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FVCML0208 10
Policy Papers


DateAuthor(s)Title of PaperPaper No.
08/18 Rick van der Ploeg

AbstractAt the 2016 international climate summit in Paris 194 countries throughout the globe have committed themselves to limit global warming to not more than 2°C and to strive for 1.5°C above pre-industrial temperatures. A two-thirds chance of meeting this target means that the world as a whole from now onwards cannot emit more than 600-1100 Giga tonnes of CO2 (GtCO2) and must strive to emit less than 150-300 GtCO2. This is called the carbon budget and is the key factor driving climate policy. If the world does not cut emissions, the carbon budget runs out in 18 to 33 years for the 2°C target and 5 to 9 years for the 1.5°C target from 2018. Running existing coal-powered electricity stations to the end of their normal economic lifetime is enough to overshoot the Paris targets (Pfeiffer et al., 2016). Hence, very ambitious climate policies must be pursued by all countries on the planet to meet the Paris targets. It will involve painful measures such as scrapping assets that have not been able to fully earn back their back investments and last-resort methods to ensure negative emissions such as geo-engineering.

Obstacles to Successful Climate Policy Contribution for the Environmental Scientist, July 2018

1/17 Rick van der Ploeg

AbstractThe discovery of natural resources has been a mixed blessing for many countries. Despite the promises of new riches, economic performance has often deteriorated whilst corruption and rent seeking take off.  This his been called the "resource curse".  We first discuss the traditional economic and political determinants of the curse before moving on to discuss the ethical and legal aspects highlighted in the book Blood Oil by Leif Wenar.

Review of 'Blood Oil: Tyrants, Violence and the Rules that Run the World' Author: Leif Wenar. Oxford University Press, lii+494 pages, 2016.  Economics and Philosopy, 2017.

12/16 Rick van der Ploeg & Armon Rezei

AbstractA stylised analytical framework is used to show how the global carbon tax and the amount of untapped fossil fuel can be calculated from a simple rule given estimates of society's rate of time impatience and intergenerational inequality aversion, the extraction cost technology, the rate of technical progress in renewable energy and the future trend rate of economic growth. The predictions of the simple framework are tested in a calibrated numerical and more complex version of the integrated assessment model (IAM). This IAM makes use of the Oxford carbon cycle of Allen et al (2009), which differs from DICE, FUND and PAGE in that cumulative emissions are the key driving force of changes in temperature.  We highlight the importance of the speed and direction of technological change for the energy transition and how time impatience, intergenerational inequality aversion and expected trend growth affect the time paths of the optimal global carbon tax and the optimal amount of fossil fuel reserves to leave untapped. We also compare these with the adverse global warming trajectories that occur if no policy actions are taken

Cumulative Emissions, Unburnable Fossil Fuel, and the Optimal Carbon Tax.  Technological Forecasting & Social Change, 21, July 2016

10/16 David Manley, James Cust & Giorgia Cecchinato

AbstractDeveloping countries rich in fossil-fuels face a unique challenge posed by climate change. They seek to extract fossil fuels at a time when the global community must reduce carbon emissions. Effective global climate policies will likely reduce the price for fossil fuels, creating the risk of 'stranded nations' - where resources under the ground become commercially unattractive to extract and a substantial share of a nation's wealth may permanently lose its value.  This constitutes a parallel to the stranded assets challenge faced by the private sector.We identify three key challenges faced by fossil-fuel rich developing countries. First, we show that these countries are highly exposed to a decline in fossil fuel demand, with their median ratio of oil and gas reserves to GDP is 3.66, compared with a median for non-FFRCs of 0.58. Second, they are less able to diversify away from this risk than fossil fuel companies or investors - oil companies on average hold only around 13 years of reserves on their balance sheets, whereas FFRDCs hold a median of 45 years of known reserves at current production rates. Third, these countries often find themselves under political pressure to implement policies that may expose them to further risk. For example, supporting fossil fuel linked infrastructure and skills that relies on long term horizons for payoffs to the country, subsidising fossil fuel consumption that extends carbon-intensity of production, or by investing state capital in fossil fuel linked assets such as national oil companies.In response, we identify four policy implications arisng from this carbon market risk that fossil-fuel rich developing countries should consider. While several of the policy recommendations align with general good practice, we show that the prioritisation, sequencing and in some cases direction of these policies may require modificaiton when considering the risks posed by a global shift away from fossil fuels.

