Energy and peace: the dangers of our slow energy transition

Resource scarcity and climate change should be driving forward the transition to the energy systems of the future. Instead we see a laggardly pace of change that threatens global political stability.

In his article, ‘Changing energy provision – a peacebuilding opportunity?’, Phil Champain poses an important question about the influence of changing energy provision on peace and conflict.  He aptly argues that future energy systems are likely to have a significant impact on peace and conflict dynamics, just as fossil fuel-based strategies have historically.  Furthermore, he rightly identifies the two dynamics that are driving changes in our energy systems – increasing constraints around certain critical fossil fuels and the climate-induced imperative to transition to low-carbon energy systems.  These two trends are indeed substantial and demand drastic changes to our approaches to peacebuilding and development. 

Despite these dynamics however, most developed and developing countries are not making the transition to alternative energy sources at either the pace required by climate science or that implied by resource scarcity.  This laggardly pace of change in energy systems has already threatened political stability – whether through increased food and fuel prices or heightened competition for scarce resources.  Therefore, in addition to asking the big question about how our future energy systems will influence conflict, in our view, a long-term question, we must also ask a shorter-term version: how will our slow rate of transition, with all of the disruptions and other knock-on impacts ensuing from it, impact political stability in the coming years?

The severe consequences of this slow pace of change are facing policy makers now, but most have neither a good understanding of its impacts on peace and conflict nor the tools to mitigate these risks.  This short post aims to complement Phil’s by offering a basic framework to answer this short-term question and some initial reflections on the implications for peacebuilding and development.

Our slow energy transition

Resource scarcity and climate change should be driving forward our transition to the energy systems of the future.  Though this transition has started in important ways in several locations, change is not being undertaken at either the scale or speed required. 

With regards to the transition to low-carbon energy, global efforts are far from adequate.  Of the estimated $650 billion per year that must be invested in renewable energy and energy efficiency measures to reach a 450 parts per million (ppm) emissions target, less than $200 billion was invested in 2010[1]. Moreover, much of this investment is required in developing countries, where the bulk of emissions growth is anticipated, but where international financial support is necessary to help pay for the transition to low-carbon energy [2].  It is thus very worrying that despite the commitment by governments to mobilize $100 billion of such climate finance in the context of the international climate negotiations, it remains unclear as to where this financing will come from [3].  This lack of clarity around the sourcing of incremental financing has served to retard this transition even as the tightening of the international capital markets in the wake of the financial crisis has resulted in delays and even cancellation of energy infrastructure projects worldwide. 

However, it would be a mistake to argue that the speed of transition is justified by climate targets alone.  Serious scarcity challenges have emerged for certain critical fossil fuels as rapidly increasing demand from emerging economies has run up against constrained supplies.  Indeed demand for these resources, and with it the danger of destabilising resource scarcity, have grown massively despite the conclusions of climate science.  Before moving on to an in-depth discussion of the scarcity dynamics of these fossil fuels below, it is crucial to highlight the significant interconnections between energy and other increasingly constrained resources, in particular food and water. 

Energy, food and water form a complex, inter-dependent system that has been described by some as the “water-food-energy-climate” or “water-energy-land” nexus [4]. This set of interconnections extends the impacts of changes in one resource into the others and vice versa, dynamics which are often only further exacerbated by climate change.  Take for example increased scarcity in oil.  Such scarcity combined with the imperative to avert dangerous climate change has helped to incentivize biofuels production.  Crop-based biofuels have in turn increased competition for land and food production which itself is already threatened by the changes in precipitation caused by a changing climate.  These dynamics have led to severe pressures on food security worldwide.  This and other aspects of these interconnections will be further discussed in the next section, but we first return to energy resource scarcity. 

Emerging scarcity trends have resulted in different dynamics for the major fossil fuels as follows:

Oil

Over the past decade, increased demand and sharply constrained conventional supplies have resulted in a set of inter-related dynamics – a rising and increasingly volatile oil price; increased investments in higher priced and higher risk unconventional sources such as the tar sands; and heightened interest in the conventional oil reserves of high risk locations such as Iraq, Sudan, Zimbabwe and Afghanistan. 

