Breaking the Poverty-Energy Nexus : Perspectives and Problems of Renewable Energies in Developing Countries with High Fuel Import Dependency

(1)

Diploma Thesis

Breaking the Poverty-Energy Nexus:

Perspectives and Problems of Renewable Energies in Developing Countries

with High Fuel Import Dependency

Simon Drexler University of Konstanz

Department of Politics and Management Faculty of Law, Economics and Politics

December 2004

First Advisor: Professor Dr. Hans Illy Second Advisor: Professor Dr. Christoph Knill

(2)

Simon Drexler

Matrikel-Nr.: 01/434531

Diplomstudiengang Verwaltungswissenschaft Universität Konstanz

Hauptstraße 241 69117 Heidelberg Telefon: 06221/5886810 E-Mail: drexler.simon@web.de

(3)

Contents

Appendix

Appendix A: SITC Rev.3 ...128

Appendix B: Data Samples ...130

Appendix C: Country Data Samples ...134

Appendix D: Statistical Calculations ...139

Appendix E: Poverty Reduction Potential ...143

List of Tables

Table 2.2-1: An Overview of the UN Millennium Development Goals and Targets ... 28

Table 2.3-1: Oil-Importing Country Macroeconomic Indicators... 37

Table 2.3-2: Data on selected Island States... 39

Table 3.1-1: Measures of Energy Import Dependency ... 48

Table 3.3.1-1: Energy Imports, net (% of Commercial Energy use) 1999 ... 52

Table 3.3.2-1: Value of Energy imports (% of total export earnings) 1998-2002 ... 58

Table 3.3.3-1: Costs of Net Energy Imports (% of GDP) 1998-2002... 62

Table 3.3.4-1: Correlation Analysis for Fuel-Importing Countries ... 68

Table 3.4.1-1: Health – Opportunity Costs of Fuel Imports ... 72

Table 3.4.2-1: Education – Opportunity Costs of Fuel Imports... 75

Table 3.4.3-1: Poverty Reduction Potential of Reduced Fuel Imports ... 78

Table 3.4.3-2: A Thought Experiment ... 79

Table 4.1-1: Share of Renewables in Global and Regional Energy Supply ... 85

Table 4.1-2: Job Creation Potential of Renewables ... 92

Table 4.3.3-1: Mali: Foreign Trade and Energy Import Dependency...106

List of Figures

Figure 2.1-1: Global Energy Poverty ... 11

Figure 2.1-2: Energy Consumption and Human Development... 13

Figure 3.3.1-1: Map of Energy Imports, net (% of Commercial Energy use) 1999 ... 53

Figure 3.3.2-1: Map of Value of Energy imports (% of total export earnings) 1998-2002 .. 60

Figure 3.3.3-1: Map of Costs of Net Energy Imports (% of GDP) 1998-2002... 63

Figure 3.3.3-2: GDP Growth and Energy Import Dependency... 65

Figure 4.1-1: Share of Renewables in World Total Primary Energy Supply... 85

Figure 4.1-2: Regional Shares in Renewable Energy Supply (2000) ... 86

Figure 4.3.1-1: Country Map of Mali...100

Figure 4.3.3-1: Composition of Mali’s Imports and Exports (2002) ...106

(5)

Chapter 1: Introduction

1. Introduction

1.1. Purpose of the Study

In recent years, the linkages between poverty and energy have increasingly been a subject of discourse in international development politics. The beginning of this trend dates back to several pathbreaking development studies published in the 1970s and 1980s.

Publications such as the Club of Rome Report “Limits to Growth” (1974), the “Brandt Report“ (1983) or the „Brundtland Report” (1987) broadened the hitherto narrow focus of energy issues on questions of geopolitical power, supply security and economic growth and helped to put other important issues like the problem of resource scarcity, the need for increased north-south cooperation, and the concept of sustainable development to the forefront of the political and public debate. The oil price shocks of 1973 and 1979 represented a similar turning point in the appraisal of international energy issues. The oil price shocks led to the Third World Debt Crisis and further exacerbated poverty in most parts of the developing world. Henceforth, the vulnerability of oil-import dependent countries to price fluctuations on the international energy markets was no longer negligible.

However, the long period of low oil prices from the late 1980s through the 1990s has again dampened interest in the macroeconomic problems and poverty implications arising from fossil fuel import dependency. Global energy prices were no longer perceived as a major impediment to economic growth and world energy consumption increased dramatically.

Within three decades, global fossil fuel consumption almost doubled and reached an estimated 8,050 million tons of oil equivalent (Mtoe) in 2000, compared to 670 Mtoe for nuclear power and 230 Mtoe for hydro and other renewable energies (IEA 2002: 410). While the industrialized countries and a few „emerging economies“ (e.g. China and India) clearly dominated the increase in fossil fuel consumption, developing countries experienced a similar rise in the consumption of traditional biomass energy as a result of rapid population growth.

Both developments brought about various forms of environmental problems, including deforestation, degradation and erosion of arable lands, loss of biodiversity and global warming. In particular climate change has come to represent one of the greatest challenges facing the world at the beginning of the 21st century. The growing incidence of climate- related disasters such as prolonged drought, destructive floods and windstorms are ominous harbingers of what we might expect to see happen in the future. Consequently, the concern

(6)

Chapter 1: Introduction that environmental degradation caused by unsustainable energy use could rapidly develop into a crisis situation of unmanageable proportions gave energy-environment issues a more and more important role in international politics. Prominent examples are the establishment of the International Panel on Climate Change (1988), the Rio Earth Summit (1992), the Kyoto Agreement (1997) and the Johannesburg World Summit on Sustainable Development (2002).

At the same time, renewable energies emerged as a viable option to overcome the adverse impacts of current energy consumption patterns. An increasing number of countries now recognize the important role of renewable energy sources and adopt promotion policies to facilitate their market penetration. The current run-up in oil prices spurs this development by reducing the costs of renewable energies relative to other energy sources. The largest conference so far solely dedicated to renewable energy was held in Bonn, Germany in May 2004 and hosted delegates from 154 countries, including 121 ministers and heads of state.

