For years, the choice to move away from fossil fuels has been a costly one, causing many countries to delay implementing environmental policies and leaving others to pick up the tab. A 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 toward renewable energy, environmentally and economically.
The global transition from fossil fuels to renewable energy is well underway, and it’s now apparent that getting on board may actually be the most effective approach for countries to both combat climate change and save money. As environmentally-friendly policies are implemented in an increasing number of countries, the choice to continue relying on fossil fuels may come with more consequences than a changing climate alone. Exactly what risks or rewards a country faces will depend on its relationship with fossil fuels.
Countries can be divided into one of three categories. For those that are heavily reliant on the import of fossil fuels, such as those in the European Union and China, moving toward greener policies has many benefits. Decarbonization for these countries means an opportunity to redirect financial resources toward the innovation of new technologies and jobs on a domestic level.
At the same time, oil-rich countries that rely on the export of fossil fuels, such as Saudi Arabia, can reduce negative impact on their own economies from decreased global demand for fossil fuels by preemptively flooding the market at a reduced cost.
Countries like the US, Canada and Russia are regarded as “large uncompetitive exporters” and stand to lose the most from continued reliance on fossil fuels. In a market flooded by exports from other oil-rich countries, these large exporters would be unable to compete. Stranded oil assets combined with lack of investment in new technology could lead to industrial decline as certain economic activity and job sectors dependent on the fossil fuel industry become obsolete. Redirecting efforts toward the creation of new low-carbon technology would help to mitigate the negative economic impact.
“As the economy transforms, if you do not decarbonise, you are shooting yourself in the foot.” Professor Jorge Viñuales, of 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 untenable a macroeconomic strategy based on ‘business-as-usual,” said Dr. Pablo Salas, from the University of Cambridge Institute for Sustainability Leadership (CISL).“Supporting low-carbon innovation is the only way to maintain long-term competitiveness in a decarbonizing economy."
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