Regan Brown
Fossil fuel consumption has increased significantly over the past few decades, with a notable shift from coal towards a combination of oil and gas. While coal consumption is declining in many parts of the world, oil and gas consumption continue to rise. This trend is particularly evident in developing countries, where the demand for energy is increasing at twice the global rate. Developing countries rich in fossil fuels face a dilemma: addressing climate change will likely lead to a decrease in the value of their coal, gas, and oil deposits, impacting their national wealth. On the other hand, failing to address climate change will disproportionately harm these countries through floods, droughts, and other weather-related issues. Additionally, developing countries often rely on revenues from fossil fuel exports to fund critical areas such as health, education, and infrastructure. The transition to renewable energy sources is challenging due to the capital and capabilities required, and developing countries may need support to adapt to new technologies and industries. Despite these challenges, there is a growing trend towards renewable energy in developing countries, with investment in non-hydro renewable energy surpassing that of developed countries since 2015.
| Characteristics | Values |
|---|---|
| Fossil fuel consumption in developing countries | Increased significantly over the past few decades |
| Fossil fuel consumption globally | Fossil fuels comprised 82% of the global energy mix in 2023 |
| Fossil fuel consumption in developing countries compared to developed countries | Developing countries are more vulnerable to shifts in the fossil fuel market |
| Fossil fuel consumption in developing countries and climate change | Developing countries argue that they need financing and support to use fossil fuels to escape poverty and improve their standard of living |
| Fossil fuel consumption in developing countries and renewable energy | Renewable energy is an increasingly used alternative to fossil fuels in developing countries |
| Fossil fuel consumption in developing countries and education | Many universities in developing countries produce more workforce for fossil fuels than for renewable energy industries |
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What You'll Learn
Fossil fuel-rich developing countries
Fossil fuels have been key to industrialization and rising prosperity. However, their impact on health and the climate has led to a transition away from them. While the consumption of fossil fuels has increased eightfold since 1950, the types of fuel used have shifted from coal towards oil and gas.
Developing countries rich in fossil fuels face a unique set of challenges. These countries are highly exposed to a shrinking market for oil, natural gas, and coal. A fall in fossil fuel prices significantly reduces the excess profits available from extraction and makes further development of reserves less profitable. This, in turn, affects government revenues and the domestic economy. Fossil fuel exports are often a key source of government cash, accounting for over 50% of government budgets in the top 15 oil- and gas-producing countries between 2006 and 2010.
These fossil fuel-rich developing countries may struggle to diversify their assets away from fossil fuels. They are tied, geographically and constitutionally, to the ownership of reserves, which cannot be sold outright but only licensed to companies for development. Fossil fuel-rich developing countries hold oil, gas, and coal assets that are harder to turn into cash, as they typically must develop, produce, and sell the fuel before converting the profits into other assets.
The Gulf Cooperation Council (GCC) countries of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates hold almost 30% of the world's total proven oil reserves and around 20% of its total proven natural gas reserves. Despite also being endowed with abundant renewable energy resources, the GCC's primary energy consumption is dominated by fossil fuels, with renewable energy sources accounting for less than 1%.
To achieve climate change goals, the world must dramatically cut its consumption of fossil fuels. This may put developing countries rich in fossil fuels in a difficult situation. If there is no progress in combating climate change, these countries will be disproportionately harmed by the resulting floods, droughts, and weather-related problems. However, if successful global actions are taken to address climate change, these countries will likely face a sharp decline in the value of their coal, gas, and oil deposits, leading to a significant reduction in their national and natural wealth.
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The impact of climate change goals
Developing countries, in their pursuit of industrialization and economic growth, have historically relied on fossil fuels as a key source of energy. This reliance has been driven by the abundance of fossil fuel reserves in these countries and the transition from traditional biomass-based fuels to commercial forms of energy. However, the pursuit of climate change goals necessitates a dramatic reduction in the consumption of fossil fuels globally.
The transition away from fossil fuels poses both challenges and opportunities for developing countries. On the one hand, developing countries rich in fossil fuels face the risk of a decline in the value of their coal, gas, and oil deposits. This could result in reduced government revenues, impacting their ability to invest in critical areas such as health, education, and infrastructure. Additionally, the shift towards renewable energy technologies may strain the capabilities and resources of developing countries, requiring significant investments and policy interventions.