As a reflection of these dynamics, the price of Brent Crude had reached nearly triple digit figures even before the recent unrest in the Middle East.  Irrespective of such above-ground supply disruptions, the fundamentals of the oil market will likely continue to drive the oil price upwards (from a lower baseline than the current elevated level) unless there are significant changes in technology or, more unlikely still, substantial new discoveries.  Even the chief economist of the historically optimistic International Energy Agency (IEA) recently declared the age of cheap oil to be over [5]. Such a high oil price has significant implications for economic development and political stability in all countries [6], and even has important and often disruptive consequences for oil-rich nations as further discussed below. 

Alongside this trend of increasing prices, perhaps the most worrying aspect of the oil market has been the consistent, rapacious growth in demand over the last decade despite such rising prices, constrained supplies and the climate imperative.  For example, from 2009 to 2010 amidst the global downturn, oil consumption grew 3.1% to its highest ever rate of 87 million barrels per day (mbd), a full 10 mbd more than a decade earlier [7]. Such an inelasticity in demand is particularly concerning as combined with increasingly inelastic supply [8], it makes the prospect of international tension and even confrontation over access to oil much more realistic.

Gas

Until recently, the dynamics in the gas sector roughly mirrored those from the oil sector – increasing demand, constrained conventional supplies, and rising and increasingly volatile prices.  However, trends in the gas market have begun to significantly diverge from those of oil, particularly in the last couple of years. 

This divergence has been driven primarily by sizeable increases in gas supply both as a result of the development of unconventional production in North America, dubbed by some the “shale gas revolution,” and substantial growth in conventional production in countries such as Qatar and now Australia.  As gas is not truly a global commodity like oil, these increases in supply have contributed to substantial regional differences in gas prices which are expected to persist into the medium term [9]. At the same time, this supply growth has been more than matched by very rapid growth in demand.  This could lead to the same supply and price pressures as for oil because demand for gas is likely to continue to grow at such a pace well into the future.  However, it remains unclear to what extent the expansion of unconventional production in North America and into other countries such as China and Poland amongst others will be able to keep up with such demand. 

While the future of gas supply and prices may be unclear, it is clear that gas will remain a resource of strategic importance.  Interest in securing access to gas has led a large number of countries to pursue unconventional extraction despite the regulatory difficulties, environmental damages and increasingly vocal public opposition.  Moreover, though the potential of unconventional production has undermined the influence of long-established exporters such as Russia, there has been growing international tension over the routes of gas pipelines in recent years [10].

Due to its relative abundance and low price, coal has been the preferred resource for electricity generation and heating in most developed and developing countries for several decades.  With the rapid expansion of electricity needs particularly in rapidly emerging economies, demand for coal has significantly increased in the last ten years.  The proportion of coal in the energy mix is now the highest since 1973 and could increase by as much as 53% over the next twenty years, a trend which is arguably the largest challenge facing efforts to avert dangerous climate change [11].

Though coal does not suffer from the same level of supply constraint as oil or gas, such rapidly increasing demand has resulted in unprecedented volatility in the price of coal in recent years.  This is largely due to the relative immaturity of the global coal market which has not yet developed adequate international transportation infrastructure, is heavily reliant on a small number of exporters and maintains spot pricing.  As seen following recent floods in Australia, difficulties with one major coal producer can produce substantial price rises at a regional level and beyond [12]. Thus, until the global coal market matures, there is a high likelihood of increased prices and price volatility for this critical, low-cost energy source.

Furthermore, the rising price of coal is serving to promote the use of lower quality domestic supplies, especially in countries with high demand such as India and China.  The growing use of low quality coal not only raises further concerns for the climate, but also poses severe local health risks, both through the dangers involved in its extraction and far more broadly through air pollution. The impacts on local populations of the use of lower and higher quality coal have already caused serious local political tension in several parts of China [13]

As you can see, scarcity dynamics across these critical fossil fuels have significant direct consequences – from rising and increasingly volatile prices as in the case of oil and coal to heightened local and international tension as a result of coal use-induced health risks, damage caused by unconventional gas production, and increased competition over access to constrained oil and gas resources.  Nonetheless, as in the case of climate change, these consequences have yet to result in a substantial transition away from these energy resources.  As shown in the table below, their share of global energy use had only fallen a mere 5.3% in 35 years by 2008, down to 81.3% from 86.6% in 1973.      

