As the debate rages over the future of fossil fuels in the run-up to the United Nations climate conference in December, lower income nations seeking to develop their own oil and gas resources are emerging as a key barometer for how the summit will unfold.
The battle lines feel familiar: Climate activists call for phasing out oil, gas and coal starting immediately, while many major oil and gas producing nations still see strong demand for their products persisting for decades.
In between those extremes, emerging oil and gas producers — many in Africa but some in Latin America — are desperate to exploit these resources to deliver energy to their populations now, even as they add renewable energy in the longer term.
“They need finance for the things we don’t have substitutes for yet,” said Vijaya Ramachandran, director for energy and environment with The Breakthrough Institute, a nonprofit research group that advocates to improve energy access in low-income countries. “We don’t have a cheap way of making fertilizer without natural gas. We don’t have substitutes for many types of liquid fuels. We have an intermittency problem with wind and solar… They can’t tell their people you can’t have electricity until 2030 when storage costs come down. They need to provide energy now.”
At the December climate conference, known as COP28, these countries — including Mozambique, Ghana, Tanzania, Senegal, Uganda and Mauritania in Africa and Guyana in South America — are expected to push for a middle path that includes both fossil fuels and renewables.
Low- and middle-income countries are already central in discussions leading up to the conference. At the Africa Climate Summit in Nairobi last month, the United Arab Emirates, host of COP28, pledged $3.5 billion for renewable energy development in Africa. The move was a sort of down payment on a much larger funding package it is negotiating to be unveiled at COP28, according to people familiar with the meetings.
Many of these countries have some of the best potential renewable resources in the world but little money of their own to develop them. Indeed, climate advocates say renewable energy could address many of these countries’ domestic needs. But funding for such projects would need to be scaled up considerably from current levels. And the countries say they’ll still need oil and gas.
“In this 10-year period from now until 2030, priority is given to exploiting all the potential of the country,” Abdessalam Ould Mohamed Saleh, Mauritania’s oil minister, told an African Energy Forum in Brussels last year.
Lower income countries can find ways to finance exporting oil and gas in partnership with international companies, but most nations want to do more than export their resources. They also want to expand access to energy at home for economic development.
Such initiatives would traditionally be funded by large multilateral lenders like the World Bank. But those institutions, under pressure from their donors like the European Union and the United States, are increasingly reluctant to support fossil fuel projects.
In some cases, new fossil fuel infrastructure could still lower greenhouse gas emissions compared to previous practices. Replacing wood and other biomass fuels with liquid propane for rural home cooking would reduce emissions and improve air quality. Deploying natural gas for local industry would be better than burning (also known as flaring) or releasing (also known as venting) the gas into the atmosphere in many cases.
Poor countries are quick to point out they have contributed almost nothing to the accumulation of greenhouse gases in the atmosphere, and yet they are the most vulnerable to the impacts of climate change. Meanwhile, most of these countries have huge debts — much of it accrued during the one-two punch of the Covid pandemic and Russia’s invasion of Ukraine that sent food and fuel prices skyrocketing — and pay high rates of interest.
“It’s no secret that we are paying at least five times as much as advanced economies to borrow,” William Ruto, the president of Kenya told the Africa Climate Summit last month.
Senegal provides an example of a dual path forward producing both oil and gas and renewable energy. The country began producing oil in 2014 and is on the verge of becoming a significant exporter of liquified natural gas (LNG) as part of a project with the British fossil fuel giant BP. It also received a commitment of about $2.6 billion (€2.5 billion) in funds from the EU to build renewable energy as part of a plan to eventually have renewables account for 40% of its electricity generation.
To help bridge the transition, the U.S. Trade and Development Agency agreed in September 2020 to lend the country $300 million to build gas pipelines and convert power plants that burn coal and oil over to gas. At first, the gas will be imported as LNG and later it will come from the country’s own offshore gas fields.
“To the extent these countries build it right and design their projects with the lowest emissions, I think that’s a good outcome,” says Valérie Marcel, a researcher who has convened these countries several times over the past five years through the think-tank Chatham House in London. “The bad outcome is a build-out that is not well managed. Then there’s a chance their emissions actually do move the needle globally.”
Editor’s note: The Breakthrough Institute receives financial support from Breakthrough Energy, which also supports Cipher.