In parallel to recent advances on the energy-environmental front, a re-orientation of poverty alleviation strategies took place during the 1990s and paved the road for the current energy- poverty debate. In the past, poverty reduction policies were predominantly based on strategies of macroeconomic growth, large-scale infrastructure development and human capital investment. In this context, energy was seen mainly as an independent sector issue and was not fully recognized as a crucial aspect of poverty itself. In contrast, the current energy- poverty debate takes a more holistic perspective and centres on the assumption that energy and poverty are inextricably linked. In our seemingly modern world, more than 2 billion people still have no access to modern energy services, relying instead on traditional biomass sources like fuelwood, charcoal and animal dung. This has severe implications for the day-today life of the majority of poor people in developing countries because energy is vitally linked to numerous important dimensions of development: economic productivity, health, nutrition, education, gender, agricultural production and environmental quality. The low level of modern energy services in Third World countries clearly adds to the misery of poor populations and significantly compromises their prospects for a better future. Bearing this in mind, a commonly shared belief is taking hold that the central Millennium Development Goal of halving global poverty by 2015 will not be achieved without considerably improving the energy situation in developing countries. This is well reflected in both the growing number of publications addressing the linkages between poverty and energy and the efforts of international donor organizations and NGOs alike to make energy an integral component of their poverty reduction strategies. An increasingly important objective in this connection is

(7)

Chapter 1: Introduction the harnessing of renewable energy sources to reduce the incidence and depth of poverty.

Particularly, this is the case in the field of rural development, where renewable energy technologies like solar home systems, biogas digesters or mini-hydro power plants are meanwhile regarded as an appropriate means to improve local living standards.

Given the enormous body of scholarship on poverty and (renewable) energy generated in recent years, it is truly not an easy task to contribute to the debate without having expert knowledge or considerable field experience. However, while the current debate is successful in shedding light on the various linkages between poverty and energy and incorporating the so gained insights into overall poverty-reduction strategies, the debate also has some major shortcomings. When it comes to the adverse impacts of unsustainable energy use in developing countries, the energy-poverty debate is mainly restricted to the rural or household level. On the whole, little detailed investigations are made about the structural economic costs associated with current energy consumption patterns on the macro or national level. This is especially the case for the great majority of developing countries that do not possess significant commercial energy resources and therefore heavily rely on fossil fuel imports to meet part or all of their commercial energy needs. When reference is made, the analysis is mainly limited to a narrow set of country examples and a short appraisal of the adverse macroeconomic impacts arising from high energy import expenditures (e.g. terms-of-trade deterioration, loss of foreign currency reserves, inflationary pressure and increased indebtedness). This critique shall briefly be illustrated by the following example. In his opening speech at the International Conference for Renewable Energies in June 2004, the German Chancellor Gerhard Schröder stated that “the current rise in oil prices is creating some 60 billion dollars in additional costs for the developing countries” and that “this is approximately the amount of money the industrial countries provide for development assistance each year”. He also added that “the poorest countries of Africa are currently spending more than half of their export earnings on oil imports” (ICRE 2004a). Surprisingly, neither the 12 thematic background papers to the conference nor any of the 69 key documents made available in the conference website’s virtual library use these staggering figures as a starting point for an in-depth analysis of energy-import dependency in order to further substantiate the importance of renewable energies. The Conference Issue Paper which was intended to “pull together main issues, findings and views” solely states that “Renewable energies reduce the reliance on energy imports, and diversify energy supply mixes by making use of locally available resources” and that “Renewable energies thus contribute to

(8)

Chapter 1: Introduction energy security and to the reduction of the foreign exchange burden”(ICRE 2004b: 8).

Further examples illustrating the lack of research in the field of structural energy import dependency are provided at the end of the next chapter.

The thesis is intended to bridge the discrepancy between the repeated acknowledgment of energy import dependency as being a severe problem for developing countries and the lack of a thorough and comprehensive structural analysis of how energy import dependency and poverty are linked. It is aimed to explore deeper the energy-poverty nexus by offering some explanations to the following research questions:

• Which countries are most severely dependent on the import of foreign energy sources? In particular, are there any significant structural differences in energy import dependency between industrialized and developing countries?

• How does energy import dependency affect poverty? In particular, what are the opportunity costs of energy import dependency in developing countries in terms of forfeited expenditure opportunities on health care, public education and transfer income for direct poverty reduction?

• How can renewable energy contribute to mitigate energy import dependency and reduce the incidence of poverty in developing countries? And what are the most striking barriers that impede the transition to renewable energy use in these countries?

1.2. Organisation of the Thesis

The thesis is organized into five parts. Following this introduction, Chapter 2 provides a critical overview of the recent poverty-energy debate and explores the nexus between inadequate access to modern energy services and the social and economic hardship of the poor. Special emphasis is thereby placed on the linkages between energy and household income, energy and health and energy and the environment. Reference is also made to the potential role of energy in achieving the Millennium Development Goals and the Johannesburg Summit Commitments. This part is not innovative in the sense that it breaks fresh ground and offers new insights. It is rather intended to reveal some of the debate’s major shortcomings and to lay out the framework for a comprehensive analysis of energy import dependency in the following chapter. Chapter 3 starts by giving a brief summary of some

(9)

Chapter 1: Introduction major oil import dependency concepts and indicators frequently used in the present literature.

This serves as a starting point to operationalize and measure the broader concept of energy import dependency. The concept used in my thesis is not solely restricted to the trade in petroleum products but also includes gas, coal and electricity. With this as a theoretical background, one physical indicator and two economic indicators of energy import dependency for 166 countries are compared. These indicators are the following: (1) net energy imports as a percentage of commercial energy use, (2) ratio of fuel import expenditures to total merchandise export earnings, (3) ratio of net energy import expenditures to GDP. The first indicator is taken directly from the World Bank’s World Development Indicators 2002, whereas the latter two are calculated by making use of data derived from the United Nations Commodity Statistics Trade Database (UN Comtrade). Comparisons are based on inter-group differences. In accordance with World Bank terminology, I differentiate between high income, upper-middle income, lower-middle income and low income countries.

The country group comparisons for each dependency indicator are complemented by a correlation analysis, which explores the statistical relationships between all three indicators.

In addition, I examine in brevity whether there is a recognizable relationship between the level of energy import dependency and per capita income growth. The second part of the quantitative analysis is devoted to the socio-economic opportunity costs of energy import dependency. The analysis is confined to two public sectors generally considered essential in combating poverty and enhancing opportunities for future generations, namely the fields of health and education. Furthermore, the opportunity costs of energy import expenditures for developing countries will be measured by calculating the loss of potential transfer income to directly eradicate extreme poverty. Based on the quantitative findings made in the previous section, Chapter 4 explores how renewable energies can contribute to overcome high levels of energy import dependency and which barriers may complicate a country’s transition to a cleaner and more sustainable energy future. A short case study of Mali complements the analysis. The selection of Mali can be justified on two grounds. In terms of energy import dependency, Mali can be considered a typical representative of developing countries in the low income country group. Furthermore, Mali is so far the only African member of the Johannesburg Renewable Energy Coalition, which has committed itself to a tangible target for the increase in renewable energy use (15 percent of total primary energy demand in 2015).

The thesis ends with a conclusion in Chapter 5. All tables, diagrams and calculations which are not included in the text are found in the appendix. The CD-Rom enclosed in the paperback version contains the utilized UN Comtrade and World Bank raw data in Excel format.