Stranded Nations? The Climate Policy Implications for Fossil Fuel-Rich Developing Countries. Revised, March 2017

10/16 Aleksandra Malova & Rick van der Ploeg

AbstractDespite substantial oil and gas revenue Russia's fiscal stance is unsustainable. Under our benchmark assumptions the permanent-income rule requires a permanent tightening of the fiscal stance by 4.6%-points of GDP. Delaying it by a decade implies that the fiscal stance needs to be tightened by a further 0.9%-point.  This benchmark optimal policy ensures that depletion of oil and gas wealth is matched by an equal increase in above-ground financial wealth.  Its merits are highlighted by comparing it with the tougher alternative of the bird-in-hand rule and with projecting the current fiscal stance. If oil and gas revenue rises by a half due to higher prices or more discoveries, the fiscal stance needs to be tightened by only 3.2%-points of GDP. However, if a large chunk of oil and gas has to be kept in the soil to meet international agreements to keep global warming below 2 degrees Celsius, the permanent transfer drops to 2.0% of GDP and the fiscal stance needs to be tightened by 5.5%-points of GDP.

Consequences of Lower Oil Prices and Stranded Assets for Russia's Sustainable Fiscal Stance. Energy Policy, 105, 27-40, 2017.

04/16 Rabah Arezki, Christian Bogmans & Akito Matsumoto

AbstractThe United Nations' 2015 Climate Change Conference (COP21) was by all accounts a success. Nearly all countries around the globe have now firmly committed to reducing their greenhouse gas emissions through the Intended Nationality Determined Contributions (INDCs). The post-COP21 agenda now focuses on the implementation of these INDCs. At the heart of that implementation is the so-called energy transition, which consists of moving away from using fossil fuels (petroleum products, natural gas, and coal) and toward clean energies to power the global economy. While the energy transition is arguably at an early stage, with important differences across countries, it is at a critical juncture. Indeed, to avoid the irreversible consequences of climate change induced by greenhouse gas emissions, the energy transition must firmly take root at a time when fossil fuel prices are likely to stay low for long.  It involves significant opportunities and risks, which energy policies will need to tackle.

The Energy Transition in an Era of Low Fossil Fuel Prices

04/16 Rabah Arezki, Karim El Aynaoui, Yaw Nyarko & Francis Teal

AbstractCommodity prices are in the news. Oil prices have dropped 65% since June 2014. Metal prices are also down substantially, albeit they have declined more gradually since 2011 on account of slower growth from emerging markets that account for more than half of global metal consumption. In this special issue we focus on food prices which have in many ways a wider impact than oil prices.

Food Price Volatility and its Consequences Oxford Economic Papers, 68(3), July 2016

02/16 Rabah Arezki, Rick van der Ploeg & Frederik Toscani

AbstractA growing number of large resource finds are in the developing world, reflecting growing openness in their economies

 A Move South  Finance & Development, 54, 1, 36-39, 2015

02/16 Rick van der Ploeg

AbstractWhen setting carbon prices in a warming world, policymakers must be cognizant of the potential economic and environmental consequences of the risk of multiple, interrelated catastrophes.

Climate Change Economics: Reacting to multiple tipping points.  Nature Climate Change, 6. 442-443, March 2016

02/16 Rick van der Ploeg

AbstractOil and gas producers face three threats: prolonged low oil and gas prices, tightening of climate policy and a tough budget on cumulative carbon emissions, and technological innovation producing cheap substitutes for oil and gas.  These threats pose real risks of putting oil and gas producers out of business.  They lead to the problem of standard assets and a significant downward valuation of oil and gas producers.  This calls for divesting from and shorting coal, oil and gas.  The economies of oil- and gas-rich countries are typically in a deplorable state, since they did not use their past windfalls to build up buffers and invest in a diversified economy.  More rapacious depletion of their oil and gas reserves will not help.  After the crash in oil and gas prices these countries are facing serous problems and it is difficult to see how they will cope with the outlined threats.

