted cashflows.