(10)

Chapter 2: The Energy-Poverty Nexus

2. The Energy-Poverty Nexus

What is actually meant by the term “energy-poverty nexus”? The term can be used to describe the complex interplay between the inadequate energy situation and the miserable socio- economic living conditions faced by most people in developing countries. Given the multifaceted nature of the relationship between energy and poverty, it seems worthwhile to take a closer look at essential issues in the current debate. The review starts by describing the overall importance of sufficient energy provision in the process of human development.

Further on, it will be shown that energy services have concrete and tangible consequences for the quality of day-to-day life in developing countries. Exemplarily, reference is made to the impact of energy on income generation and spending, health, and the environment. This is followed by an examination of the potential role of energy in achieving the Millennium Development Goals and the Johannesburg Summit Commitments. The chapter concludes with a critical appraisal of the current energy-poverty debate.

2.1 A Review of the current Energy-Poverty Debate

The following World Bank statement offers a good introduction into the topic:

“While rising petroleum prices have captured the headlines, for almost half of the world’s population energy problems take the form of a daily search for wood with which to cook food. Over 2 billion people still depend almost entirely on other traditional fuels, including crop and animal wastes.”

This sobering assessment was made in a World Development Report at the beginning of the 1980s (World Bank 1981: 40). Very little seems to have changed during the last two decades.

We currently witness a considerable surge in international oil prices and the World Energy Outlook of the International Energy Agency (IEA) draws pretty much the same bleak picture of the energy situation in developing countries. The IEA states that an estimated 2.4 billion people still rely on traditional biomass to meet their cooking and heating needs. It is even projected that the absolute number of people relying on biomass will increase to over 2.6 billion in 2030 due to rapid population growth and urbanization. In Africa the number is estimated to grow by 27 percent from 583 million to 823 million people and in South Asia, excluding India, by over 30 percent to 187 million people. The biggest reduction in biomass use is expected to happen in Latin America and Indonesia, where around a third of current biomass users will have abandoned consumption in 2030 (IEA 2002a: 390-391). International

(11)

Chapter 2: The Energy-Poverty Nexus electrification rates are commonly used as a second indicator to portray the insufficient energy situation in developing and transitional countries. According to the IEA some 1.6 billion people (one-quarter of the global population) completely lack access to electricity. 80 percent of the people without access to national grid systems or alternative off-grid applications live in rural areas, mainly in sub-Saharan Africa and South-East Asia. Africa has the lowest electrification rate with 34.3 percent, followed by developing Asia with 67 percent and Latin America with 86.6 percent. It is important to recognise that these aggregates contain significant regional variations. For example on the African continent, countries like the Democratic Republic of Congo, Ethiopia, Kenya or Uganda have electrification rates well under 10 percent, whereas in South Africa 66 percent and in the North African countries Algeria, Tunisia, Libya and Egypt more than 90 percent of the population enjoy access to electricity services¹.

Figure 2.1.1: Global Energy Poverty

Source: IEA World Energy Outlook (2002a: 400)

People lacking modern energy services are often but not necessarily identical with those 2.8 billion living in extreme poverty with per capita incomes of less than $2 per day (IEA 2002a:

375, UNDP 2002a: 17). This is especially the case for sub-Saharan countries. In the above mentioned countries Kenya and Ethiopia 62 percent and 76 percent of the population

1 The aggregate data is to be found in chapter 13, page 40 of the World Energy Outlook 2002 under “highlights”

(sic!). For a full account of electricity access data on a country basis, please refer to Table 13.A1 in the Annexes of the World Energy Outlook.

(12)

Chapter 2: The Energy-Poverty Nexus respectively fall below the $2 income margin (UNDP 2002b: 156/157). In other countries, the energy-poverty situation is more complicated. In China and Egypt only half of the population have daily incomes above $2 but more than 90 percent have access to electricity. Nevertheless, data on electrification rates often tell little about access reliability and affordability. This explains why in China, 706 million people still rely on biomass (out of 1.2 billion), while officially only 18 million people lack access to electricity (see Figure 2.1.1). A study which compared cross-country data for more than 100 countries revealed that energy consumption rises and the mix of energy carriers changes with increasing income. In particular, dependence on biomass is greater among countries with low per capita GDP, relatively large rural populations and more unequal income distributions (Leach 1992: 116-123).

However, the relationship between energy and poverty cannot be fully captured by solely applying monetary income indicators. A number of recent studies gave proof to the fact that a very strong linkage exists between commercial energy consumption and other important aspects of human welfare². Goldembergand Johansson for instance, point to the fact that low energy consumption is not the cause of poverty but a good indicator for many of its characteristics, such as poor education and healthcare. They show that 1 ton of oil equivalent (toe) of annual commercial energy consumption per capita can be used as a suitable threshold to determine the level of socio-economic development. When annual commercial energy use per capita is below 1 toe, infant mortality and illiteracy as well as fertility rates are high, whereas life expectancy is low. As commercial energy consumption increases and surpasses the 1 toe threshold living conditions improve substantially. Countries above a 2 toe threshold of energy consumption per capita rapidly approach the living standard of OECD countries with an average consumption of 5 toe per capita (Goldemberg/Johansson 1995: 4-6). This finding is supported by Suárez, who first plotted the Human Development Index (HDI)³ as a function of commercial energy use. His statistical analysis showed that energy consumption has an important influence on the HDI in the early stages of development. The HDI begins to increase notably between consumptions levels of 1 toe and 3 toe. From there on, the marginal

2 While studies by Goldemberg, Johansson, Suarez and Reedy are mostly quoted in recent publications, it should be noted that the first major studies to determine the role of energy in socio-economic development date back to the Latin American World Model studies of the Argentinean Bariloche Foundation in the 1970s (“Fundación Bariloche (1976): “Catastrophe or New Society: A Latin American World Model”. International Development Research Center: Ottawa).

3 The HDI measures human development with regard to three basic dimensions: long and healthy life, knowledge and decent standard of living. Life expectancy at birth, adult literacy rate and GDP per capita (PPP US$) are used to operationalize these dimensions and to calculate the composite index. For details on how the HDI is calculated, see UNDP 2003:341-342.

(13)

Chapter 2: The Energy-Poverty Nexus utility of increased energy consumption rapidly diminishes and even large improvements of energy services do not lead to increased human welfare (Suárez 1995).

Reedy refined the analysis by subdividing the energy-HDI function in three regions, an elastic, a transitional and an inelastic region (see Figure 2.1-2). In the elastic region impressive improvements in HDI can be achieved with very small investments of energy. It is even possible to decouple HDI improvements from income increases at this stage of development.