Fossil Fuel Producers Under Threat  Oxford Review of Economic Policy,32,2, 206-222, 2016

07/15 Rabah Arezki & Olivier Blanchard

AbstractOil prices have plunged recently, affecting everyone: producers, exporters, governments, and consumers.  Overall, we see this as a shot in the arm for the global economy. Bearing in mind that our simulations do not represent a forecast of the state of the global economy, we find a gain for the world GDP between 0.3 and 0.7 percent in 2015, compared to a scenario without the drop in oil prices.  There is however much more to this complex and evolving story.  In this blog we examine the mechanics of the oil market now and in the future, the implicaitons for various groups of countries as well as for financial stability, and how policymakers should address the impact on their economies.

Seven Questions about the Recent Oil Price Slump.  The International Monetary Fund's global economy forum, Blog-imf.direct.org, 22 December 2014

04/15 Armon Rezai & Rick van der Ploeg

AbstractThe optimal social cost of carbon is in general equilibrium proportional to GDP if utility is logarithmic, production is Cobb-Douglas, depreciation is 100% every period, climate damages as fraction of production decline exponentially with the stock of atmospheric carbon, and fossil fuel extraction does not require capital.  The time profile and size of the optimal carbon tax corresponding to this simple rule are not robust to more convex climate damages, smaller elasticities of factor substitution and non-unitary coefficients of relative intergenerational inequaility aversion.  The optimal timing of energy transitions and the amount of fossil fuel reserves to be locked up in the earth are also not accurately predicted by this framework.  Still, in terms of welfare and global warming the simple rule for the optimal social cost of carbon manages to get quite close to the first best.

Robustness of a Simple Rule for the Social Cost of Carbon.  Economics Letters, 132, 48-55, 2015

03/15 Paul Collier & James Cust

AbstractAfrica is judged to have a severe shortage of infrastructure. The World Bank estimates annual needs at $93bn and the financing shortfall at between $31 and $40bn.  The underlying rationale for the notion of an infrastructure shortage is that it would unlock large gains in African factor productivity.  There is probably more potential for resource extraction than any other region, and the African labour force is increasing and urbanizing more rapidly than any other region.  However, these opportunities cannot be fully seized without the provision of the infrastructure.  Yet increasing the finance for infrastructure faces acute difficulties.  Domestic financing is constrained because Africa's fragile democracies are hungry for consumption.  International public finance is constrained by the fiscal woes of OECD governments.  International private finance is deterred because African infrastructure is encumbered by an array of political and organization impediments that raise perceived risk to unacceptable levels.  To break the impasse, each of these will need to be tackled.  African electorates must be convinced that deferring gains in consumption would yield large benefits.  Donors must restructure aid budgets so as to gear up other sources of finance.  Governance reform of infrastructure projects must make them acceptable assets for patient international capital such as pensoin funds.

Investing in Africa's Infrastructure: Financing and policy options. Forthcoming, Annual Review of Resource Economics, 7, 2015

03/15 Rick van der Ploeg & Steven Poelhekke

AbstractThe cross-country empirical evidence for the natural resource curse is ample, but unfortunately fraught with econometric difficulties.  A recent wave of studies on measuring the impact of natural resource windfalls on the economy exploits novel datasets such as giant oil discoveries to identify effects of windfalls, uses natural experiments and within-country econometric analysis, and estimates local impacts.  These studies offer more hope in the search of quantitative evidence.

The Impact of Natural Resources: Survey of recent quantitative evidence.  Journal of Development Studies, 1-12, April 2016

01/15 Armon Rezai & Rick van der Ploeg

AbstractFighting global warming requires a price of around $15 per ton of emitted CO2 or 13 cents per gallon gasoline.  This price must grow at the same rate as world GDP and follows from a simple and robust back-of-the-envelope rule.  The rule shows that the carbon price must fall below $15 if welfare of future generations is discounted, intergenerational inequality aversion exceeds 2, and growth in living standards grow faster than 2% per annum.

Global Carbon Taxation: Intuition from a back-of-the-envelope calculation. VOXEU, 15 January 2015.

