How can oil- and gas-dependent countries transition away from fossil fuels in energy systems in a just, orderly and equitable manner?

This was the key question being posed to policymakers and researchers at the Policy Dialogue on Just Energy Transitions in June, hosted by Climate Strategies, Salzburg Global, Stanley Center for Peace and Security and Windward Fund. Over three days, governments and researchers shared perspectives on different strategies, creating a rich exchange of ideas.

To inform these discussions, I was invited to prepare a paper examining the forces driving the decline in oil and gas demand and what they mean for producer countries, which has now been published in a new report. The analysis points to urgent choices governments must make.

According to most energy forecasters, oil and gas demand are set to peak this decade and go into slow decline, even without any change in governments’ policies. The report  explores what is driving this:

• The biggest oil and gas demand segments – cars and power generation – also happen to be the ones where technological alternatives are the most advanced. Electric cars and wind & solar power are in the rapid-rollout phase. As they progressively replace the existing fleet of cars and power stations, they will soon push total demand into decline.

• Energy forecasters are more conservative about earlier-stage technologies such as electric trucks and clean industrial heat. Noting how the forecasters underestimated electric cars, wind and solar when they were at this earlier stage ten years ago, advances in these areas  suggest potential for much larger demand disruption in the late 2030s  and 2040s.

• While  the current trajectory is not fast enough to achieve the Paris goals, new policies to further reduce emissions or enhance importers’ energy security will accelerate the decline.

These changes create a profound threat to economies that depend on oil and gas exports, from Trinidad & Tobago to Nigeria. The report examines how:

• Oil and gas exporters urgently need to diversify their economies, reducing their reliance on oil and gas and building resilience. This entails both building new sectors to create a broader economic base, and diversifying their sources of fiscal revenue.

• Because diversification can take decades, action needs to start now to keep pace with the global transition.

• Transitioning away from dependence on oil and gas creates an opportunity for a more prosperous economy.

• Despite today’s tense geopolitical climate, countries need to work together to make the transition just, orderly and equitable.