The COP27 summit has left many people dissatisfied. African countries feel they are not being adequately compensated for climate damage they did not cause. Oil-exporting countries are looking for ways to replace the revenue with other income, but have so far failed to do so. While Western activists see a Corona-like shutdown of society as the only viable way to reduce carbon emissions. Coordination between all these positions is difficult – especially because there is no judge with the authority to make the final decision.
Pictures by Fahd Al-zein, Text: Thorsten Veblen
The COP27 summit in Sharm el Sheik, where world leaders discussed the end of the fossil fuel economy, is over. But not everyone is happy with the results. European politicians like Frans Timmermans, non-governmental organizations, climate activists and green politicians, often from wealthy industrialized countries, made frustrated statements about the fossil fuel lobbies and oil exporting countries thwarting the necessary steps to decarbonise our global energy supply. While young aspiring activists with no responsibility to the rest of society already see spilling soup on paintings and sticking to highways as a sufficient contribution, converting a world economy driven by fossil fuels to sustainable energy sources is a far more challenging undertaking. One that must be well planned, prepared and ultimately executed with precision: Otherwise, there is a risk of chaos and unrest, from which the world’s poorest would suffer the most.
Egypt, the host country of this year’s COP27, is itself an oil-exporting country. With an estimated population of 104 million people, it is one of the largest countries living (in part) on fossil fuel revenues, as there are no alternative sources of income in the mostly deserted country. To illustrate the complexity of getting off fossil fuels without harming a large part of the world’s population, Fahd takes us to his workplace: of all things, an oil rig that has to be relocated from one oil well in the Mediterranean to another serves as an analogy for the complexity of the green transition to renewable energy. Just like the oil rig, our global economy as a whole needs to be unhinged and embedded in a new place.
The rig is being prepared for sailing
Before the complex construction can be moved even one metre, the barge captain has to make calculations about stability. These calculations decide what cargo the platform can keep on board to ensure stability during the journey. The rest is transferred to escort vessels. The remaining cargo must be secured with straps to ensure that nothing goes overboard. One of the biggest challenges is to carry the right amounts of water and fuel to reach the new location.
Economists certainly do comparative calculations when it comes to the transition of the economy as a whole – and to ensure its stability. In Denmark, for example, 80 people, from PhD students to professors, are working on a model to analyse the current state of the economy and what it would take to move it to another state: how many skilled workers, inputs in the form of solar panels or financial capital are needed? Others, such as the Wegener Institute in Austria, are conducting analyses of what impact tax reforms might have on low-income households or how the transition will affect certain sectors of the economy, such as food production. Does a decarbonized economy have enough provisions for the current population?
So before one can begin to restructure the economy, the costs must be determined and, above all, who will bear them. Not only the direct costs, e.g., for new photovoltaic and wind power plants or the damage caused by climate change. But also, the costs of change must be considered: As the current global cost of living crisis teaches us, high energy prices also cause high food prices: Fertilizers need CO2 and methane, tractors and other machinery need fuel, food systems rely on electricity-intensive refrigeration. This leads to higher prices for those who already have little money. In Egypt, for example, more than a quarter of the population lives on less than 3.20 US dollars a day, with high expenditure on basic foodstuffs.
Sunset over the Rig heliport
However, when measured by a multidimensional approach, the number of Egypt’s poor is much smaller: 4.1 per cent of the people have no housing, no schooling and insufficient food. The World Bank highlighted that Egypt does well in terms of subsidising consumption, schooling and basic services when compared to similar countries.
However, this spending on school education and food subsidies is largely fed by oil revenues. The commodity sector, largely oil production, contributed about ten percent to Egypt’s gross domestic product in 2021. In 2021, oil export revenues amounted to 8.5 billion US dollars, about one-third of all foreign exchange. This amounts to about 85 US dollars for each Egyptian citizen or 300 US dollars for an average Egyptian household – not bad for a country where the average income of a household per year is 2,800 dollars. With this foreign currency, the country finances its food imports to feed the population. Export revenues from oil and petroleum products are therefore essential for the functioning of the Egyptian state and even the survival of countless Egyptians: no less than 1.4 million state employees in public administration, defence and other state organisations (many construction companies are part of the Egyptian army) are on the Egyptian state payroll. (Data from Egyptian in Figures, 2022)
Weighing the anchor
Bolts (spudcans) anchor the platform deep into the seabed to keep it stable in the harsh weather conditions at sea during oil production. This was literally true for the oil sector during COVID-19, when the Egyptian economy and the country’s main source of revenue, tourism, which provides income to millions of households in normal times, came to a standstill. Even with low commodity prices, oil revenues helped the Egyptian government support businesses and workers in the hardest-hit sectors, such as tourism and manufacturing. At the same time, citizens were exempted from taxes and cash transfer programmes were expanded for poor households and irregular workers, according to the IMF.
In terms of society, this means: Thousands of communities that have organised their social structure based on reasonable energy prices, billions of individuals aligned their housing situation, their mobility and their career choices with an economy based on cheap energy – they have literally anchored their living conditions in the availability of cheap energy. If one wants to set all these individuals in motion at once towards a climate-neutral future, one should think carefully about where the journey should go – because all too quickly the masses could start to tilt – similar to the platform once the spudcans are solved. Here, too, Egypt’s Arab Spring can serve as an analogy: some experts attribute its outbreak to the sharp rise in food prices at the time. While in Egypt the spring was followed by the Arab autumn, Egypt’s neighbouring countries Libya and Syria were even torn apart in brutal civil wars.
So if we loosen our anchorage without sufficient stabilisation measures, we risk no less a tilting in numerous societies. We describe how this sudden loss of one’s energy sources can play out in our magazine “The Post-Soviet World” when Armenian society was subjected to such a withdrawal practically overnight (available here).
Teamwork and coordination
The real risk only begins when the rigging is loosened and the platform is ready to cast off. The manoeuvre that sets the huge construction in motion requires the concentration, coordination and interaction of many different ships. Without seeing each other, the different crews have to coordinate and rely on each other’s skills, because once the inertia of the mass is overcome, the possibilities to change the platform’s course are very limited.
The same applies to societies – if they are moved with a rash jerk, many risk going overboard. But once the masses are on the move, it is equally difficult to steer them back into orderly channels. The current inflation of food and energy prices and the associated national debt of emerging and developing countries gives us a foretaste of what could happen if the demands of various activists with a one-sided focus on an immediate halt to all fossil activities were to become reality.
A ship sails ahead
A ship pulls the rig behind it under the command of the captain on the platform. That is the big difference with the climate negotiations: There is no supreme judge as the final authority or captain who makes the final decision. The participants in the international climate negotiations have to rely on each other to stick to their mutual pledges to reduce their carbon emissions and to chart an appropriate course over several decades without letting too many go overboard:
Even though the oil rig will be in use for the oil industry for decades to come, this does not mean that plans are not being made today to replace it with a cleaner energy source afterwards. However, before governments, politicians and CEOs could responsibly set the energy transition in motion for their citizens and workers, there must be a master plan that offers realistic alternatives: not only for the crews on board the oil rigs but also for the millions of Egyptians who depend on the transfers funded by oil revenues. Therefore, it is only responsible that the oil-exporting and industrialised countries look for workable solutions before they possibly plunge their populations into chaos.