He supports his argumentation by giving an example of energy needs in the Karnataka State in Southern India. According to Reedy, only

100 watts per capita are needed to allow for clean and efficient cooking with liquefied petroleum gas (LPG) and sufficient home electrification for lighting, food preservation and entertainment. This is only one tenth of the energy needed to support living standards in Western Europe ⁴ . In the inelastic region enhanced energy services do not automatically lead to increased human welfare, but may indirectly be responsible

for HDI improvements by providing better conditions for income generation. He concludes, that “in the elastic region increased energy services guarantee direct improvement of HDI, whereas improvement of HDI via income depends on what the income is used for” (Reedy 2002:19).

The empirical results as outlined above indicate that the energy dimension of poverty fits well into the broader definitions of poverty, as developed in the international discourse over the last years. The theoretical construct “poverty” is today commonly perceived as “a multidimensional phenomenon, encompassing inability to satisfy basic needs, lack of control over resources, lack of education and skills, poor health, malnutrition, lack of shelter, access to water and sanitation, vulnerability to shocks, violence and crime, lack of political freedom and voice” (World Bank 2001: 3). In the same vein, the U.N Committee on Economic, Social

4 The example given above corresponds to the so-called „1 kilowatt per capita scenario” conducted in 1985. It was found out that only a 10 percent increase in energy consumption (equal to 1 kilowatt) would lead to a level of energy services in developing countries comparable to those of Western Europe in the 1970s. The scenario was developed under the condition that the developing countries would deploy the most efficient energy carriers and technologies available in the 1980s (Goldemberg, et al. 1985).

Figure 2.1-2: Energy Consumption and Human Development

Source: Reedy (2002): 118

(14)

Chapter 2: The Energy-Poverty Nexus and Cultural Rights described poverty as “a human condition characterized by sustained or chronic deprivation of the resources, capabilities, choices, security and power necessary for the enjoyment of an adequate standard of living and other civil, cultural, economic, political and social rights“⁵.

Energy in itself is not a basic need because people do not want the energy itself but the services it provides, e.g. lighting, heating, cooking or transport. Demand for energy is thus often defined as a “derived demand” essential in satisfying most basic human needs (DFID 2002: 5). If we rewrite the previously mentioned poverty definitions with regard to the energy dimension, we could conclude that: “Poverty can in many instances be described as a condition in which people are deprived of having access to modern energy resources and services leading to reduced capabilities, a limited menu for choice and finally resulting in a low standard of living and a weakened position in society”. What does the lack of modern energy services actually mean for the poor in their daily lives? In the following, the nexus between poverty and energy will be closely looked upon, by showing how insufficient energy provisions constrain the capabilities of the poor and contribute to their misery. The overview focuses only on some core issues for illustrative purposes (income, health, and environment) and is therefore rather exemplary than exhaustive. Many detailed publications have already been made on these issues and a wide range of other characteristic linkages could have been easily added to further underline the critical role of energy in human development (e.g. the linkages between energy and population growth, energy and urbanisation, energy and nutrition).

5 This poverty definition is part of a statement adopted by the UN Committee on Economic, Social and Cultural Rights on May 4th 2001 (UN Doc. E/C.12/2001/10).

(15)

Chapter 2: The Energy-Poverty Nexus 2.1.1 Energy and Household Income

The linkages between energy consumption and household income are manifold. Firstly, household spending for energy services reduces the disposable income and consequently involves opportunity costs. Especially poor households have the difficult choice of how to appropriate their scarce income between the need for basic energy provision (cooking, heating etc.) and other essential purchases, like food, clothing, shelter and health services. Low income households usually spend a higher portion of their available income and more time for energy services than do the rich. Many living standard studies conducted in developing countries confirm this fact. For example, a household survey carried out in Pakistan compared the household energy consumption in the lowest and the highest income quintile. The study showed that the poorest households devoted on average 100 hours more per year to the collection of biomass than did the wealthiest. This discrepancy was further reflected in the household spending behaviour. Rich households spent 30 times more on energy services than the poor, although the relative fraction of their fuel expenditures to total income was substantially lower (World Bank 1992). In South Indian villages people –mostly women and children– spend between 2 to 6 hours each day collecting wood and walk an average of 4 to 8 kilometres (DFID 2002: 9). The situation is much the same in sub-Saharan Africa, where women in rural areas often carry 20 kilograms of fuel wood and walk similar distances every day (Greenpeace/ITDG 2002: 7). These examples suggest that a simple focus on the monetary value of the household’s basket of goods and services would strongly understate the true costs incurred by the poor. The time lost to the collection or production of energy services indirectly reduces the income of the poor, because the time could have been better allocated to socially or economically productive activities like child care, educational training or remunerated work.

The metaphor of an “energy ladder” is often used in the development literature to describe the patterns of energy usage associated with certain income levels. At least in urban areas, households can theoretically resort to various fuels and end-use devices to meet their energy needs. These fuels comprise both traditional energy sources like firewood, agricultural waste, dung, charcoal or torches as well as so-called modern sources like coal, kerosene, LPG and electricity. Cooking devices cover a similar wide range of different devices from simple three- stone fires over kerosene wick stoves and LPG stoves to electric hot plates. Household income mostly determines which energy carriers and end-use devices are used. People living in extreme poverty predominantly use fuels like wood, dung or crop residues, which are

(16)

Chapter 2: The Energy-Poverty Nexus considered to be the lowest rungs on the energy ladder. Cynical but true, the combustion of these fuels is a “technology” reminiscent of the Stone Age and seems to have changed little in most rural parts of the developing world ever. With increasing incomes and improving socio- economic conditions, households generally climb up the ladder by substituting biomass for more convenient and cleaner energy carriers like kerosene, LPG and electricity. The fuels occupying the different rungs on the energy ladder also stand for different degrees of energy content and combustion efficiency. LPG stoves for example have considerably high efficiency rates of more than 60 percent, compared to 50 percent for kerosene stoves and less than 20 percent for ordinary fuelwood cooking devices (UNDP 2000:7).

While many cross-country household surveys confirm the existence of an energy ladder (see UNDP 1997: 2.1.1.2 or Hosier/Dowd 1987), it is important to recognize that the transition from traditional biomass to modern energy carriers is usually not a simple “straight-line process” (IEA 2002a: 368). It is true, that rising household income normally changes consumption patterns and increases the demand for modern appliances and better energy services. However, decision-making on fuel usage depends on a variety of additional factors.