Table 1: Share of primary energy use by energy source: 1973 to 2008

Energy Source

Share of primary energy in 1973 (%)

Share of primary energy in 2008 (%)

Oil

46.1

33.2

Coal/Peat

24.5

27.0

Gas

16.0

21.1

Hydro

1.8

2.2

Nuclear

0.9

5.8

Combustible renewables and waste

10.6

10.0

Other

0.1

0.7

Fossil fuels total

86.6

81.3

Total energy demand (in millions of tonnes of oil equivalent (Mtoe)) 

 

6,115

12,267

      Source: Key World Energy Statistics 2010, IEA 

Implications of energy resource scarcity on political stability

Our continued reliance on these energy sources in light of both resource scarcity dynamics and the climate change imperative has significant knock-on impacts.  Building upon the chart included in Phil Champain’s article, the diagram below maps out the consequences of the scarcity trends currently at play for the major fossil fuels.  It highlights those that will result in increased pressure on local governance, institutions and the political economy more broadly, particularly in developing countries. 

In this diagram, we have not explicitly included the knock-on impacts emanating from changes in the climate that are expected as a result of this continued reliance.  Not only do the pressures exerted by climate change largely serve to exacerbate the trends described below, particularly through their impact on food and water, but the impacts of a changing climate on political stability have already received significant attention.[14] Our core aim here is therefore to add to these analyses by focusing on the dynamics unleashed by energy resource scarcity.

With this focus on resource scarcity, the diagram identifies three broad sets of knock-on impacts related to political stability:

·         Higher costs that will directly impact lower and middle income groups, particularly in urban areas (highlighted in red);

·         Increased investments in constrained resources with potentially country-wide consequences in poorly governed, resource-rich states (highlighted in green); and

·         Heightened threats to substantial government programmes and economic growth more broadly in all affected countries (highlighted in blue).

Diagram 1: Knock-on consequences of emerging energy resource scarcity dynamics

 

Set 1 - Higher prices of food, transportation and electricity

The first set of knock-on impacts includes three of significant import for lower and middle income populations – higher prices of food, transportation and electricity.  As shown in the diagram, rising and increasingly volatile oil and coal prices are placing upwards pressure on these three sets of costs.   

In the case of food, prices are being driven upwards by the rising and increasingly volatile oil price through a set of inter-related dynamics.  Firstly, oil and oil-based products such as petrochemical fertilizers are key inputs for food production and distribution, and thus as the oil price has dramatically risen over recent years, so have these input costs.  At the same time, increased oil prices have rendered biofuels more economically competitive, unleashing rapid growth in their demand which has in turn created intense competition for land and for the end-use of some food staples.  These shifts in land use, particularly in major breadbasket countries such as the USA and Brazil, have served to reduce overall food supply and thus to raise food prices globally.  Moreover, these resource scarcity-driven dynamics are taking place within a global food system that is now widely viewed as fundamentally “bust.”[15] Other long-term drivers such as rapidly growing consumption, overly-intensive production patterns, water scarcity and climate change have arguably stretched the current system beyond its limits. 

The destabilising political effects of higher global food prices were displayed clearly in the origins of the Arab Spring.  Though no single factor, including food price rises, can be held responsible for political instability, such price rises are likely to increase its risk when combined with other vulnerability factors such as a high dependency on food imports, low state capacity, corruption, high income inequality and long-term demographic challenges such as a “youth bulge” and high population growth.  Our analysis indicates that high global food prices along with these factors in varying combinations are placing a much larger set of countries at higher risk of political instability than our usual list of “fragile states,” however defined.  For example, when using even very conservative thresholds for the above factors, we found that many middle income countries are at a higher risk of political instability as a result of rising global food prices, including rapidly emerging economies such as China, India, South Africa and Mexico. 

With the exception of the small number of localities that have taken steps to shift to gas, biofuel or electrified transportation, transportation systems worldwide remain heavily reliant upon oil.  Thus the rising and increasingly volatile oil price is placing upwards pressure on the cost of transportation in most countries, with impacts not only on food prices as noted above, but also with potentially severe direct implications for lower income urban populations dependent upon public transportation.  Due to the economic importance of transportation, most developing countries have a long-standing system of price supports for transportation fuel which partially shields lower income populations and the broader economy from rises in the price of oil.  However as will be further explored in the subsequent section on threats to government programmes and the economy, the long-term upward trend in oil price and increasing price volatility are making these programmes progressively more unsustainable.  As Mr. Champain notes in his post, one need look no farther than the recent protests over fuel subsidies in Nepal to see the potential political stability implications of these dynamics.

