Oil Shock Mitigation Strategies for Developing Countries
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OIL SHOCK MITIGATION STRATEGIES FOR DEVELOPING COUNTRIES JUNE 2013 OIL SHOCK MITIGATION STRATEGIES FOR DEVELOPING COUNTRIES JUNE 2013 PREPARED FOR THE PRINCIPAL AUTHORS United Kingdom Department Dr Jeremy Wakeford for International Development Associate Prof. Martin de Wit BY THE CONTRIBUTING CASE STUDY AUTHORS Sustainability Institute and School of Public Leadership Dr Sumetee Pahwa-Gajjar Stellenbosch University, South Africa Mr Blake Robinson RUSSIAN FEDERATION LATVIA LITH. BELARUS UKRAINE KAZAKHSTAN MOLDOVA MONGOLIA S ROMANIA . & M B.-H. BULG. UZBEKIST . GEORGIA KYRGYZ REPUBLIC MAC. TURKMENIST ALB. ARMENIA AZ. AN TURKEY TAJIKISTAN AN N SYRIA TA CHINA LEBANON CCO IRAN TUNISIA IRAQ JORDAN AFGHANIS AN NEP MORO ALGERIA AL LIBYA AKIST EGYPT P I IT MEXICO A CUBA H INDIA DOMINICANREPUBLIC MAURITANIA LA O PDR BELIZE JA ANTIGUA & BARBUDA CAPE VERDE MALI NIGER ERITREA MAICA SUDAN GUATEMALA HONDURAS DOMINICA SENEGAL CHAD MEN BANGLADESH ST. LUCIA YE EL SALVADOR NICARAGUA GRENADA GAMBIA CAM. VIETNAM ST. VINCENT DJIBOUTI GUINEA BISSAU GUINEA BURKINA COSTA RICA & GRENADINES FASO NIGERIA THAILAND PHILIPPINES N VENEZUELA E CENTRAL AFRICAN IR N GUYANA BENI TE OO ETHIOPIA O PANAMA SIERRA LEONE OGO O GHANA REPUBLIC SURINAM T C Note to Readers LIBERIA 'IV SRI D MALAYSIA COLOMBIA A MALDIVES LANKA CAMER ECUADOR SÌO TOM & PRINCIPE AND KENYA PAPUA UG This report is intended to serve as a ONGO DEMOCRATIC RWANDA NEW GUINEA GABON C REPUBLIC BURUNDI SEYCHELLES OF CONGO reference work for policy-makers, planners I NDONESIA PERU TANZANIA SOLOMON TIMOR-LESTE ISLANDS and researchers, primarily in developing BRAZIL COMOROS ANGOLA MALAWI SAMOA countries but also in multilateral agencies and ZAMBIA E VANUATU U Q BI BOLIVIA M A international aid organisations. The document ZIMBABWE Z FIJI P O GASCAR ARA A MAURITIUS NAMIBIA M TONGA presents and applies an analytical framework GU BOTSWANA AY MAD for assessing national-level socio-economic they read the Executive Summary and the SWAZILAND vulnerabilities to international oil price and sections of the report pertaining to the generic SOUTH LESOTHO URUGUAY AFRICA supply shocks, and for mitigating the impacts country category which is of direct interest to of such shocks in both the short term and them. In addition, given that fairly extensive CHILE the long term. The report develops generic background data and vulnerability analysis has ARGENTINA vulnerability assessments and mitigation been provided in Part I, some readers may strategy recommendations for four categories wish to focus more directly on the mitigation COUNTRIES INCLUDED IN THE STUDY of developing countries: low income oil strategies in Part II. Finally, there are four stand- importing countries; lower middle income oil alone country case studies of vulnerabilities and 5 000 km 0 1 000 2 000 3 000 4 000 5 000 importing countries; upper middle income likely impacts of oil shocks, each representing KEY (at Equator) oil importing countries; and net oil exporting one of the four generic country categories. Low income oil importing countries countries. By design, there is a certain amount These case studies provide a greater level of overlap among the sections dealing with of detail concerning oil shock vulnerabilities Lower middle income oil importing countries SOURCE: World Bank (July 2011) the three oil importing categories. For those and also served to inform the development Upper middle income oil importing countries readers with limited time, it is suggested that of mitigation strategies and policies. Oil exporting countries iv I OIL SHOCK MITIGATION STRATEGIES FOR DEVELOPING COUNTRIES WORLD MAP – COUNTRIES INCLUDED IN THE STUDY I v THE DEPARTMENT FOR INTERNATIONAL DEVELOPMENT (DFID) THE SUSTAINABILITY INSTITUTE ABOUT THE AUTHORS The Department for International Development (DFID) The Sustainability Institute (SI) was established in 1999 to Project Leader and Co-principal Author Case Study Authors leads the UK government’s fight against world poverty. advance learning for sustainable living. Located in the Lynedoch Dr Jeremy Wakeford is an economist specialising in energy and Dr Sumetee Pahwa-Gajjar is a sustainability professional Through its network of offices throughout the world, DFID Eco-Village near Stellenbosch, it focuses on combining practice sustainability. He holds Master’s degrees in economics from who was formerly a researcher based at the Sustainability works with governments of developing countries, charities, with theory in a way that integrates ecology and equity in the University of Cape Town (South Africa) and Cambridge Institute, Stellenbosch University, South Africa. She obtained no-government organisations, businesses and international support of a