Distribution infrastructure for modern fuels is often limited to a few urban centres and therefore beyond the reach of the majority of the population. Even if modern fuels are accessible and affordable, high up-front costs for new appliances like gas stoves or solar cookers may deter poorer households from changing consumption patterns. Poor people often apply high discount rates when making consumption decisions and therefore tend to neglect that large initial capital costs are in the long rung offset by lower life-cycle and operating costs due to efficiency gains (Reddy and Reddy 1994: 561-571). For example, in many households the operating costs of kerosene lamps to generate light are estimated to be 70 times higher then the equivalent costs from mains electricity. Power from battery use is still 10 to 30 times more expensive than from mains electricity (DFID 2002: 7). Solar cookers can help to reduce fuel consumption by 40 percent. However, their average amortisation time is 2 years (BMZ 1999: 64). Public awareness raising supplemented by innovative finance mechanisms like lending programmes from microfinance institutions can thus be crucial to overcome the initial barrier of high up-front costs.

A rise in household incomes does not necessarily mean a departure from the use of biomass.

More affluent households which can afford modern fuels and end-use devices tend to use these energy sources selectively and in combination with traditional energy carriers. The

(17)

Chapter 2: The Energy-Poverty Nexus combination of fuels often depends on local differences in relative prices. Electricity is used when necessary, for example for cooling, lighting and communication devices, whereas biomass is still used for less sophisticated needs like cooking or heating. As long as biomass is still seen as an almost free and readily available good, it is unlikely that even better-off households will completely opt for the more expensive modern fuels (IEA 2002a: 369).

The relationship between income and energy consumption is not one-sided. Energy services are more than just a cost factor because they are indispensable in generating income and improving education, for example through the provision of information technologies in schools. Energy input is essential in most work processes and its efficient use can significantly enhance people’s productivity and the profitability of their work. Labour productivity is often closely linked to the availability and affordability of reliable energy sources and efficient end-use technologies for energy transformation and storage. The provision of lighting extends the workday and helps to further one’s education in the evening, motorized transport helps to travel longer distances and to gain access to new markets and the substitution of human muscle and animal power by powering machines increases the output.

In developing countries most of the jobs for the poor are provided by family businesses and small and medium-sized enterprises (SME) in the rural and urban informal sector, such as bakeries, brickyards, pottery making, dyeing works, hot food stalls, or guest houses. Most informal sector enterprises use unprocessed biofuels (e.g. charcoal) and waste oils, which have a far lower energy content per unit of output in comparison to higher quality fuels like liquefied petroleum gas (LPG). While traditional biomass like fuelwood is often considered a free good in rural subsistence economies with access to timbered areas, in over-exploited regions and urban agglomerations it can turn quickly into an expensive and scarce commodity.

The procurement costs for fuelwood can often reach 50 percent or more of the total production costs (BMZ 1999: 15, ITDG 2004: 7). High fuel costs not only harm less important economic sectors but often have severe impacts on regional and national economic backbones, like palm oil processing in Cameroon or fish smoking in Mali. It is frequently overlooked, that high energy costs in developing countries are not only confined to production processes. Especially in the service sector energy use can reach expensive and unsustainable levels. In Nepal’s guest houses, tea shops and restaurants, more than 800,000 tonnes of wood are used annually to satisfy the needs of foreign tourists (UNDP 1997: 2.1.1.2). Inefficient use of biomass does not only constrain productivity of small manufacturing, food-processing and

(18)

Chapter 2: The Energy-Poverty Nexus service businesses but also negatively influences productivity in the agricultural sector.

Modern energy services are urgently needed to improve farming activities all the way through the food chain, including ploughing, crop cultivation, irrigation, harvesting, processing and transport. Moreover, agricultural residues and dung are often put to household use instead of using them as fertilizers to manure the arable acreage. This leads to additional expenditures for artificial fertilizer or meagre crop yields. An Indian energy research institute has estimated that the dung used as fuel in India would be worth 250 billion rupees ($800 million) per year if it were used as fertilizer (Tata Energy Research Institute et al. 1999: 149). Replacing traditional biomass use through modern energy sources would not only save valuable fertilizer but also increase the productivity of various agricultural activities like irrigation, crop processing, storage and transport of the products to the market.

In addition to the previously outlined energy-income linkages, consumption behaviour may be strongly influenced by habit and cultural preferences. The Hindu and Buddhist religions for instance, know a wide range of social-ceremonial uses of wood energy like cremation, merit- making, bonfires and post partum heating practices. The religious ceremonies can be very energy intensive. To cremate a dead body on a funeral pyre about 200 to 300 kg of fuelwood is required (Balla 1991: 54). Cooking and heating habits can also hinder the dissemination of cleaner and more efficient energy sources. In addition to the high up-front costs of solar cookers, their successful dissemination is often complicated by the fact that the rural population cooks their meals in the morning hours before going to work and in the night after returning home. People have to be willing to shift their cooking activities to noon and the early afternoon or have to be provided with low-cost heat storages. Otherwise solar cookers will hardly be accepted (see Biermann et al. 1999, Singhal/Thierstein 1984). Despite the initial problems of new energy services to gain general acceptance, there are also positive examples showing that over time new technologies can even become an integral part of socio- cultural life. In some rural areas in China, biogas digesters are now part of the girl’s dowry and are included as a “priceless asset” in marriage agreements. Biogas digesters were first introduced in China in the 1930s and by now became highly appreciated by the rural population for saving time and labour (Keyun 1995).

(19)

Chapter 2: The Energy-Poverty Nexus 2.1.2 Energy and Health

The use of unprocessed solid fuels for cooking and heating is responsible for a wide range of public health hazards. According to the World Health Organisation (WHO), indoor air pollution is among the leading causes of illness and death in most developing countries.

The WHO estimates that indoor smoke causes more than 1.6 million deaths per year and 2.7 percent of the global burden of disease, as measured in disability-adjusted life years (DALYs)⁶. The death burden is almost equally shared between South East Asia (35 percent of all deaths), the Western Pacific Region (31 percent) and Africa (24 percent). However, the African continent alone has to bear more than 50 percent of the total DALYs lost⁷. This fact underlines the dramatic consequences of indoor pollution for Africa’s populations and the productivity of its workforces. The impact is most severe in high-mortality developing countries, where solid fuel use features the fourth place of the ten leading health risks, coming directly after underweight, unsafe sex and unsafe water, sanitation and hygiene (WHO 2002:

102). The health problems associated with indoor pollution include acute respiratory infections (ARI), chronic pulmonary diseases, asthma, lung cancer, eye irritation (cataract) and reduced birth weight (Bruce et al. 2002: 13-21). As reported by the WHO, globally 36 percent of all lower respiratory infections and 22 percent of all chronic obstructive pulmonary diseases are caused by indoor pollution (WHO 2002: XV).

