Many countries have developed comparative advantages in energy and carbon-intensive sectors which have helped them escape poverty and fuel shared prosperity. This report deepens the understanding of the impacts that carbon-intensive countries may face from uncertain but possible developments such as international climate policies, trade measures, transformational technology trends, and shifts in consumer preferences that can affect global demand for fossil fuels and the cost of burning them.
The report's methodological framework combines qualitative and quantitative analysis, offering new insights into understanding impacts and the most robust and sustainable coping strategies. Its key messages include:
• Countries have different carbon-intensive assets-resources in the ground and built infrastructure-that vary in their exposure and vulnerability to transformational trends.
• Structural transformations are normal in history, and many coping strategies have turned risks into new development opportunities.
• Climate change adds new momentum to the traditional diversification debates in resource-intensive countries. The best hedging strategies are based on deep diversification not only of outputs and exports but also of the asset base-natural, physical, human, and intangible capital.
• Countries will use a menu of policies to manage structural transformations including energy, fiscal, and climate policies as well as trade measures.
• Anticipating or reacting to the climate transition shocks, some carbon-intensive countries may choose to be the early movers and divest quickly, some will choose to be the followers, while others may try the harvesters’ strategies. Each strategy has opportunities and risks.