Study shows wealthy countries must begin a managed phase-out of fossil fuels

As the oil and gas sector experiences a chaotic decline during COVID-19, a new peer-reviewed study outlines how policymakers can plan for a more resilient future through an equitable phase-out of production.

Wealthy, diversified economies should be the first to phase out fossil fuel extraction and should cover the cost of a global phase-out, according to a new peer-reviewed study published in the journal Climate Policy.

The study – led by researchers at the Stockholm Environment Institute and Oil Change International – is the first to explore how governments can fairly manage a rapid transition away from oil, gas and coal production. It proposes five principles to guide this necessary phase-out, including reducing extraction fastest in countries that can best afford it and will see the least social cost.

“Our study maps out, for the first time, the how and where of an equitable phase-out of fossil fuels,” said SEI Senior Scientist Sivan Kartha, co-author of the study. “Getting this done in a fair way is critical both to preventing economic chaos and meeting climate goals, and not only from a moral standpoint but a political one. Phasing out fossil fuels is going to take global cooperation – and that cooperation will only happen if governments and workers see the process as fair and as helping with both the immediate-term economic crisis and the longer-term climate crisis.”

In recent months, the COVID-19 crisis has wreaked havoc on the oil and gas sectors, forcing a chaotic, unmanaged decline that comes with myriad social and economic losses. The study provides principles that governments can use in their recovery efforts, both to support workers and to shift capital to safe, clean, and renewable energy systems.

“Today's contrast of rich-country governments bailing out their oil companies, while developing countries face devastating disruption, shows the perversities of an energy transition that is unmanaged, unjust, and unsustainable,” said study co-author Greg Muttitt, a climate and energy researcher. “In short, it shows how not to equitably manage the decline of fossil fuel extraction. We hope this paper helps inform a fairer pathway to a post-fossil society.”

The study examines the world’s largest fossil-fuel-producing countries and considers how an energy transition would impact their workers, communities, economies and governments. It finds a stark difference between developing countries and wealthy ones -- namely, that fossil-extracting developing countries are far more dependent on oil and gas revenues and on coal mining jobs. For example: oil and gas revenues provide 60% or more of public revenues in Timor Leste, Equatorial Guinea and Iraq, while they account for close to 0% of these revenues in the UK and US. 

Based on that review, the study’s authors examined common equity approaches and proposed five principles to ensure a just transition:

1. Phase down global extraction consistent with 1.5°C. Countries can do this through both economic and regulatory approaches, including extraction taxes and licensing moratoria.
2. Enable a just transition for workers and communities. Key elements of this principle include sound investments in low-emission sectors, social protection for fossil-fuel workers, and local economic diversification.
3. Curb extraction consistent with environmental justice. Ending fossil fuel extraction should be prioritized where communities disproportionately experience the harms of extraction (such as pollution) and not the benefits.
4. Reduce extraction fastest where social costs of transition are least. Wealthier, diversified economies – such as the US, Canada, UK and Norway – should phase down production quickly, as they can better mitigate and absorb the adverse impacts on workers and communities.
5. Share transition costs fairly. The largest burden should be borne by those with the “broadest shoulders,” or ability to pay. In practice, this means wealthy countries – who have already benefited the most from past extraction – should bear the most cost. 

Read the study: Equity, climate justice and fossil fuel extraction: principles for a managed phase out

Reactions to the paper

Sharan Burrow, Secretary General, International Trade Union Confederation (ITUC):

“The transition out of fossil fuels is more urgent than ever. This poses different challenges in each country, in the Global South and North. We need Just Transition measures that include international solidarity with all workers and communities that are economically dependent on fossil fuel extraction. Governments, business and unions need to set up social dialogue processes to plan a Just Transition away from fossil fuels that creates alternatives and provides decent and quality jobs for those affected.”

Ambassador Marlene Moses, Nauru:

“For generations, fossil fuels have provided cheap energy for economic development. We now know the greenhouse gas emissions from that oil, coal, and gas is putting all of those economic gains at risk through climate collapse. With implications for major producers and consumers alike, the challenge of extracting fossil fuels from the global economy will require an historic collective effort. This research takes an honest look at the distinct challenges, capacities, and needs of different countries, and how our responsibility to act can be shared equitably. Only a fair approach like this can move the world towards a future that is both free of fossil fuels and prosperous for all."

For interviews or further information, please contact:

Sivan Kartha, Senior Scientist, Stockholm Environment Institute, US Center
sivan.kartha@sei.org

Greg Muttitt, Climate & Energy Researcher
greg.muttitt@googlemail.com

Hannah McKinnon, Director, Energy Transitions and Future Program, Oil Change International
hannah@priceofoil.org

Emily Yehle, Senior Communications Officer, SEI US
emily.yehle@sei.org