Women and children are commonly hit hardest by the exposure to air pollution. In developing countries, activities like cooking and heating are traditionally the domain of female family members. Women typically spend several hours per day close to the open hearth and are most of the time accompanied by their children, often carrying the youngest on their back. In traditional stoves combustion is usually incomplete and contains a variety of health-damaging pollutants like carbon monoxide and nitrous or sulphur oxides. In poor people’s homes levels of exposure to polluted air often exceed international recommended maximums by a factor of 100 (Warwick/Doig 2004:8). For example, cooking stoves using fuelwood typically release more than 50 times more particulate matter than those operating with gas (Bruce et al. 2002:

5). Children –especially under the age of five– have the highest risk to get sick with respiratory health diseases because they absorb pollutants easier and keep them in their respiratory system for a longer time than adults. This is mainly due to their smaller airways

6 The WHO measures the burden of disease in Disability-Adjusted Life Years (abbr. DALYs). DALYs are the sum of years of potential life lost due to premature mortality and the years of productive life lost due to disability.

7 The figures were taken from the WHO websites on indoor air pollution (www.who.int/indoorair). These websites offer an excellent and comprehensive overview about all major aspects related to this topic.

(20)

Chapter 2: The Energy-Poverty Nexus and not fully developed immune systems. Not without reason, ARI –particularly pneumonia–

are said to be the world’s biggest child killer causing more than 2 million deaths. This toll falls almost completely on children in developing countries and exceeds the number of casualties inflicted by malaria and HIV/Aids (Warwick/Doig 2004:2).

In addition to air pollution from domestic sources, people in urban agglomerations are increasingly exposed to high levels of transport-related emissions like dust, smoke and noise pollution⁸. This is mainly due to the fact, that in many developing countries urbanization and rising per capita incomes go hand in hand with unprecedented growth rates in motorization.

UN-Habitat summarizes this trend as follows: “Developing countries are now experiencing the same car-related social and environmental ills as those in developed countries, and increases in rates of motorization now approach 10 percent per annum in many of them – substantially higher rates than ever found in automobile-bound societies like the United States, Australia and Canada” (UNCHS 2001: 42). Apart from the absolute growth in vehicle use, urban air pollution in developing countries is often attributed to poorly maintained and inefficient vehicle fleets, the absence of functioning public transport systems and frequent traffic congestions (Figueroa et al. 1998: 2.3-2.4).

Similar to the previous section, in which the linkage between energy and income was described, the relationship between energy and health also works in both directions. Although the daily drudgery of collecting fuelwood, the dominant use of highly-emitting solid fuels in many households and the growing automobile-related emissions in urban centres pose a major health risk to people living in poverty, modern energy sources and energy infrastructures are urgently needed to improve poor people’s state of health. The transition to cleaner, less- polluting fuels in households, SMEs and the transport sector can immediately help to reduce airborne emissions levels to the direct benefit of poor people’s health. Moreover, access to electricity is essential to ensure vital medical care services. Most routine functions in hospitals and doctors´ offices rely heavily on the provision of electricity, such as the cooling of vaccines, the operation of medical equipment or the sterilising of instruments. On the community level, energy is a prerequisite to guarantee minimum sanitary standards, e.g.

through the pumping of clean water or the powering of water treatment systems.

8For a comprehensive appraisal of the current air quality problem in developing countries, please refer to the World Bank publication “Reducing Air Pollution from Urban Transport” (Gwilliam et al. 2004).

(21)

Chapter 2: The Energy-Poverty Nexus 2.1.3 Energy and the Environment

Beyond the dramatic health problems of domestic and urban air pollution, people in the developing countries face even greater risks as a result of regional and global environmental degradation. Although not completely unfolded, the global warming process belongs without doubt to one of the most hazardous environmental threats. The International Panel on Climate Change (IPCC) has undertaken major scientific studies, which offer a clear body of evidence that climate change is happening and will even further accelerate in the coming decades. The decisive force behind the global warming effect is the large-scale burning of fossil fuels resulting in an unprecedented release of heat-trapping greenhouse gases into the atmosphere.

Carbon dioxide (CO2) is by far the most important greenhouse gas. At present, around 80 percent of all human-caused CO2 emissions can be attributed to the combustion of fossil fuels (EIA 2003a: 4). According to the IPCC, the concentration of CO2 in the atmosphere has increased from a pre-industrial concentration of 280 ppm in 1750 to 367 ppm in 1998. It is assumed that the current level of CO2 concentration has never been reached during the last 420,000 years and likely not throughout the past 20 million years (IPCC 2001a: Technical Summary 39). As a result of climate change, the global average surface temperature has increased by 0.6 ± 0.2 °C in the 20th century, the largest increase in the course of the last 1.000 years. The rise in temperatures has long-term effects on crucial characteristics of the global ecosystem. The following examples clearly underline this development: Since the late 1960s the global snow and ice cover has decreased by about 10 percent, parallel to the widely noticed retreat of mountain glaciers. The average global sea level has risen by 0.1 to 0.2 metres over the last century and is expected to rise even further by 0.09 to 0.88 metres until 2100⁹. Furthermore, global warming is likely to be responsible for an increase in heavy precipitation events due to higher concentrations of atmospheric moisture (IPCC 2001a:

Political Summary 3-4, 16). Recent publications of the IPCC give a comprehensive overview of the adverse impacts of climate change on human life¹⁰. Among many other effects, global

9 To give an example of the potential consequences, in Bangladesh a sea-level rise by 45 cm is likely to result in a land loss of roughly 15,600 square km (10 percent of the country’s total area) and would expose 5.5 million people. For further examples, see Table TS-8 (IPCC (2001b): Technical Summary 49).

10 Even though, the negative impacts of climate change will clearly dominate for the vast majority of the world’s population, it should be added that global warming can benefit certain countries through improved agricultural conditions, an increase in precipitation and a reduced need for heating during the winter season. This is likely the case for some countries in the Northern Hemisphere (e.g. the Scandinavian countries). However, it is very complicated to determine whether the net impact of climate change will truly be of benefit to some countries.

Even if natural conditions might improve in some regions, the harsh repercussions of the expected social and economic disturbances in the rest of the world will not stop at national borders. For a detailed analysis of the current debate, please refer to the exhaustive IPCC report “Climate Change 2001: Impacts, Adaptation, and Vulnerability”.

(22)

Chapter 2: The Energy-Poverty Nexus warming is likely to lead to a general reduction in crop yields in tropical, subtropical and most mid-latitudes regions posing a severe threat to food security in many of these countries, decreased water availability in areas already being characterized as water-scarce (e.g. in the Sahel region), higher energy demand for space cooling in the summer, increased human exposure to water-borne (e.g. cholera, typhus) and vector-borne diseases (e.g. malaria) as well as increased weather-related disasters like floods, droughts and windstorms (IPCC 2001b:

Political Summary 5).

