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Session Overview
5-HP052: Inclusive Development, Climate Change, the SDGs and Social Justice: The Problem of Stranded Resources and Assets
Wednesday, 07/July/2021:
11:00am - 12:15pm

Session Chair: Prof. Joyeeta Gupta, University of Amsterdam, Netherlands, The
Session Chair: Prof. Barbara Hogenboom, University of Amsterdam, Netherlands, The

Session Abstract

Climate change requires drastic restructuring of global society. This will lead to winners and losers and will require increased levels of global solidarity. For example, countries are being asked to not use their fossil fuel reserves (which makes such reserves a stranded resource) and move from fossil fuel infrastructure to renewable energy infrastructure (which makes fossil fuel infrastructure a stranded asset). In the context of the Sustainable Development Goals, the question is what kinds of development (e.g. inclusive development/ post development/ de growth) and related measures are needed to leave fossil fuels underground and address climate change in a socially just manner?

EADI Working Group: Inclusive Development

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Large Investors and Fossil Fuels: The Case of Pension Funds

Arthur Martorelli Rempel, Joyeeta Gupta

University of Amsterdam, Netherlands, The

Achieving the 1.5-2°C target requires leaving more than 80% of proven fossil fuel reserves underground. Investors - particularly large institutional investors like pension funds (PFs) - are major global actors, but their role in investing in the fossil fuel sector has scarcely been investigated in the scholarly literature. Hence this paper addresses the question:

What is the extent of pension fund investments in the fossil fuel sector, and how do these investments contribute to the mitigation of greenhouse gas (GHG) emissions?

In order to address this problem, we take an inclusive development perspective – which calls on an analysis of the social, ecological and relational inclusiveness of PF investments and actions. Our methodology is based on a statistical analysis of the fossil fuel assets (common shares & corporate bonds) held by PFs by investigating in detail the portfolios of 15 major PFs and extrapolating that to the rest of the field. We also assess the policies of these PFs through an examination of their corporate sustainability reports (CSRs).

The statistical analysis revealed that: (a) PFs globally manage an estimated €40 trillion in assets, equivalent to 13% of global wealth and therefore their investment patterns merit investigation; (b) the sampled PFs have liquid assets worth roughly €2 trillion and hold approximately €80 billion in liquid fossil fuel assets; (c) these fossil fuel assets translate to substantial ownership of major firms like Royal Dutch Shell (3.7%), Total SA (4.0%) and BHP Billiton (2.6%); (d) extrapolating beyond the sample suggests that global PFs hold an estimated €800 billion in liquid fossil fuel assets.

Furthermore, the CSR assessment concluded that: (e) sampled PFs are largely not committed to leaving fossil fuels underground and mitigating GHG emissions because, inter alia, they: (e1) do not account for potential GHG emissions from fossil fuel equity when computing their carbon footprints; (e2) allocate much smaller funds to climate mitigation compared to their fossil fuel assets (0.4% vs 4% of portfolios on average); and (e3) seldom exert their leverage over fossil fuel firms by directly engaging them, and when they do, do so reactively rather than proactively; (f) when generalized beyond the sample, this could mean that global PFs are not committed to mitigating present and future GHG emissions, hampering the likelihood of achieving the 1.5-2°C target and threatening prospects of social, ecological and relational inclusiveness and development. Finally, a preliminary ranking of the sample reveals that: (g) very few PFs (like Denmark’s ATP and Sweden’s AP4) show promising signs of commitment to mitigate GHG emissions, though many others (like the AustralianSuper and France’s Fonds de Réserve pour les Retraites) show no such commitments. The paper concludes that a strategic way to address the issue of leaving fossil fuels underground is bringing the activities of such large institutional investors into the spotlight and to assess the extent to which they should be held accountable for their role in promoting fossil fuel dependency.