01/15 Ton van den Bremer & Rick van der Ploeg

AbstractAlbertans have long been aware that while their provincial government has shown a lack of consistent discipline in investing oil royalty revenues in the Alberta heritage Savings Trust Fund, the Norwegians have been showing oil-rich jurisdictions just how effectively saving can be done.  While Alberta's fund was established in the mid-1970s, more than a decade before Norway began its national savings programme, the Norwegian fund was worth more that $900 billion as of the beginning of 2014; Alberta's is worth roughly £15billion today, revealing the province's inability to stick with firm, routine contributions commitments, and its occasional habit of using the fund's earnings to cover spending priorities. But, while many economists, politicians and pundits from both theleft and right have long pointed to Norway as the model for Alberta to follow, it would in fact be wrong for Alberta to mimic Norway's strategy.  Indeed, the right plan for Alberta can set the province up in better shape for the future than even Norway will be.

Digging Deep for the Heritage Fund: Why the right fund for Alberta pays dividends long after oil is gone.   SPP Research Papers, 7, 32, October 2014.

01/15 Rick van der Ploeg & Aart de Zeeuw

AbstractClimate policy aims to internalize the social cost of carbon by means of a carbon tax or a system of tradable permits such as the ETS set up in the European Union.  But how do we determine the social cost of carbon? Do we take everything into account that should be taken into account? Most integrated assessment models (Nordhaus, 2008, Stern, 2007) calculate the net present value of estimated marginal damages to economic production from emitting one extra ton of carbon caused by burning fossil fuel.

Dealing with the Threat of Catastrophic Climate Change
VOXEU, 31 July 2014.

10/14 Radoslaw (Radek) Stefanski

AbstractStefanski (2014) develops a unique methodology to extract fossil-fuel subsidies from patterns in countries carbon emission-to-CDP ratios.  This paper examines the regional, temporal and country-specific trends emerging from this 170 country, 30 year database.  I find that: 1) Both the direct and indirect financial as well as the environmental-costs of subsidies are very large and increasing: 2) The overwhelming majority of the world's subsidies come from only three countries: China, the US and the ex-USSR: 4) Whilst subsidies have been increasing almost everywhere, the vast majority of the increase comes from just two countries: China and the US.

Into the Mire: A closer look at fossil fuel subsidies

10/13 Rabah Arezki, Prakash Loungani, Rick van der Ploeg & Anthony J Venables

AbstractAn overview is provided of recent work on commodity prices, focussing on three themes: (i) "financialization" of commodity markets - commodities being considered by financial investors as a distinct asset class, (ii) trends and forecasts of commodity prices, and (iii) fracking - a shorthand for the emergence of new soources of energy supply.  Lessons are drawn on the role of fundamentals and expectations in driving the rapidly changing nature of commodity markets.

Understanding International Commodity Price Fluctuations.   Journal of International Money and Finance, 42, 2014, 1-8.

09/13 Rick van der Ploeg & Cees Withagen

AbstractGlobal warming is caused by accumullation of CO2 in the atmosphere.  A substantial part of this comes from burning fossil fuel, but increasingly it is also caused by the energy-intenstive process of extraction fossil fuel such as the tar sands.  Climate change can be miti gated by curbing fossil fuel demand by becoming more energy-efficient, switching demand from fossil fuels such as coal and tar sands to others such as gas which do less harm when it comes to global warming, substituting fossil fuel for renewables, making fossil fuel obsolete by locking more fossil fuel in the crust of the earth, capture and storage of CO2, and moving the direction of technical progress from dirty to clean growth.

On the Relevance of Green Paradoxes. Research in Management Economics and Finance, October, 2013.

01/13 Paul Collier & Anthony J Venables

AbstractAfrica is the green continent: its CO2 emissions per person are less than one tonne pa, one-fifteenth of Europeans and one-thirtieth those of a North American.  With 12 percent of world population, Africa accounts for just 2.4 percent of world emissions.  However, this is a consequence of Africa's poverty, and emissions intensity in Africa (emission per unit GDP at PPP) is at the world average.  South Africa has one of the highest emissions intensities in the world; Tanzania, Kenya, Uganda and Nigeria ('Four African countries', figure 1) have emissions intensity higher than most European countries.  Development typically generates an inverse-U pattern of emissions intensity peaking between $2-£3,000 per capita, implying that Africa's emissions will rise because of rising income and increasing emissions intensity.