The given examples reveal that the potential impacts of climate change do not only cause irreversibly damage to fragile ecosystems and a loss of biodiversity through the extinction of vulnerable species, but also threaten the natural, social and economic foundations of human life. But not all countries will carry the same burden. There is general consensus that developing countries are most vulnerable to climate change. The poorest and less-developed countries are mainly located in the tropical and mid-latitude regions, which are supposed to experience greater variability in climate. In addition, they lack the financial and institutional capacities to cope adequately with natural disasters¹¹ and regional climate change. Africa is expected to be hit hardest by rising levels of poverty, food shortages and disease. Higher temperatures in tropical Africa will further improve breeding conditions for disease-carrying insects, especially mosquitoes, which are known to transmit many diseases like malaria and dengue fever. Decreased rainfall is expected to reduce African crop yields and contribute to more severe droughts and famines. The available water in the important catchment basins of Senegal, Niger and Lake Chad is reported to have decreased by 60 percent in the last years.

Additional and more severe famines and epidemics will probably increase the migration pressure to urban areas (UNEP 2001: News Release 01/27).

Additional evidence on poor countries´ vulnerability is given in the annually published World Disasters Report. The 2003 report states that during the last decade on average 555 people died per disaster in low human development countries (LHD), compared to 133 people in nations of medium human development (MHD) and only 18 people in countries of high human development (HHD) (IFRC 2003: Chapter 8)¹². The regional discrepancy between exposure and vulnerability is further underlined by the fact that “high human development

11 Natural disasters are defined by the UNDP as “serious disruptions triggered by a natural hazard causing human, material, economic or environmental losses, which exceed the ability of those affected to cope“ (UNDP 2004:

136).

12 The countries are divided into low human development, medium human development and high human development countries in accordance with the UNDP HDI categorization. Further information on the HDI is given in footnote 3.

(23)

Chapter 2: The Energy-Poverty Nexus countries” represent 15 percent of the exposed global population, but suffer only 1.8 percent of the deaths (UNDP 2004a: 3). According to an UNDP report, half of the “low human development countries” currently face high levels of disaster risks (24 out of 49 countries).

Over the course of the last 15 years, more than 20 countries experienced multiple natural disasters per year. Some countries were even hit by up to 8 disasters per year¹³ (UNDP 2001: 3).

While the death toll in less developed countries is by far the highest, the estimated figures on financial losses depict a completely different picture. Over the last 10 years the average cost of damage per natural disaster was the lowest in LHD countries with 61 million US$, followed by MHD countries with 149 US$ and HHD countries with 477 million US$ ((IFRC 2003: Chapter 8). When it comes to insured losses, developing countries do not play any significant role in the international statistics. In 2002, Munich Re, one of the biggest global reinsurance companies, recorded worldwide 698 loss events and a total of 12.7 billion US$ in insured losses caused by natural catastrophes. America and Europe alone accounted for more than 95 percent of the insured losses (12.1 billion US$). Asia and Africa accounted for most of the remaining 4 percent of the total insured losses (386 and 185 million US$), whereas insured losses in Australia/Oceania just amounted to 11 million US$. The regional discrepancy of insured losses cannot be attributed to the regional distribution of loss events, because the number of combined loss events for Asia and Africa (261 and 51) almost equalled the number for America and Europe (181 and 136) (Munich Re 2003: 8-9). The large differences in damage costs are better explained by the higher monetary value of industrial plants, buildings and infrastructure systems in industrialized countries. In addition, most developing countries lack a full-fledged and affordable insurance system. The statistical bias can be reduced by focusing on the relative costs of damages to GDP, because these costs tend to be far higher in developing countries (IPCC 2001b: Political Summary 8). For example, in 1998, Hurricane Mitch caused damages to the Honduran economy equivalent to three-quarters of the country’s GDP (IFRC 2001: Chapter 8). This corresponded to around 3.5 billion US dollars. In comparison, the Elbe Flood in August 2002 is estimated to have caused an economic damage of 9.2 billion € in Germany alone. This was between two and three times the total damage suffered by Honduras. However, the damage inflicted to the German

13 Bangladesh for example has a 6.1 annual frequency of large-scale disasters. Between 1970 and 1998 the country suffered from 83 tropical windstorms and 49 floods. These disasters caused half a million deaths and affected 400 million people. Another sad example is Eritrea. 25 droughts and famines during the last three decades caused a combined death toll of 1.2 million and affected almost 61 million people (UNDP 2001: 9,24).

(24)

Chapter 2: The Energy-Poverty Nexus economy was less than half a percent of GDP. In addition, 20 percent of the damages in Germany were fully insured (Munich Re 2003: 20)¹⁴.

The above made observations clearly show that climate change will first and foremost strike the world’s poorest and least developed countries, which do not have the resources to absorb the negative impacts. In other words there is a clear nexus between climate change and poverty. But how is this climate-poverty nexus linked to the global geography of fossil fuel consumption? What is the part of developing countries in the global warming process? In the past, OECD countries have accounted for the biggest share of global carbon emissions. In 2000, they were responsible for 55 percent of greenhouse emissions, whereas developing countries and transitional countries accounted for 34 percent and 11 percent respectively.

However, the regional share of greenhouse emissions is projected to reverse in the next decades. According to the IEA, by 2030, developing countries will have become the largest emitters with 47 percent followed by the OECD countries with 43 percent. The share of transitional countries will only slightly change (down to 10 percent in 2030). More important are the projected absolute changes in greenhouse gas emissions. The IEA estimates that under a business-as-usual scenario¹⁵ worldwide CO2 emissions will increase annually by 1.8 percent during the next three decades and will reach a total of around 38 billion tonnes in 2030, compared to 22 billion tonnes today. Two-thirds of the additional emissions will come from developing countries. The emerging economic and energy-hungry giant China will double its emissions and will solely be responsible for one-quarter of the increase in worldwide CO2

emissions. India, East Asia and Latin America are expected to experience similar strong growth trends. Even the technological-advanced OECD countries are not expected to serve as a positive model for a climate-friendly turnabout and will add to global warming with double- digit growth numbers in greenhouse emissions over the next three decades¹⁶. OECD Europe for example is supposed to increase annual emissions by 23 percent until 2030. The power

14 To make the disasters in both countries comparable, I calculated the missing data (the absolute loss for Honduras and the relative loss for Germany). The necessary data on the GDP in both countries was obtained from the World Development Indicators on CD-Rom (2002 Version).