Lffu in Latin America: Ideas, Interests and Institutions in Action

Barbara Hogenboom

University of Amsterdam, Netherlands, The

This paper aims to identify new ideas and strategies for LFFU and environmental justice in Latin America, and discuss their rootedness in formal and informal institutions and their potential for up-scaling from the perspective of environmental governance. To any innovative institutional change on natural resource extraction, the politics of ideas are of key importance. Understanding which new ideas are persuasive is the first step to develop, realize and up-scale alternatives. As a second step, while epistemic communities influence public discussions and policies and thus serve as agents of resource governance change, more often “ideas become influential when they are bundled with movements and coalitions” (Bebbington 2013: 10). A third steps concerns the institutionalization, including matters of scale, legitimacy, resources, etc. In the case of LFFU, a possible next step connects these ideas and coalitions to global climate action and funding schemes. The challenge of limiting FFE in LIMC cannot be tackled with a few top-down global reforms and financial and technological solutions: what is equally important are creative new ideas and strategies that connect local calls and plans for sustainable and inclusive development pathways with global agendas and financial mechanisms, and a consideration about the role of stranded resources and assets.

Social Mobilization for Leaving Fossil Fuels Underground in Ecuador, the Land where Nature has Rights

Carolina Valladares

UvA, Netherlands, The

The dependence of oil exports in Ecuador has influenced far beyond the national economy. It has also influenced the way of doing politics. Oil changed the relationship between the Ecuadorian state and its people, and the way citizenship is understood and claimed.

The aftermath of the exploitation of the oil reserves found in the Amazon, almost half a century ago, was one of the salient factors that triggered the resistance of Amazon indigenous organizations. This contributed to the claims of territory linked to identity of the national indigenous organizations, which are nowadays a key strategy for territorial defense and multi-scalar alliances.

In this paper I analyze how oil has shaped Ecuadorian politics. I put particular attention to the strategies and alliances of the social movement, who deploy cultural politics for contesting oil extraction in the country. My analysis starts from the 80´s, when social mobilization appeared in times of neoliberal policies and when the social environmental aftermath of oil extraction became visible outside the exploited territories. I contrast these strategies with the current mobilization after the recognition of nature’s rights in the Constitution of 2008 and the end of the second oil boom. After 2014 the indebtedness and economic crisis continues to put pressure on territories with oil reserves, while local and global environmental crisis and climate change are high on the international agendas.

Inclusive Development, Climate Change And The Case Of Revenue Recycling From Carbon Pricing: A Simulation Approach For Peru

Daniele Malelrba1, Anja Gaentzsch2, Hauke Ward3

1German Development Institute, Germany; 2BMZ; 3Leiden University

Climate change mitigation and poverty eradication are two of the main challenges of our time. Economic growth and growing household consumption, whilst decreasing poverty, have also given rise to environmental degradation. Carbon taxes in combination with cash transfers to the lower income households are usually seen as the most effective way to address climate change mitigation without negative distributional effects. But evidence, especially for many low and middle income countries, is needed to better understand the potential use of this policy package. And to understand how to better use the revenues fro carbon pricing mechanisms to copensate for other stranded resources and stranded assets.No such analysis is available, for example, for Peru, among the fastest growing countries in the region of Latin America. The paper aims at answering the following research questions: (i) What would be the fiscal, poverty and distributive impact of a carbon tax? (ii) How well is the current social protection architecture suited to offset adverse consequences for the poor, if (part of) the revenues from the carbon tax are recycled towards existing programs? (iii) What are the main limitations of the current targeting scheme for social assistance, and what improvements can be proposed, especially in the context of its compensatory role within the implementation of a carbon tax?

The analysis is based on a static incidence model, linking top-down macro data (environmentally extended MRIO) with bottom-up household surveys. The results show that through a well design cash trannsfer program can decrease poverty as a result of the fiscal reform (carbon tax plus cash transfer). On the other hand it is true that policy makers face a trade-off between poverty reduction effects and the share of revenues used. This is crucial as part of the revenues needs to be used to copennsate other actors for their stranded assets. The paper sheds light on crucial questions at the interface of social and environmental goals. More specifically, this paper contributes to the literature by estimating how existingcash transfer program architecture can act as compensatory measure for real income losses due to carbon taxes. While a consensus seems to being reached on the importance of using of cash transfers in combination with carbon taxes, it is crucial to understand the practical complementarities between these two policies starting with the current systems.

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