On the other hand, the pursuit of climate change goals presents opportunities for developing countries to diversify their energy portfolios and harness their abundant renewable energy resources. Renewable energy technologies offer a cost-effective and sustainable alternative, particularly in rural and remote areas where the transmission and distribution of fossil fuel-based energy can be challenging. Developing countries like Kenya have already made significant strides in this direction, with a strong focus on solar power systems.
Moreover, international cooperation and financing play a crucial role in supporting developing countries' transition to cleaner energy. Wealthy countries have pledged to provide financial assistance to facilitate this transition, although there have been challenges in meeting these commitments fully. Development banks and international funding groups have also begun dialing back their financing of fossil fuels in developing countries, redirecting investments towards renewable energy technologies.
In conclusion, the impact of climate change goals on developing countries is multifaceted and far-reaching. While there are challenges associated with the transition away from fossil fuels, there are also opportunities for economic diversification, improved environmental sustainability, and enhanced energy security. The successful navigation of this complex landscape will require concerted efforts from developing country governments, international organizations, and private sector entities alike.
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Transitioning to renewable energy
Fossil fuels have been key to industrialization and rising prosperity, but their impact on health and the climate means that the world needs to transition away from them. While fossil fuel consumption has increased eight-fold since 1950, renewable energy sources are becoming an increasingly used alternative, especially in developing countries. This is because renewable energy can be particularly suitable for rural and remote areas where the transmission and distribution of energy generated from fossil fuels can be difficult and expensive.
Developing countries are scaling up their energy supplies to address energy poverty, and renewable energy technology was once seen as unaffordable for them. However, since 2015, investment in non-hydro renewable energy has been higher in developing countries than in developed countries, and it comprised 54% of global renewable energy investment in 2019. Most developing countries have abundant renewable energy resources, including solar energy, wind power, geothermal energy, and biomass, as well as the ability to manufacture the relatively labor-intensive systems that harness these. For example, Kenya is the world leader in the number of solar power systems installed per capita. More than 30,000 small solar panels, each producing 12 to 30 watts, are sold in Kenya annually.
Renewable energy can also help reduce developing countries' dependence on oil and natural gas, creating energy portfolios that are less vulnerable to price rises. In many circumstances, these investments can be less expensive than fossil fuel energy systems. Off-grid renewable technologies provide a sustainable and cost-effective alternative to diesel generators that would otherwise be deployed in isolated rural areas. Renewable technologies can also help to displace other unsustainable energy sources such as kerosene lamps and traditional biomass.
However, there are still challenges to transitioning to renewable energy. For developing-country governments, it can be difficult to steer resources mobilized for large-scale investments into new production sectors and new technologies. There is a need to subsidize these types of energy services to make them affordable to the major part of the population. Additionally, there is a high demand for a clean energy workforce in Africa, but many universities in the region still produce more workforce for fossil fuels than for renewable energy industries, and thus the supply of human capital is lagging greatly behind demand in solar and wind energy sectors.
Furthermore, successful action to address climate change would diminish the value of fossil fuel resources in many of the world’s poorest countries. Fossil-fuel-rich developing countries are generally highly exposed to a shrinking market for oil, natural gas, and coal. A fall in fossil fuel prices for producers significantly reduces the excess profits available from fossil fuel extraction and makes further development of reserves less profitable. If those reserves stay in the ground, future government revenues from fossil fuel extraction will be reduced, as will other benefits to the domestic economy, such as job creation.
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Fossil fuel subsidies
Subsidies are intended to protect consumers by keeping prices low, but they have unintended negative consequences. They have sizable fiscal costs, leading to higher taxes, more borrowing, or lower spending. They also promote inefficient allocation of an economy's resources, hindering growth, and encourage pollution, contributing to climate change and poor local air quality, which causes premature deaths. Furthermore, they often do not benefit the poor, as they mostly benefit higher-income households.
