Global powers will suffer economically as they move away from fossil fuels

For years, the decision to move away from fossil fuels has been costly, causing many countries to delay implementing environmental policies and others to pick up the tab. TO recent study by the Universities of Exeter, Cambridge, the Open University and Cambridge Econometrics shows that this is no longer the case. There is much to be gained from a shift to renewable energy, from an environmental and economic point of view.
The global transition from fossil fuels to renewables is well underway, and it is now clear that participating may be the most effective approach for countries to combat climate change and save money. As environmentally friendly policies are implemented in an increasing number of countries, the choice to remain dependent on fossil fuels may have more consequences than a changing climate alone. The exact risks or rewards a country faces will depend on its relationship to fossil fuels.
Countries can be divided into one of three categories. For those heavily dependent on imported fossil fuels, such as those in the European Union and China, moving towards greener policies has many benefits. Decarbonisation for these countries represents an opportunity to redirect financial resources towards the innovation of new technologies and jobs at the national level.

At the same time, oil-rich countries that depend on the export of fossil fuels, such as Saudi Arabia, can reduce the negative impact on their own economies of declining global demand for fossil fuels by preemptively flooding the market at a reduced cost. .

Countries like the United States, Canada and Russia are considered “large uncompetitive exporters” and are the ones that will lose the most if they continue to depend on fossil fuels. In a market flooded by exports from other oil-rich countries, these big exporters would not be able to compete. Stranded oil assets combined with a lack of investment in new technology could lead to industrial decline as certain economic activities and job sectors that depend on the fossil fuel industry become obsolete. Reorienting efforts toward creating new low-carbon technology would help mitigate negative economic impact.

A man walks past an advertisement related to the United Nations Climate Change Conference (COP 26), where world leaders debate how to tackle climate change on a global scale, near the conference area in Glasgow, Scotland, Great Britain , October 30, 2021 (credit: REUTERS). / YVES HERMAN)

“As the economy transforms, if you don’t decarbonize, you shoot yourself in the foot.” Professor Jorge ViƱuales, from the University of Cambridge and co-author of the study, said. “The key question is how to do it in the specific conditions of your country.”

“The disruptive nature of the low-carbon transition makes a macroeconomic strategy based on ‘business-as-usual” unsustainable, said Dr. Pablo Salas, from the University of Cambridge Institute for Sustainability Leadership (CISL).
“Supporting low-carbon innovation is the only way to remain competitive in the long term in a decarbonizing economy.”

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