15 The business-as-usual scenario is the IEA “Reference Scenario” and should be regarded as “a baseline vision of how energy markets might evolve if governments individually or collectively do nothing more than they have already committed themselves to do”. The Reference Scenario is based on some key assumptions about macroeconomic and demographic trends, technological progress, energy prices and government policies. For instance, the IEA assumes that the world economy will grow by 3 percent and the world population by 1 percent per year over the next three decades. Interestingly, the crude oil price is expected to be almost the same at the end of the projection period (from 28 $/barrel in 2000 to 29 $/barrel in 2030). For an explicit overview of the key underlying assumption, see IEA 2002: p. 40 to 55 and the projection tables in the annexes (p.408 to 497)

16 According to the IEA Reference Scenario the OECD Annex B countries of the Kyoto Protocol will not be able to meet the protocol’s central target to reduce total emissions to at least 5 percent below 1990 levels until 2012.

The predicted emissions will even exceed 1990 levels by approximately one-third.

(25)

Chapter 2: The Energy-Poverty Nexus generation and transport sector will be the main driving forces behind the total increase in emissions. More than 50 percent of the worldwide increase in power generation is expected to be met by high CO2 emitting coal-fired power plants. Especially China and India will increasingly resort to domestic coal sources to meet their growing energy demand. The rise in vehicle ownership and freight transport in the developing world will be the prime pusher behind the increase in transport-related emissions (IEA 2002a: 73-80). Car ownership in OECD countries ranges from 338 cars per thousand inhabitants in Portugal to 769 cars per thousand inhabitants in the United States. In comparison, the fast growing Asian economies India and China own less than 10 cars per thousand inhabitants (Metschies 2001: 80-64)¹⁷. These figures drastically illustrate the enormous growth potential in the international transport sector.

The past build-up of greenhouse gases was indoubtably caused by the unequal fossil fuel over-consumption in the industrialized world, where the current per capita fossil fuel use of 6.4 toe is still around ten times higher than in developing countries (WSSD 2002: 9). Keeping this in mind, it would be appropriate to describe climate change as “a northern problem with a southern victim” (ITDG 2004:9). However, if we take the prospective future energy trends into account, developing countries will soon not only bear the brunt of OECD-related greenhouse emissions but will also painfully feel the heavy burden of their own unsustainable energy growth patterns.

As of yet, emphasis was primarily placed on the close connection between immoderate fossil fuel use and climate change. However, current energy production and consumption patterns in developing countries are also responsible for a variety of other environmental problems.

Some of these problems should be shortly mentioned to give a more accurate and comprehensive picture of the energy-environment linkage. Unsustainable energy use can be an influential contributor to land and forest degradation. In its latest “Global Forest Resources Assessment”, the Food and Agricultural Organisation (FAO) estimated that between 1990 and 2000 the world lost a forest area of 94 million hectares, an area two and a half times larger than Germany. The annual global net reduction of forest area was 0.22 percent representing an area about the size of Portugal (FAO 2001: Executive Summary). Forest degradation is the

17 The data is for four-wheel motor vehicles and refers to the year 1996. It was originally taken from the World Road Statistics 1999 published by the International Road Federation (IRF). Up-to-date data is to be found in the latest 2002 edition of the World Road Statistics (www.irfnet.org/wrs.asp). Unfortunately, the data is not available free of charge.

(26)

Chapter 2: The Energy-Poverty Nexus highest in Africa. During the 1990s, the African forest area was diminished by almost 0.8 percent per year (FAO 2001: Chapter 11: Africa). Besides the ongoing transformation of natural forests into arable land and grazing sites, biomass extraction for energy purposes is regarded as a major cause of forest degradation and depletion in many parts of the world. The situation is especially severe in countries or areas, where fuel wood and charcoal production represents the biggest share of energy consumption and wood consumption exceeds the annual average forest growth. This is the case in many developing countries, like in sub- Saharan countries, in the Middle East or in poor mountainous countries like Nepal. To give an example, it is assumed that charcoal production reduces Zambia’s woodland by 430.000 hectares per year. The annual production of more than 100.000 tonnes of charcoal is an important sector of the country’s economy and is supposed to generate incomes worth 30 million US$ and to employ some 60.000 people (UNEP 2003a:100). Uncontrolled forest exploitation may have many adverse impacts on fragile ecosystems. In steep areas it can impair the forest’s important protective functions of safeguarding fertile soils and watersheds.

Accelerated erosion removes nutrients from the ecosystems and may increase the risks of landslides and avalanches. In hot and dry areas excessive harvesting of forest resources may additionally contribute to desertification (UNEP 2003a: 102,114).

Increased acidification of waters and soils poses another environmental threat to developing countries. Acidification is mainly caused by the deposition of sulphur and nitrogen oxides, which deplete soils and surface waters of their bases. Sulphur and nitrogen oxides emissions are a result of the growing fossil fuel combustion in the power and transport sector. The impacts of acidification are expected to be more severe in developing countries, because in many areas agricultural activities are carried out on marginal soils with a low buffering potential. In such areas, acidification alters or reduces plant growth and may thus directly impinge on crop yields (Emberson et al. 2003: 14-18). The problem is worsened by the longer recovery time of degraded marginal soil. In the past, industrialized countries found ways and means to successfully respond to acidification by introducing emission abatement legislations and by extensive liming of agricultural soils. Unfortunately, most developing countries still lack efficient environmental legislation to curb acid rain and the liming of soils is still far too costly for most farmers (UNDP 1997: 2.2.2.1). Without a clear change in emission policies, farming methods or energy consumption patterns, acidification and soil erosion will further deteriorate the stock of arable land, which constitutes the critical production factor and basis for survival in most developing countries.

(27)

Chapter 2: The Energy-Poverty Nexus

In addition to biomass extraction and acidification, the large-scale industrial production of fossil fuels through mining or drilling activities can have profound impacts on the local environment. The exploitation of new oil, gas and coal reserves frequently takes place in environmentally vulnerable areas, such as rainforests or maritime offshore regions and thereby often derives local and indigenous populations of their natural means of subsistence.

Involuntary resettlements are common practice and usually tantamount to the loss of ancestral land and cultural life. In many cases, resettlement programmes have proven to worsen the socio-economic living conditions of the people involved (EIR 2003: 25-38). Similar concerns have been raised with regard to the environmental and social performance of large dam and hydropower projects (World Commission on Dams (2000): Chapter 3 and 4). Apart from the environmental and social problems linked to the extraction phase of the fossil energy chain, poorly maintained distribution systems (e.g. oil and gas pipelines) may cause severe harm to the surrounding environment through frequent spills and leaks (World Bank 2000: 28). It is therefore not surprising, that the environmental risks associated with the extraction and transport of fossil fuels are time and again subject to controversial public debates and intensive media coverage. Shell’s drilling activities in the Niger Delta and the West LB financed oil pipeline project through Ecuador’s biodiversity rich Amazon rainforest are good examples.

Breaking the Poverty-Energy Nexus : Perspectives and Problems of Renewable Energies in Developing Countries with High Fuel Import Dependency

Diploma Thesis