The carbon curse: Can countries that produce fossil fuels ever get close to a low-carbon economy?

By Katya Perez Guzman, IIASA CONACYT postdoctoral fellow in the Advanced Systems Analysis Program

Extractivism, a mode of economic growth currently practiced by many developing countries, is the phenomenon of extracting natural resources from the Earth to sell as raw materials on the world market. It is a central cause of many environmental problems, such as deforestation, loss of habitat and biodiversity, water, soil, and air pollution. Any study of these topics is therefore incomplete if it does not take this model of development into account.

Climate change is no exception, and it is my goal at IIASA to investigate the links between extractivism and climate change mitigation policies for Mexico. To start this search, it is relevant to ask whether the drivers of CO₂ emissions might be different in countries that practice extractivism to those that do not. During my PhD, which examined the basic drivers of CO₂ emissions in Mexico as a fossil fuel producer and exporter, I suggested that the answer is yes.

Even when there are as many causes of CO₂ emissions as there are economic activities, CO₂ emissions can be linked to four main drivers: population, GDP per person, the energy use per unit of GDP, and the CO₂ emitted by each unit of energy consumed. The greater the value of these variables, and the faster their growth, the more CO₂ emissions (all other things being equal). These four factors can then be incorporated into a model known as the Kaya identity, which aims to explain CO₂ emissions at a global level.

Deforestation in Malaysia. © Rich Carey | Shutterstock

For fossil fuel producers and exporters, these four elements of the Kaya identity may vary in idiosyncratic patterns across various periods, for example during booms and busts. There is a possible positive relationship between oil abundance and increased population growth, namely because of increased migration to oil production sites. For GDP per capita, a phenomenon known as the natural resource curse describes how production and export of fossil fuels can harm economic growth in the long term, although this debate is still not settled. Alongside this, various analyses have linked fossil fuel production with higher energy consumption, especially during boom times.

Lastly, a proposed carbon curse relates higher abundance of fossil fuels to higher “carbon intensity”—the amount of CO₂ emissions per unit of GDP. The carbon curse may be a result of four mechanisms. First, the predominance of a fossil fuel production sector which emits a lot of CO₂ itself. Second, crowding out effects in the energy generation sector, forming a barrier to newer renewable energy sources. Third, crowding out effects in other sectors of the economy—a phenomenon known as the “Dutch Disease” because when the Netherlands discovered its Groningen gas field in 1959 the economic boom that followed the gas exports resulted in a decline in manufacturing and agriculture. Finally, less investment in energy efficiency technologies and more subsidies for national fossil fuel consumption can also bring on the carbon curse.

It is therefore crucial to account for the links between extractivism and climate change related topics: for mitigation, but just as importantly for vulnerability and adaptation. If the past can be used to shape the future, a measure of the carbon curse could help national and international policymakers to determine how close an oil-extractive economy can get to being a low carbon economy.

This article gives the views of the author, and not the position of the Nexus blog, nor of the International Institute for Applied Systems Analysis.