In Chapter 4 of my book Zero Carbon Our Choice, I focus on the geo political consequences of decarbonisation. What surprises me about those who advocate the green deal as a positive, is that they underestimate the downside of “carbon wealth at risk” from decarbonisation. Many dismiss this as something which will only affect large oil companies (which it will) but the consequences beyond the obvious are significant in global terms.
I’ve written about the effect of Covid 19 on demand for carbon goods and services like airlines and what level of support we should be considering as a response. But the ramifications are considerable from the drop in demand for energy. As an example, some electricity tariffs are now negative in the UK in the day, due to the combination of the fall in demand and renewable production which cannot be turned off. Some customers will earn 3.3p/Kw to use electricity!
Norway provides an interesting perspective on carbon wealth at risk. The decline in the oil price has led to a fall in the Norwegian currency and politicians are recognising that going forward Norway may become more like other countries and have to adjust its government spending as a result. Norway benefits from the prudence of its sovereign wealth fund which will cushion some of the consequences, but if Norway is adjusting in this way then the effects on other countries which have a significant dependence on carbon in their economies will be even harder, particularly if they don’t have sovereign wealth funds.
I will write separately about the developing countries which have significant carbon wealth at risk. The likely consequences of reduced carbon wealth are increased instability in those regions of the world with carbon wealth and the contagion from that instability in those regions to neighbouring countries (Venezuela and Colombia is a recent example).
The economic slowdown and the effect on carbon demand from Covid 19 measures is showing that the consequences of carbon decline will need to be carefully analysed and the costs involved properly calculated rather than dismissed.
This is not to say we should not decarbonise, but that we need to understand all the costs and ramifications of this change.
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