Dependence drives pace: Fossil fuel imports as a signal of transition speed

Research evidence excerpt

Dependence drives pace: Fossil fuel imports as a signal of transition speed

transition

momentum linked to fossil created by fossil fuel import dependence and provides a trackable indicator – the cost of fossil

imports fuel imports as a percentage of country export earnings – of that incentive.

In the current environment, macro-economic factors, such as inflationary pressures, alongside

increased impetus for energy security provide a strong catalyst for us to analyse how energy

import dependency acts as an accelerator or brake for incentivising increased momentum to

control emissions, thus addressing the external pressure and market pull driver of our framework.

In this case, the incentive for a country to mobilise transition operates through the external

positioning of an economy. For this analysis, we are focusing on domestic fossil fuel coming

from imports, but external factors could also be linked to the market opportunity from exporting

clean tech solutions.

The incentive for change works as follows. The larger the fossil fuel import bill relative to export

earnings, the stronger the economic incentive to reduce dependence on imported energy – and,

in turn, the stronger the conditions for faster transition. The rationale for identifying the import

cost relative to exports, rather than GDP, for example, is because of currency effects and the

transmission effect on the balance of payments.

For fossil fuel importing economies, imported energy represents a recurring external cost.

Import dependence means

Payments for oil, gas or coal are typically made in foreign currency, creating a persistent outflowprice variability, greater

exposure to FX fluctuation, that is visible in the trade balance and current account. The larger the fossil fuel import bill