Ramifications of a world’s shift towards greener/renewable energy, a zero net carbon future, the staggering $66.1 Billion Climate Finance made by the Multilateral Development Banks in 2020, and the consequences Somaliland could face if we do not align our extractive industry programs.
The global talk of the town is the COP 26, the climate change summit currently taking place at Glasgow of Scotland (31st October 12th November 2021) and the universal commitment to a 2C degree reduction by shifting to green energy with zero emissions. The 2021 United Nations Climate Change Conference, synonymously known as COP26, the pinnacle of all climate change conferences, will be taking place, and nations worldwide will engage in the eagerly awaited summit to prevent further damage to our human existence. It is widely speculated that one of the immediate objectives is to immediately and radically reduce the use of all fossil fuels – such as oil, gas, coal, and other minerals with aggressive commitments code-named the Environmental, Social, and Governance (ESG).
The late Ahmed Zaki Yemeni, the former Petroleum Minister of the Oil-rich Saudia, made a sage quote in the 1970s, by saying “The Stone Age came to an end, not for lack of stones, and the oil age will end, but not for the lack of oil, but the world will discover more efficient and better fuel energy”. This predicted adage seems to be catching up with us fast and becoming the norm of the day, and we are witnessing the vast amount of finances going into greener renewable energy and its advancement year after year. The Multilateral Development Banks (MDBs) reports showing that in 2019 and 2020, the total investment into climate finances and mainly emission reduction were $35.7 and $66.1 billion, respectively.
We are all witnessing a critical time in our history where we see a significant shift from a predominant fossil fuel-based economy to something cleaner more efficient. The greener/renewable energy age is set to take over in this immediate future when we see significant investments shifting away from the natural resource industry to more sustainable sources. Nearly $50 billion from the $66.1 billion investment in 2021 from the MDBs was associated with the climate change mitigation schemes.
The implications of climate change on Somaliland’s extractive industries?
Climate change, a topic regarded to many as controversial or even rhetoric hype, is worth engaging in due to its complexity and need to join abreast with the global communities by addressing it while safeguarding our national interest first, which has exceeded our expectations. Governments urge their industries to lower their carbon emissions, fight against climate change, and establish a framework to address global warming. Climate change and extractive industry are somewhat intertwined with each other in that they adversely affect each other. Tackling climate change in Somaliland’s case will require significant social, economic, and technological changes, which will be costly, together with the need to abandon our oil, gas, and mining sectors. Climate change will impact our extractive industries in many ways on both sides of the threat and opportunities spectrum.
The extractive industry of Somaliland, which consists of oil, gas, and mining, is regarded as the ‘future driver’ of our economic growth. Despite not yet extracting any oil or gas and coal and our minimal effort to extract minerals so far, the potential it has to transform our economy for the greater good cannot be understated. The prospects of extracting our resources far outweigh the negatives it can do to our climate, especially in the eyes of our yet to be developed nation. The need to transform our already weak and vulnerable infrastructure will not come to our country by chance, and it is up to us to seize the moment instead of dancing to the thrilling rhetoric climate change tunes of the developed world.
There is no specific way to avoid the threat climate change poses to us, and also, at the same time, the resulting COP26 restrictions will hamper our still infantile extractive resources programs. The developed nations are forcing down to the undeveloped countries while still using billions of metric tons of coal year on year with any sign of abating. Greenhouse gas emissions, pollution, and biodiversity loss are just some of the few dangers it poses to humanity’s environment and overall well-being. The threat is real and there, but there is no concrete reason to stop the entire extraction process for the undeveloped world while big nations are mostly indifferent. Governments could improve the environmental performance of the extractive industry by issuing fines/penalties for those who violate and engaging with environmental experts to improve the policy and regulatory frameworks that govern this sector. Companies could also implement robust ecological practices in their daily operations.
Another major threat to the development of our extractive industry stems from the announcement from the World Bank. This financial institution provides loans and grants to the governments of low and middle-income countries and declares that they are shifting from investing in oil, gas and minerals. The world bank has not made any coal investments for over a year and ramping up its financing of renewable energy by servicing 34 gigawatts of renewable energy to help communities thrive. This clearly shows that the World Bank is taking climate change seriously, indicating that Somaliland might have lost a potential investor partner in their extractive industry.