Finally, electricity prices are being driven upwards by these emerging scarcity dynamics, in coal-importing nations due to the rising and increasingly volatile price of coal, and by oil price rises in the limited number of countries where oil is still used for electricity generation.  Such an increase in the price of primary energy will likely further diminish access to electricity in locations where baseline levels of access are already very low.  As a result, the World Bank predicts that the proportion of people with access to electricity will actually decrease by 2030 [16]. Such energy poverty has been one of the enduring barriers to development in many parts of the world.  Although we have not yet seen direct political instability consequences from electricity price rises or diminished energy access, future trends remain uncertain.  In the coming decades, energy poverty is expected to increase most significantly in rapidly expanding urban areas in developing countries.  Combined with other destabilizing dynamics such as rising food and transportation prices, higher electricity costs and the resulting diminished access to electricity could encourage political instability in these contexts.

Set 2 - Increased investment in constrained resources: oil, coal and land

The second set of knock-on impacts involve increased investment flows in the progressively more valuable energy resources themselves, in the case of oil and coal, and in resources such as land that as a result of scarcity dynamics, are becoming increasingly sought after. 

The heightened interest of investors in these resources is causing them to become more aggressive and much less risk averse in their approach to securing these assets.  As detailed in the sections below, this means that larger sums of capital are flowing into a greater number of countries with poor overall governance capacity such as Iraq, or to others that have inadequate governance structures for the particular resource in question, such as Ethiopia in the case of land. 

These trends have set off dynamics analogous to those long-described as the “resource curse” – processes in which natural resource wealth is not shared equitably or invested sustainably and is largely used to promote the narrow interests of the domestic elite.  Not only have such dynamics historically involved a substantial portion of resource rents being lost through capital flight, but they have also frequently served to undermine the local economy considerably beyond the resource sector.  If not managed correctly, resource rents can cause currency overvaluation which damages the competitiveness of other exports, further contributing to an often excessive economic focus on the resource sector and other associated economic distortions.

Though these dynamics may well be slightly different in this coming period and will surely be hugely context-specific, they are poised to significantly threaten economic development and political stability in many countries.  The following short sections highlight the countries at increased risk by resource.

Oil – As many of the giant oil fields that we rely upon fall into terminal decline and large discoveries become progressively rarer, oil companies have looked further and further afield for economically viable reserves.  As noted above, this has involved substantial expansion of unconventional production alongside increased investments in contexts previously considered too risky.  The willingness to invest in contexts of poor governance has been further encouraged by the rise of powerful and thirsty new actors in energy, most prominently Chinese and Indian national oil companies.  

The following table includes countries with conventional oil reserves whose production has not yet peaked [17] and which have relatively poor governance (we have used control of corruption as a proxy here though there are several other governance indicators that could be used).  Such a listing very roughly approximates the countries at a higher risk of an oil-based resource curse as a result of resource scarcity, or in most cases, those that are at a higher risk of deepening of existing curse dynamics.  These nations, despite their poor governance, are likely to attract substantial additional capital in the coming years as oil supply becomes progressively more constrained.  These dynamics will only intensify as oil becomes scarcer, and the list overall will almost certainly lengthen as unconventional oil production is pursued in such risky contexts. 

Table 2: Countries with non-peaked oil production and poor control of corruption 

Country

Proven Oil Reserves

(Mtoe)

Control of Corruption Score

(-5 to 5 range)

Angola

1,800

-0.241

Azerbaijan

1,000

- 0.391

Chad

100

-1.752

China

2,000

-0.439

Colombia

200

-1.67

Republic of Congo

300

-0.411

Equatorial Guinea

200

-0.024

Iran

18,900

-1.518

Iraq

15,500

-2.33

Nigeria

5,000

-1.953

Saudi Arabia

36,300

-0.367

Sudan

900

-2.647

Thailand

100

-1.105

Venezuela

24,800

-1.411

Source: compiled by the authors using data from BP Statistical Review of World Energy 2010, World Bank World Governance Indicators (2009, accessed in 2011)

Coal – As discussed above the global demand for coal is rapidly increasing and in consequence, there is a growing need for international coal exporters.  This trend has been driven in large part by the recent shift in China’s position from coal exporter to being one of the largest importers of coal worldwide.  It is also being compounded by surging demand in other emerging economies, and is likely to be furthered by a shift away from nuclear in large OECD coal importers such as Japan and Germany after the recent nuclear crisis in Japan.