How Rapidly Should Africa Go Green? The tension between natural abundance and economic scarcity

The World Financial Review, Jan/Feb 2013

12/12 Rick van der Ploeg & Cees Withagen

Abstract A Schumpeterian case can be made for boosting Green Growth in a global economic crisis.  The best way to achieve this is a combination of R&D subsidies to rediret growth from polluting to clean economic activities and a credible, rising carbon tax to speed up the transition to the carbon-free era.  If a carbon tax is infeasible, renewables subsidies might be a second-best alternative to reduce the duration of the fossil fuel era and curb cumulative carbon emissions despite some adverse, short-run Green Paradox effects.

Green Growth, Green Paradox and the Global Economic Crisis.  Environmental Innovation & Societal Transitions, 2013, 6, 116-119

04/12 Rick van der Ploeg

AbstractNatural resource rents worldwide now exceed $4 trillion per annum, amounting to some 7 percent of global GDP. Non-renewable resource revenues are a dominant feature of 50 economies with a combined population of 1.4 billion.  There are 24 countries for which resources make up more than three quarters of their exports, 13 countries for which resources make up at least 40 percent of their GDP, and 18 countries for which resources make up more than half their fiscal revenue (IMF data 2000-5).  Some countries (e.g. Botswana, Malaysia or Chile) have grown fast on the basis of these revenues but others (Nigeria or Cameroon) have not, a have been labeled as countries suffering from the 'resource curse'.

Oil Windfalls and Investing to Invest in Central Africa. Forthcoming, B.Akitoby & S. Coorey (eds), Oil in Central Africa - Policies for Inclusive Growth. International Monetary Fund, Washington, D.C. pp 89-109, 2012.



Ian Parry, Rick van der Ploeg & Roberton Williams

AbstractCarbon pricing policies are potentially the best instruments for incorporating environmental damages into the market price of intermediate inputs and the price of final goods and services.  By reducing the demand for fossil fuels and discouraging exploration for new fossil fuel reserves - especially fuels with high CO2 content - these pricing effects exploit the entire range of behavioral changes at the household and firm level for reducing energy-related CO2 emissions.  Carbon pricing also creates across-the-board incentives for the development and deployment of clean-energy technologies, and boosts the supply of carbon-free renewable substitutes.  A carefully designed time path for carbon pricing not only ensures that firms and households use less CO2-intensive production methods, appliances, vehicles, machines, etc. but also that renewables are brought to the market and phased in more quickly.  Especially attractive in the present fiscal crisis, carbon pricing can also provide a substantial source of government revenue.  Here the focus is on carbon taxes, though as explained in Chapter 1 (revenue-raising) emissions trading systems are also very promising approaches

How to Design a Carbon Tax. R.de Mooij, I.W.H. Parry & M. Keen (eds), Fiscal Policy to Mitigate Climate Change - A Guide for Policymakers, International Monetary Fund, Washington, D.C. pp 27-48, 2012.

03/12 Rick van der Ploeg, Anthony J Venables & Samuel Wills

AbstractThis report compares fiscal policy options for Iraq, given the anticipated large increase in oil revenues expected over the coming two decades.  A stylised general equilibrium model of the Iraq economy is built and calibrated to Iraqi data.  Five fiscal policy options are considered, comparing the effects on the economy of allocating the windfall (i) proportionately to existing spending, or towards increasing (ii) the government wage bill, (iii) domestic investment, (iv) foreign assets or (v) direct transfers.  We find that investment in the capital stock leads to the largest increase in non-oil real GDP.  Since the economy will suffer from absorption constraints if the entire windfall is invested immediately, a combination of a sovereign wealth fund used for temporarily parking funds abroad in conjunction with investment in domestic capital is recommended.

Oil and Fiscal Policy in Iraq.  World Bank Iraq Report, 28 March 2012

07/11 Rick van der Ploeg, Radoslaw Stefanski & Samuel Wills

 Abstract Ghana has recently started producing oil from the offshore Jubilee field.  This paper addresses the question of how Ghana should best harness these oil revenues.  This is done in two sections. In the first, it considers whether Ghana should spend or save the windfall, comparing spending rules under a range of assumptions to the permanent income (PI) benchmark.  On balance we find that Ghana should bring spending further forward than is suggested under PI, to promote development.  In the second, it considers how the windfall should be used, comparing the alleviation of capital scarcity, accumulation of foreign assets and investment in domestic public capital to boost growth and development.  We find that the problem of capital scarcity should be alleviated first if Ghana is facing a premium on borrowing costs.  The remainder of the windfall should primarily be used to invest in domestic capital, but some funds may temporarily be parked in foreign assets if there are absorption constraints in the non-traded sectors.