The world still relies heavily on natural resource exploration, and demand is ever-growing. It would be foolish for Somaliland to stop its extractive industry due to the agenda of the climate initiatives such as ‘COP26’ who have cast smaller nations aside all in the name of ‘global warming. According to the United Nations Environmental Programme, mineral extraction plays a dominant role in 81 countries and employs around 118 million workers. This is without mentioning other benefits the oil industry provides, such as the transportation it provides, the generating of electricity, and the products derived from it such as medicine, plastic, etc.
While the BRIC economic block of countries “Brazil, Russia, India, China and South Africa) all declined to participate in the ongoing COP26 summit and most likely will not bind to its outcome. At the same time, they are the biggest culprits for coal carbon emitters as China consumed 4.3 Billion MMcF and India 1 Billion MMcF annually and jointly contributed to 61.8% of world coal consumption. Therefore, Somaliland should not join the climate change initiative or what we sarcastically call ‘propaganda’ until it is adequately compensated. It will not be wise to completely abandon the vital extractive resource programs needed to transform our economy. Somaliland needs to utilise all its resources to transform into an economically better, small yet developing nation.
Finally, we live in a world of great paradoxical hypocrisies; the recent announcement of Mark Zuckerberg for the zenith of artificial intelligence and into metaverses, therefore, rebranding Facebook to the virtual ‘Meta’ proves that we live in two different worlds, the developed nations live advancement and fantasy world, and we the underdeveloped countries are challenged by the reality. The COP26 attending delegates were reported to have used more than 400 privately chartered aircraft, in addition to the thousands of other commercial flights that landed at Glasgow, exposing more hypocrisy to the world.
Our key takeaways and recommendations.
The story of the battle between the extractive sector and climate change makes for a complex and fascinating narrative. On the one hand, you have most of the world’s population living in nations that are well endowed with natural resources. On the other, you have other countries advocating for a change of our current plight by reducing this industry’s damage to our climate. As humanity intensifies its efforts to reduce the irrecoverable consequences of climate change by introducing international initiatives such as the COP26, UN Sustainable Development goals, nations in the extractive industries are facing an ever-increasing challenge to address the urgent topic of climate change whilst remaining competitive.
A ‘net zero carbon’ future presents some opportunities for the extractives industry of Somaliland. Shifting to such as future will require significant investments in new infrastructure in which Somaliland does not possess. In 2020, MDBs reported that $13.2 billion would be committed to low and middle-income countries for climate change adaption finance. This reported figure is too low when compared to what our extractive industry can offer us. The extractive industry of the Somali race can offer up to 700 times that of what the MDBs are offering. There is no incentive yet for Somaliland to stop the total extraction of our precious ‘fossil fuels’. It is unfair that the other nations have properly developed themselves using their extractive industries to propel themselves to greater heights and suggest we keep sitting down with the ducks and donkeys!
The world has failed to realise that the Somali race lives in a harsh undeveloped world wherein no way, shape, or form will benefit from blindly following the climate changes rhetorics. Our message is to forget this virtual reality and the more hype climate changes and be emphatic and focus on the facts of our nation’s conditions. It is true that that the natural resource industry poses a range of environmental challenges. Still, its benefits and means of the development outweigh and should not come at the cost of the Somali race’s only means of action.
This does not mean that we should snub caring for our’ Mother Earth’ whilst extracting resources. There is no reason why we cannot incorporate what’s best for our climate in our daily operations when extracting minerals from Earth. Why can’t we adopt the best practices and code of conduct when dealing with the natural resources and as such, have listed a few recommendations that must be adhered to by our Ministry of Energy & Minerals, who sustainably oversee our extractive industry:
- Pledge to promote and adopt best industry practices.
- Promote enhanced transparency about the environmental practices with the affected communities.
- Support research and use the best available technology in the production chain.
- For the Ministry of Energy & Minerals to enforce the international guidelines on the protection and maintenance of the environmental standards.
- Commit to community rehabilitation schemes.
- Engage with the companies to improve their mitigation systems
- Increase the recycling rate of minerals.
- Invoke precautionary measures on large-scale and risky operations
Jointly co-authored by Mohd Faisal Hawar and Mohamoud Faisal Hawar, both Oil and Gas Management Graduates, specialising in Oil and Gas Fiscal Regimes, Oil and Gas Economists, Trainers & Consultants on all the Extractive Fiscal Regimes.
|Mohamed Feysal Hawar
Extractive Resources Economist (Upstream Petroleum & Mining Economist )
BBA (Hons) Oil and Gas Management.
|Mohamoud Feysal Hawar
Extractive Resources Economist (Upstream Petroleum & Mining Economist )
BBA (Hons) Oil and Gas Management.