In general, the dangers of a resource curse around coal are much less pronounced than those for oil since the capital investments and rents involved are at a much smaller scale.  With rising coal prices, however, larger investments will become more common, especially in cases where governments establish bilateral supply deals, as China has recently with Russia.       

As above, the following table lists countries with substantial coal reserves available for export and which have been rated as having relatively poor governance (defined as above).  This listing provides a crude estimation of the countries which may be at higher risk of a coal-based resource curse as a result of energy resource scarcity.  It should be noted, however, that as future trends in coal demand are less certain than those for oil, it is more difficult to be certain that resource curse dynamics will develop for coal in these or any other contexts.   

Table 3: Countries with coal reserves available for export and poor control of corruption 

Country

Proven Reserves

(Mtoe)

Control of Corruption Score

(-5 to 5 range)

Colombia

6,814

-1.67

Greece

3,900

-0.065

Indonesia

4,328

-0.642

Pakistan

2,070

-2.156

Russian Federation

157,010

-0.725

Ukraine

33,873

-0.27

Source: compiled by the authors using data from BP Statistical Review of World Energy 2010, World Bank World Governance Indicators (2009, accessed in 2011)

Land – Despite its relatively low valuation, the danger of a resource curse from land is a very real prospect.  As evidenced by the recent spate of large-scale international land deals, land is an asset of growing interest to investors due to all of the factors we noted above – rising food prices, heightened attractiveness of biofuels, and longer-term water scarcity trends.  To some extent, recognition of the risk of a resource curse from land is implicit in the concerns that have already been raised about such investments, which are now being widely referred to as “land grabs” [18].

While we have decent data on fossil fuel investments, there is not yet a comprehensive system to document land acquisitions worldwide.  As such, our understanding of the global pattern of land acquisitions remains primarily based upon fragmentary data from secondary sources largely focused on international land deals.  As a comprehensive data set is developed, we may find that the bulk of concerning acquisitions are not international as currently conceived, but rather more regional or domestic in nature.  The growing literature on “land grabs” is making strides in closing this gap though further systemic analysis is clearly needed.

Notwithstanding this lack of data, what is clear is that large-scale land deals are being made all around the world in the absence of adequate domestic land regulations in most contexts or effective international guidelines and norms.  Most worryingly, in many cases even those countries with reasonably decent levels of governance do not have strong land tenure systems or the larger set of government regulations required to manage such large-scale acquisitions for the public interest.  In cases such as Ethiopia, where the government has formulated a national policy to benefit from land acquisitions, local rights have not been protected and the benefits have not been equitably shared.  To those familiar with resource curse dynamics, these results are not very surprising.  On the other hand, the relative successes from the use of carefully designed contracts for land deals in Liberia may offer a practical remedy that can be immediately taken up by developing countries as other international frameworks are developed.

Across these resources, scarcity trends are threatening to unleash or further deepen existing resource curse dynamics.  As the resource curse has long been recognized and is reasonably well understood, it is critical that we use the lessons learnt from previous cases to ensure that this destabilising and debilitating pattern is not further extended or exacerbated.  Moreover, we must build the national-level systems that address all of the potential negative consequences from these rents to enable countries and communities to actually benefit from the opportunities unlocked by these scarcities. 

Set 3 - Threats to government programmes and the economy

Finally, the most wide-reaching impacts of resource scarcity and the resulting high commodity prices are the threats they pose to national and global economies.  As food, transportation and electricity are vital to social and economic wellbeing, the foundations of countries’ welfare and thus stability are challenged as their prices rise.  These high prices not only reduce access to these goods as discussed above, but are likely to cause increases in inflation and the loss of competitiveness across entire economies.  Moreover, these increased prices threaten the sustainability of large-scale subsidy programmes for food, fuel and transportation which exist in the vast majority of developing countries.  It is this threat that may prove be the most damaging to political stability of all of the ones unleashed by resource scarcity.  

As the cost of subsidy programs rise due to higher prices, countries must choose between taking on further debt to maintain subsidy programs or phasing out subsidies and facing serious backlash from a public faced with higher costs.  Some countries such as India have responded by phasing out their fuel subsidies despite severe public protest.  Others such as Jordan have been forced to renege on established and much-needed programs of subsidy removal.  Indeed, most low and middle-income countries have been locked further into subsidies by rising prices.  Perhaps most worryingly, very few countries have been able to replace wide-reaching programmes with more targeted ones, the first step in a sustainable, inclusive transition path away from subsidies.  Arguably both of the other options - of short-term political survival by maintaining subsidies and medium-term economic viability by eliminating them - have serious implications for political stability.

