Global Decarbonization in Fossil Fuel Export-Dependent Economies: Fiscal and Economic Transition Costs

This paper takes a closer look at the potentially huge economic and fiscal transition costs of global decarbonization in fossil fuel export-dependent economies. The paper identifies 40 heavily fossil fuel dependent economies. It is estimated that these countries will lose more than 60 percent in oil rents alone during the period 2023-2040 under a net-zero 2050 global decarbonization scenario compared to a ‘business as usual’ scenario reflecting stated policies. Local projections analysis provide evidence in support of possibly large adverse impacts on growth, government revenue and debt from a rapid fall in global fossil fuel demand in net-exporting emerging markets and developing economies. Finally, the paper discusses the mitigating domestic and international policy options to help countries.