Developing countries that are rich in fossil fuels are particularly vulnerable to a shrinking market for these resources. A fall in fossil fuel prices significantly reduces the excess profits from extraction, making further development of reserves less profitable. As a result, future government revenues from fossil fuel extraction will decrease, along with other benefits to the domestic economy, such as job creation. These countries have a median ratio of fossil fuel reserves to GDP of 3.6, indicating that their national wealth is highly dependent on these reserves.
The removal of fossil fuel subsidies could have multiple benefits. It would reduce energy security concerns related to volatile fossil fuel supplies. It would also generate substantial revenues, which could be used for better targeted social spending, reductions in inefficient taxes, and productive investments, promoting sustainable and equitable outcomes. For example, the full price reform in 121 emerging and developing countries in 2030 is projected to raise $3 trillion in revenues, which could be used to support Sustainable Development Goals. Additionally, removing subsidies would address climate change and inequality concerns, as these subsidies currently impede progress in these areas.
To support developing countries in phasing out fossil fuel subsidies, the UNDP has developed a 'toolkit' for policymakers. This toolkit provides a phased approach that includes income protection and compensation for disadvantaged groups, ensuring a just and equitable transition.
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The future of fossil fuel consumption
Fossil fuel consumption has increased significantly over the past few decades, with a roughly eightfold increase since 1950 and a doubling since 1980. This increase has been driven by rising consumption as societies industrialize, gain wealth, and shift from traditional biomass-based fuels to commercial forms of energy. While coal consumption is falling in many parts of the world, oil and gas are still growing quickly, and they dominated the energy mix in 2023. Fossil fuels accounted for 82% of the global energy mix in 2023, with renewable energy sources making up 15%—the highest share in history.
Developing countries are significant consumers and producers of fossil fuels. Many developing countries are fossil-fuel-rich, with large reserves of oil, gas, and coal. These countries are highly exposed to the risk of shrinking markets for fossil fuels as the world transitions to cleaner energy sources. A fall in fossil fuel prices reduces the excess profits available from extraction and makes further development of reserves less profitable. This can result in reduced government revenues and a decrease in other benefits to the domestic economy, such as job creation.
At the same time, developing countries are also vulnerable to the impacts of climate change, including floods, droughts, and other weather-related problems. To address climate change, the world must dramatically cut its consumption of fossil fuels, and wealthy countries have promised to provide funding to help developing countries transition to cleaner energy sources. However, these promises have often not been kept, and development banks and international funding groups have dialed back their financing of fossil fuels in developing countries.
Despite the challenges, there is a growing trend towards renewable energy in developing countries. Since 2015, investment in non-hydro renewable energy has been higher in developing countries than in developed countries, and renewable energy can be particularly suitable for rural and remote areas where the transmission and distribution of energy generated from fossil fuels can be difficult and expensive. Additionally, renewable energy technologies can provide a cost-effective alternative to diesel generators or unsustainable energy sources such as kerosene lamps and traditional biomass. Kenya, for example, is a world leader in the number of solar power systems installed per capita. However, there is still a high demand for a clean energy workforce in Africa, and universities in the region have been slow to adjust their programs to meet this demand.
In conclusion, the future of fossil fuel consumption in developing countries is likely to involve a gradual transition away from fossil fuels towards renewable energy sources. While fossil fuels still dominate the global energy mix, the share of renewable energy is slowly increasing, and developing countries have significant potential for renewable energy sources such as wind and solar power. However, the transition will require continued investment and support from both governments and international organizations to ensure a just and equitable shift towards a cleaner energy future.
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Frequently asked questions
Fossil fuel consumption has increased significantly over the past few decades, and developing countries are major consumers. In 2023, fossil fuels accounted for 82% of the global energy mix, with coal, oil, and natural gas being the most consumed. Developing countries, particularly those in the Global South, are responsible for more than half of the increase in global energy demand, which is growing at twice the global rate.
China and India are the leading consumers of coal, with China burning more coal than the rest of the world combined. Other developing countries with significant fossil fuel consumption include Nigeria, Kenya, and the Philippines.
Developing countries often rely on fossil fuels due to their abundance of natural resources, lack of infrastructure for renewable energy, and the need for industrialization and economic growth. Additionally, fossil fuels have been a major source of government revenue, accounting for over 50% of government budgets in the top 15 oil- and gas-producing countries between 2006 and 2010.
