Climate Governance and the Resource Curse

Evan Musolino and Katie Auth

The energy sector is the world's single largest driver of climate change, accounting for roughly 70 percent of global greenhouse gas emissions. Limiting emissions by reducing our dependence on fossil fuels will require the active participation of diverse, and often conflicting, stakeholders, including policy makers, scientists, industry leaders, and consumers. The difficulties inherent in rallying such groups to combat a complex, long-term problem like climate change make it a “super wicked” public policy challenge, testing not only our capacity to innovate technological solutions but also—perhaps most importantly—our capacity to govern.

So far, global leaders and delegates to the United Nations Framework Convention on Climate Change (UNFCCC)—the international governance structure designed to prompt and enforce the global response—have failed to enact signifi change, despite near-universal scientifi consensus on the existence and causes of human-induced climate change, widespread public support for climate mitigation in countries around the world, and growing momentum behind grassroots climate activism in the United States and elsewhere. Given this lack of action, are there alternative means of leveraging social pressure and pushing for meaningful action that would have greater success?

Given the strength of the fossil fuel industry, its political influence, and the extent to which our economies and infrastructure have become dependent on its products, the concept of the “resource curse” offers one potential way to understand the immense challenges facing democratic governance and international climate cooperation. Traditionally, the curse has been understood as a socioeconomic phenomenon that negatively affects poor countries dependent on resource extraction, including by impeding democratic governance or enabling political repression. Now, however, and in the context of climate governance, similar effects can be observed in some of the world's most stable industrialized democracies, including Australia, Canada, and the United States.

The Traditional Resource Curse and Its Impacts on Governance

The resource curse theory has been a major component of international relations since it was put forward in the mid-1990s to explain the paradoxical observation that countries with abundant natural resources—particularly non-renewable resources like oil and minerals—often fail to achieve the economic growth and development that might be expected. Instead, strong dependence on such resources often results in economic stagnation, increasing social stratification, and a failure to invest in long-term development needs. Although these impacts have been linked with dependence on the exploitation of natural resources of various kinds, oil has particularly acute effects because of its central role in the global economy and the opportunities it affords for a high return on investment.

Much of the established literature focuses on the economic impacts of the resource curse, yet the theory also posits that economic dependence on oil resources can have detrimental impacts on national governance, discouraging investment in public priorities and creating incentives for or enabling government corruption and authoritarian rule. A regime supported by massive oil revenues has little need to cultivate popular support or respond to its citizens' demands, and can therefore use resource earnings to enrich a small elite, neglecting broader development priorities such as education and public health. Elements of this paradox have been observed in troubled countries like Angola, the Democratic Republic of the Congo, Nigeria, and the oil states of the Persian Gulf. Angola has been cited as a prime example of how developing countries with significant oil resources are among those “most prone to poor governance, armed conflict, and poor performance in economic and social development.”

Certainly, the style of governance in any given country reflects a wide range of economic, social, and historical factors. Many of the world's oilproducing developing countries gained independence only recently, or had weak governing institutions to begin with. In such cases, although the discovery and exploitation of oil resources may not cause repressive governance, it may enable or aggravate it, providing a guaranteed financial cushion that allows governments to ignore or suppress popular demands for increased accountability. In some cases, significant oil earnings have allowed repressive regimes to remain in power longer than would have been the case otherwise. Nevertheless, the correlation between economic dependence on oil and gas resources and poor governance can be illustrated by numerous international indicators. World Bank data indicate that of the 30 national economies most dependent on oil and gas resources, 27 rank below both global and regional averages in the annual “Voice and Accountability” index, which assesses citizens' ability to select government representatives, exercise freedom of expression and association, and access a free media. Heavily oiland gas-dependent countries also perform poorly in other international benchmarks for government accountability, including the Reporters Without Borders Press Freedom Index, an annual ranking of the “freedom to produce and circulate accurate news and information” in 179 countries worldwide. Of the world's 30 most oiland gas-dependent economies, only 3—Kuwait, Norway, and Trinidad and Tobago—fall within the Index's top 100. (See Figure 17–1.)

Figure 17–1. Freedom of the Press in Countries Most Dependent on Oil and Gas Earnings, 2011

Many oil and gas-dependent countries with limited accountability to their citizens also fail to mitigate the negative health and environmental impacts associated with the extraction and use of fossil fuels. In a study of the oil industry's impact in Nigeria, Amnesty International concluded that oil exploration has resulted in violations of the right to an adequate standard of living (including food and water), of the right to gain a living through work, and of the right to health. With hundreds of oil spills occurring each year, the study concluded that the Nigerian government's lack of accountability played a chief role in perpetuating these damages, and the absence of government transparency remains a major stressor in the Niger Delta. According to Amnesty, the Nigerian government continually fails to enforce its own laws and regulations and, in designating a partner of the oil industry as its regulator, has developed a regulatory scheme that “fundamentally conflicts with the concept of an independent regulatory body.”

Correlations between economic dependence on fossil fuel extraction and undemocratic governance can be observed even in strong economies where governments do choose to spend resource earnings on public priorities. In some cases, this spending reflects an effort to stifle popular criticism rather than to improve democratic rule. Political scientist Michael Ross, using statistics gathered from 113 countries between 1971 and 1997, concluded that oil wealth can inhibit democratization in part through its “taxation” and “spending” effects: oil wealth allows governments to relieve social pressures and increase patronage spending, both of which can dampen demands for reform.

Following the start of the Arab Spring in December 2010, which eventually toppled repressive governments in several countries in the Middle East and North Africa, the government of Saudi Arabia nearly doubled national spending in order to placate its population and solidify central power. This was enabled by increased oil revenue tied to a jump in the global oil price from less than $70 per barrel to more than $100 per barrel. Some speculated that this market shift was not purely coincidental but rather was driven by Saudi Arabia working with its fellow Organization of Petroleum Exporting Countries (OPEC) members to assert their influence over global oil prices in an effort to increase revenue.

In addition to its impacts on domestic governance, evidence suggests that oil dependence can be associated with a decreased likelihood that countries will engage actively in global governance, and that such countries have developed their own norms for international cooperation. Although petrostates are deeply integrated into the global economy and rely heavily on foreign markets, oil-rich nations generally can access foreign markets with greater ease and without concession, granting them the freedom to operate autonomously with little fear of losing potential buyers. This is in contrast to countries that lack such abundant resource endowments and that must seek markets for goods with a more elastic demand.

Petroleum products already benefit more widely from import duty exemptions than any other product group, further reducing the incentive for oil-producing nations to seek new agreements guaranteeing market access and allowing them to protect their domestic industries. The world's dependence on a steady supply of fuels also can work to shield such states from censure by the international community. Despite engaging in actions such as “expropriating foreign investors, flouting human rights, and financing terrorism and armed rebellions in foreign countries,” petro-states in which these situations have occurred manage to remain actively engaged in international markets, belying the predicted increase in political and legal cooperation as countries increase their economic integration.

Despite the multitude of examples linking economic dependence on resource extraction with a decrease in democratic governance, the correlation is neither causal nor inevitable. Many established states with strong democratic traditions have managed to exploit their extractive resources without sacrificing responsive governance, choosing to rely on extensive public input to ensure that oil revenues support public priorities and benefit the country's population in both the short and long term. Norway, which has chosen to apply its oil revenues to ethical and sustainable long-term foreign investments, is a case in point. (See Box 17–1.)

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