Overall, these three sets of knock-on impacts of energy resource scarcity pose significant threats to political stability worldwide.  Moreover, they are complemented by other risks such as water scarcity when we consider the full, interconnected “water-energy-land” nexus.  As we have discussed, our slow pace of transition is unleashing these risks now, all of which will be further exacerbated by climate change. 

Some Reflections on Our Future Energy Systems

We will eventually transition to alternate energy systems and Mr. Champain rightly notes that they are poised to have as substantial peace and conflict implications as our current ones.  In the following sections, we will briefly apply the lessons from resource scarcity and governance to our future energy prospects.

Nuclear – Besides the well-explored issues of non-proliferation and accident-induced meltdown, a rapid expansion of nuclear power could create similar resource curse dynamics for uranium as for coal.  As with coal, many of the most abundant sources of uranium are located in high or middle-income contexts such as Russia, Canada, the USA and Australia.  At the same time, there are also substantial uranium reserves in poorly governed lower-income countries such as Namibia and Niger.  Substantial exploitation of uranium in these contexts could trigger resource curse dynamics.  However, given the recent nuclear crisis in Japan, it seems unlikely that these resources will come under pressure in the immediate future.

Hydroelectric – As noted in Phil Champain’s post, hydroelectric power often involves large-scale engineering projects which can have significant impacts on political stability.  Such projects offer several avenues for corruption both through the large sums of money involved as well as the payments provided to people that must be displaced.  More importantly, these displacements often contribute to the dynamics of inter-group conflict and political tension.  In the most extreme cases, ambitious unilateral hydroelectric programs have been very important factors in the tension and conflict between states over transboundary aquifers.   

Solar, wind and other renewables – Solar, wind and other renewable energy technologies are also not without their impacts on political stability.  Some of these implications are due to the resources required for their production and implementation, many of which remain poorly understood.  For example, solar relies on rare and expensive minerals, and wind requires quite rare metals for its blades.  If these technologies were scaled rapidly, a host of minerals, including the well-known rare earths, would come under significant pressure.  This could unleash resource curse dynamics if their extraction occurred in poorly governed states.  In addition, many solar technologies are very water-intensive, and since the most productive areas for solar generation are very arid, this could exacerbate existing intra- and inter-state tensions over scarce water resources.  Finally, many renewable technologies require large amounts of land, further contributing to competition over this resource.

Conclusions

As resource scarcity and climate change become more severe due to the slow pace of our energy transition, there will be significant additional risks to political stability in a wider set of countries.  Many countries are already suffering from these risks through higher food, fuel and electricity prices, destructive resource curse dynamics, and threats to their economic health and large-scale programmes of critical public interest.  Moreover, the close integration of resources across the “water-energy-land” nexus and with the global economy means that these dynamics extend to other resources and across countries and regions.  These interconnections pose further threats to developing countries through trends such as increasing water scarcity, but remain relatively poorly understood. 

As such, one of the first steps to address these issues is to build our understanding of resource scarcity within the context of the wider “water-energy-land” nexus and its implications on economic development and political stability.  To this end, we support the work being undertaken by ODI and its partners for the European Report on Development 2011/2102, as well as the proposals put forward by Alex Evans to develop an integrated World Resources Outlook.  In addition to these systems-level analyses, work should be undertaken to better understand the dynamics of resource scarcity-induced instability at a local level, as well as to formulate effective design options for targeted subsidy programmes and related safety nets that could prevent instability and preserve development.  

At the same time, there are many elements of these dynamics that we already understand and can start to address.  For example, countries need to take urgent steps to examine and redesign their subsidy programmes for food, transportation and electricity in light of rising and increasingly volatile prices.  Such a process should aim to maintain protection for the most vulnerable as well as the overall economic health of the country in a conflict-sensitive manner.   Furthermore, the international community should support countries with oil, coal or land assets to build their systems of governance and establish the regulations required to prevent the resource curse.  Such efforts should clearly be supported by stronger international regulation and guidelines.  Moreover, governments and the international community at large must work together to address the drivers of food price rises and volatility, including tackling controversial policies such as biofuels subsidies, as well as putting in place the social safety nets required to prevent food price-related political instability.  