Harnessing Oil Revenues in Ghana. Prepared for the International Growth Centre

05/11 Anthony J Venables

Abstract This paper gives an overview of the key policy choices that arise in effectively managing natural resource revenues.  Its is organised into 4 sections: 1)The long run: consumption, saving and investment.  2)Transition to the long run: Dutch disease and effective spending. 3)The short run: managing volatillity. 4)Fiscal instruments and spending channels.

Resource Revenue Management.
Paper written for the Asian Development Bank Knowledge Sharing Platform for Resource Revenue Management, Manila, April 2011. Revised May 2011.

03/11 Guido Porto, Nicolas Depetris Chauvin & Marcelo Olarreaga Abstract Cash crops provide the livelihoods for millions of people in sub-Saharan Africa. This CEPR/World Bank book explores the effects of increasing competition in these markets. It finds that while competition improves welfare for farmers on the whole, policymakers should still consider the potential winners and losers in each case.

Supply Chains in Export Agriculture, Competition, and Poverty in Sub-Saharan Africa. Published by CEPR/World Bank, March 2011.ISBN:978-1-907142-20-8
Vox Column, 11 March 2011

03/11 Anthony J Venables Managing Resource Revenues
Paper presented at the Economic Reform Workshop: Sudan People's Liberation Movement, Juba, March 2011. 
03/11 Rick van der Ploeg

Abstract In this paper we revisit the Dutch disease paying particular attention to the role of specific factors of production and capital stock dynamics.  The main insight is that if the natural resource rich windfall is substantial but not large enough for the country to become a rentier, capital goods must be produced at home and adjustment to natural resource windfall takes time.  It takes time to build this home-grown capital. Specific factors are crucial to explain the dynamic responses of the real exchange rate, capital intensities and wages in response to a natural resource windfall.  if a country is small and the windfall is large, it may be able to import capital and migrant labour in which case the Dutch disease can be avoided.

Fiscal Policy and Dutch Disease.  International Economics and Economic Policy, 2011, 8, 2, 121-138.

01/11 Rick van der Ploeg

Abstract Fossil fuels like oil or gas may run out in the following fifty years and need to be replaced by renewable sources of energy such as solar or wind energy. Fossil fuels also lead to the emission of CO2 to the atmosphere, contribute to global warming and thus need to be phased out.  Our key questions is how to switch from a fossil fuel to a carbon free economy and what kind of depletion paths are optimal from the point of view of both efficient extraction and internalizing global warming externalities.

Macroeconomics of Sustainability Transitions: Second-best climate policy, Green Paradox, and renewables subsidies.  Contribution to Environmental Innovations and Transitions, January 2011.

02/10 Karlygash Kuralbayeva, Rick van der Ploeg & Anthony J Venables

AbstractManagement of Natural resources are critically important to many of the countries of Central Asia. The region has large endowments of hydrocarbons and minerals, and natural resource exports account for up to 80% of countries' exports. Their importance is amplified by the other key geographical feature of the region - its remoteness. This makes it difficult for countries to develop substantial exports in other sectors, hence increasing their dependence on natural resources. This paper outlines key issues that arise in the management of resource revenues, and then relates them to the experience of two countries in the region; Azerbaijan and Kazakhstan.

Resource Revenues: Economic principles and Caspian experiences. Forthcoming, Natural Resources and Development. Ed. G.Mavrotas

08/09 Rick van der Ploeg

AbstractThe global financial crisis has potentially many adverse effects on the developing world: falls in exports of goods and services to the OECD, dramatic falls in commodity prices and resource exports, and falls in remittances.  Many of the poorer countries are heavily specialized and dependent on natural resources, often landlocked, ethnically polarized, and financially underdeveloped.  They therefore suffer especailly from the notorious volatility of natural resource prices.  Volatile oil prices harm not only producers and consumers in the developing world, but also harm environmental quality if they hold back irreversible investments in costly energy-saving technology and hydrocarbon substitutes.  In the aftermath of the crisis, political leaders should seek for a global deal whereby resource-rich developing countries are helped to cope with managing very volatile streams of resource revenues while cutting back pollution of the energy industries.  The global crisis facing the world today is thus not only a financial crisis, but also a fuel and commodity crisis.  In addition, the world also faces a food, water and climate change crisis, all of which undermine the ability to sustain prosperity and eradicate poverty in the developing world.  Hence, the contours of a Global Green New Deal will be sketched.