sustainable South Africa, with special reference University (United Kingdom), and a PhD in sustainable her PhD degree in sustainable development and planning from organisations, like the United Nations, the European to reducing and eradicating poverty. The SI has built a name development and planning from Stellenbosch University (South Stellenbosch University. Commission and the World Bank, to eliminate global for itself through its Masters Programme in Sustainable Africa). He is currently a Senior Lecturer Extra-ordinary in the poverty and its causes. DFID’s work forms part of a global Development Planning and Management, which comprises School of Public Leadership at Stellenbosch University and was Mr Blake Robinson is Project Manager at the Sustainability promise, the eight UN Millennium Development Goals, a Postgraduate Diploma in Sustainable Development and a formerly a Senior Lecturer in Economics at the University of Institute, Stellenbosch University, South Africa. He holds for tackling elements of global poverty by 2015. DFID’s Master of Philosophy degree in Sustainable Development, Cape Town. Dr Wakeford has extensive research experience an MPhil in Sustainable Development from Stellenbosch Climate and Environment Department (CED) is helping in partnership with the School of Public Leadership at in the field of energy economics, and frequently consults to University. to establish DFID as a world leader in demonstrating Stellenbosch University. government departments, private sector clients and non- results, impact and value for money from supporting governmental organisations, both in South Africa and abroad. developing countries to tackle climate change. CED’s SI Projects is a business unit of the SI that offers its clients E-mail: [email protected] goal is to demonstrate that low-carbon, climate resilient sustainability expertise shaped by the insights of the Masters and sustainable development is necessary and achievable. programme and the latest research conducted by its students Co-principal Author Acknowledgements and Disclaimer and associates. Projects are managed by a core group of Professor Martin de Wit is an environmental and natural This project was funded by the UK Department for International individuals and institutions linked to the SI, offering expertise resource economist, having obtained his PhD in economics Development. The authors are grateful to several reviewers for across a range of sustainability-related areas. SI Projects works from the University of Pretoria (South Africa). He was formerly their comments and suggestions, including Dr Gary Kendall closely with graduates of the SI’s Sustainable Development Principal Environmental Economist/Business Area Manager of the Cambridge Programme for Sustainability Leadership, programme, Stellenbosch University’s Centre for Renewable at the Council for Scientific and Industrial Research and is and several DFID staff members. We also received valuable and Sustainable Energy Studies (CRSES) and the TSAMA-Hub. currently Associate Professor Extra-ordinary in the School of feedback from stakeholders in the case study countries. However, The SI is a non-profit organisation, so any additional revenues Public Leadership at Stellenbosch University (both in South the authors are solely responsible for the report and for views generated by SI Projects are channelled to support community Africa). Professor de Wit serves as a director on ASSET expressed in it, and these should not necessarily be attributed development initiatives such as the crèche and after-school care Research (Pty) Ltd, a not for profit organisation, focussed on to DFID, the Sustainability Institute or Stellenbosch University. facilities for under-privileged children at Lynedoch. research and capacity building in ecological and development economics. He has a broad interest in national and international © The authors and Sustainability Institute affairs and has consulted to a wide range of clients including national and provincial governments, corporate business, non-government organizations, and universities. E-mail: [email protected] vi I OIL SHOCK MITIGATION STRATEGIES FOR DEVELOPING COUNTRIES I ABOUT THE AUTHORS vii Contents Abbreviations . xi 1.4 Upper Middle Income Countries . 46 Units of Measurement . .xii 1.4.1 Key socioeconomic characteristics . .47 List of Figures . .xiii 1.4.2 Oil dependencies and vulnerabilities . 51 List of Tables . xv 1.4.3 Likely impacts of oil shocks . 55 Executive Summary . xvii 1.4.4 Summary . 57 1.5 Oil Exporting Countries . .58 0. INTRODUCTION . .1 1.5.1 Key socioeconomic characteristics . .59 0.1 Background and Rationale . 3 1.5.2 Oil dependencies and vulnerabilities . 62 0.2 Aims and Research Questions . 5 1.5.3 Likely impacts of oil shocks . 66 0.3 Methodology . 5 1.5.4 Summary . 67 0.3.1