Finally, to address the root cause of these problems and meet urgent climate targets, it is imperative that we confront our reliance on fossil fuels.  Whilst this and the other challenges we face are indeed daunting, we must have the courage to deal with them head on.  We believe that if they continue to be ignored or misunderstood, particularly by the peacebuilding and development communities, political and economic stability will become increasingly endangered worldwide.

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1 Towards a Green Economy – Pathways to Sustainable Development and Poverty Eradication: A Synthesis for Policy Makers, UNEP, 2011

2 The World Bank estimates that $139-175 billion per year will be required for the next 20 years to finance the incremental costs of the transition to low-carbon energy in developing countries.

3 The “Cancun Agreements” reached within the context of international climate negotiations in December 2010 formalized the commitment to mobilize $30 billion of fast-start finance for the period 2010-2012 and $100 billion of longer-term finance per year by 2020. However the agreements were rather silent on where the money was going to come from, stating it will be from a “wide variety of sources, public and private, bilateral and multilateral, including alternative sources”.

4 Food, energy, water and the climate: A perfect storm of global events, Beddington/UK Government Office for Science, 2009; Water Security: The Water-Food-Energy-Climate Nexus, World Economic Forum, 2011; European Report on Development 2012, Draft Outline - Effective natural resource management for inclusive and sustainable growth in the context of increased scarcity and climate change, ODI, 2011

5 Address to the Bridge Forum Dialogue, 13th April 2011

6 World Economic Outlook 2011, IMF

7 Statistical Review of World Energy 2011, BP

8 We have seen such inelasticity of supply in evidence very recently as the IEA declared a state of emergency in the oil sector and released supplies from its strategic petroleum reserves.

9 Medium-Term Oil and Gas Markets 2011, IEA

10 In the past, the most notorious disputes over gas pipelines have been between Russia, Ukraine and European consumers. However, as gas infrastructure continues its eastward expansion, a new set of international tensions, between Russia, China, India and gas-rich Central Asian states, has emerged. For example, there was friction between China and India following unilateral Chinese decision-making over a pipeline running from Iran through Turkmenistan. This action was taken despite trilateral Russian-Chinese-Indian pipeline talks which had the stated goal of future cooperation. At the same time, a major pipeline between Russia and China was also announced in the same year. This pipeline has become the subject of acrimony and nationalist rhetoric on both sides following China’s simultaneous efforts to broker deals for lower-priced gas with competing gas providers Turkmenistan and Kazakhstan.

11 World Coal Association project a 53% rise in coal consumption. For power generation, the most important sector for abatement, the IEA estimates that reducing demand for coal will account for over 70% of all emissions reductions in a 450 ppm scenario (World Energy Outlook 2010, IEA).

12 Floods in Australia early this year sent coal prices to a two year high. In particular, the price of coking coal, used in steel manufacturing, rose by 30% from the previous quarter as a result.

13 Both mining and air pollution have significantly contributed to public discontent in China. Protests in Inner Mongolia earlier this year sparked by the death of a herder struck by a coal truck are just one recent example of the problems caused by coal production in China. Even more worryingly, air pollution largely caused by coal use regularly ranks alongside corruption as one of the major sources of discontent amongst the wider population (The Case of China and the Global Environment: Dizzying Growth, Devolution of Power, Environmental Disaster, 2009).

14 Conflict, Climate Change and Fragility, International Alert, 2009; Climate Change Governance and Fragility: Rethinking Adaptation – Lessons from Nepal, International Alert, 2010; 'Climate change will increase threat of war, Chris Huhne to warn', The Guardian 6th July 2011

15 Growing a better future: Food justice in a resource constrained world, Oxfam, 2011

16 Energy Strategy Approach Paper (for the 2011 World Bank Energy Strategy Review), World Bank, 2009

17 We have decided to use one of the more conservative estimates of which countries have already hit their peak. This list would have been quite a bit longer if a more mainstream estimation of peaked countries was applied.

18 The Surge in Land Deals: When others are grabbing their land, The Economist, May 2011; report on the International Conference on Global Land Grabbing

About the authors

Shruti Mehrotra is an independent advisor on climate change, resource scarcity and state fragility.  She was formerly a Global Leadership Fellow and Associate Director at the World Economic Forum, Senior Climate Campaigner at Global Witness and Executive Director of Relief International-UK.

Benedick Bowie is a senior researcher focused on climate change and resource scarcity.  Shruti and Ben are finalizing a publication on the “climate-food-energy-water-land” nexus and its implications on economic development and political stability.