Global Crises and Developing Countries: Financial, Environmental, Resource and Food Perspectives.  International Review of Environmental and Resource Economics, 2009, 3, 2, 119-160.

10/08 Rick van der Ploeg & Anthony J Venables

AbstractA temporary windfall of foreign aid or natural resource revenues poses interesting policy challenges. Should the revenues be used for government investment in public infrastructure to stimulate economic activity? Should the government use the windfall income to reduce government debt and thereby lower interest rates and boost private sector investment? Should the extra income be used to provide more education, health care and other public goods to improve the quality of life or transferred directly to citizens through tax cuts? Alternatively, windfall revenues could be used to transform exhaustible resource assets into interest?earning foreign assets by setting up a Sovereign Wealth Fund for future generations. This is a bewildering array of policy options and the most appropriate option depends on what stage of development the economy is and what kind of constraints the economy faces.

Harnessing Windfall Revenues in Developing Economies. Vox Column, 3 October 2008
08/08 Paul Collier & Benedikt Goderis

AbstractThose low-income countries that export non-agricultural commodities are in the midst of a resource transfer. It is undoubtedly the biggest opportunity for transformative development that these societies have experienced, dwarfing both aid and previous commodity booms. To get it in proportion, in 2004 commodity exports from Sub-Saharan
Africa accounted for 146 billion US dollars or 28 percent of the region’s GDP, while aid amounted to 5 percent of GDP. Compared with the boom of the 1970s many more countries are beneficiaries: the push to diversify sources of supply has resulted in exploitable discoveries in places that were previously political no-go areas. Further,whereas the boom of the 1970s was conjured up by the OPEC cartel, this one is grounded in Asian growth and so is intrinsically less precarious. In this paper we draw on a range of new research that provides a prognosis of prospects, a diagnostic of likely problems, and prescribes an agenda for international action. The paper is organized around these three objectives.

Prospects for Commodity Exporters: Hunky Dory or Humpty Dumpty? World Economics, 8 (2), 2007

03/08 Anthony J. Venables

AbstractThe summary of international experience:
• On average:
• Growth: each 1% point increase in the share of natural resources in GDP reduces growth by 0.09% per annum
• Resource booms are short-lived: An increase in resource prices has a short-run positive and long-run negative effect on the income of a resource exporter.
• Resource rich economies have low investment rates and verylow real savings rates:
• Savings adjusted for change in ‘natural wealth’;
Nigeria, -30% GDP
Central Asia, approximately 0% GDP

Turning Resource Wealth into Sustainable and Equitable Development: International experiences

03/08 Rick van der Ploeg

AbstractAfter an overview of the stylised facts about Africa’s natural resources, we discuss the problems and challenges facing the management of natural resources in Africa. We highlight the paradox of plenty, which is that many resource-rich countries in Africa have bad growth performance. They typically also have low investment rates and high degrees of inequality. The curse is especially bad for point-source resources such as oil, gas and diamonds and less for diffuse resources. We point out on the basis of cross-country evidence that this paradox can be resolved if institutions are good, financial systems well developed and the economy open to international trade. We argue that the quintessential nature of the paradox of plenty arises from the very high volatility of commodity prices. This further strengthens the case for good financial systems. We subsequently focus on an analytical framework for the assessment of the management of natural resource wealth. We point out that rapacious rent seeking and the lack of effective mineral property rights has led to negative genuine saving rates and the gradual erosion of the wealth of many African countries. Although there may be a rationale for negative genuine saving if countries are investing heavily in new innovative exploration technology, this hardly seems the case for Africa. The challenge for policymakers in Africa is therefore how to get more incentive-compatible contracts and transparent accounts of mineral extraction. A key question is how to manage natural resource wealth and whether it should be used to save and invest or to boost purchasing power of the people. If it is spent, the challenge is to spend the resource revenues on productive purposes. We conclude with a discussion of the role of China and India in the new ‘scramble’ for Africa’s natural resources.

Africa and Natural Resources: Managing natural resources for sustainable growth. Background paper for the 2007 Annual Report of the African Development Bank