Green transition risks leaving ‘stranded nations’ behind – WEF
More than a dozen fossil fuel-rich economies risk becoming “stranded” as the world shifts away from oil and gas to sustainable energy sources.
That is according to a new report from the World Economic Forum (WEF), which warns that countries are particularly vulnerable if their carbon wealth outweighs the value of their human capital and financial assets.
Qatar, Kuwait, Azerbaijan and Yemen are among those most at risk, and “must act now” to develop the economic diversification needed to thrive in the “age of green energy”.
The report also highlights how sovereign wealth funds will be crucial, but that less than 0.2% of their $8trn (£6trn) in assets are currently invested in green or renewable energies.
“To protect their economic futures, countries whose economies rely on fossil fuels need to prepare now for the impending global shift,” WEF senior director, Maha Eltobgy, said.
“Nations that have diligently built large sovereign wealth funds to manage the economic challenges of the ‘age of oil’ must now consider how to use this vast wealth to prepare for the age of green energy.”
Adding urgency, the report points out that the shift to green power may come relatively soon, with some estimates forecasting up to three-quarters of energy coming from sustainable sources by 2050.
This is much higher than the 15% that was predicted a decade ago, meaning that countries with high carbon wealth may have less time to avoid being stranded than anticipated.
The WEF said that the potential of sovereign wealth funds to play a transformational role is underpinned by the number of funds rising from 26 to 75 since 2000.
Only one-third of these operate under a strategic mandate, but the report identifies 41 funds from commodity producers with nearly $4trn in assets that could do so.
“As the impacts of climate change, demographic shifts and the transition towards green energy become more acute, economic policy-makers should more aggressively apply the strategic investment mode,” the WEF said.
“Increasing the number ‘strategic investment funds’ is the first step to ensuring economies are prepared for the impending global energy shift.”
Image credit | iStock
Chris Seekings is a reporter for TRANSFORM