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Equitable Framework and Finance for Extractive-based Countries in Transition (EFFECT)

image of Equitable Framework and Finance for Extractive-based Countries in Transition (EFFECT)

How can fossil fuel producers and mineral-rich developing countries design realistic, just and cost-effective low-carbon transition pathways? Taking into account the heterogeneity of low-carbon trajectories, the Equitable Framework and Finance for Extractive-based Countries in Transition (EFFECT) provides options for policy makers, industry and finance institutions in search of the answers. The report aims to help them seize the transformational opportunities linked to sustainable, low-carbon growth. It identifies ways of mitigating the transition’s impacts on fossil fuel industries, workers and poor households, and of preventing the risks of high-carbon lock-in and stranded assets. Recognising the shared responsibility of consuming and producing countries in reducing fossil fuel production and use, EFFECT advocates for transformative partnerships for technology transfer, green finance and capacity building. Ultimately, it supports an equitable sharing of the transition’s benefits and costs, both across and within countries.

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Executive summary

Fossil fuel-producer developing economies have contributed least to cumulative greenhouse gas (GHG) emissions and yet are exposed to some of the worst impacts of climate change. They are also among the least equipped to navigate the risks and take advantage of the opportunities arising from the low-carbon transition. Many are in the midst of severe economic downturns caused by the enduring effects of the COVID-19 pandemic and Russia’s invasion of Ukraine. These crises have created strong inflationary pressures, increased public debt to unsustainable levels and made it harder and more expensive to access international finance. Faced with rapid demographic growth, urbanisation and burgeoning demand for energy, they rely heavily on cheap access to fossil fuels for power generation and industry, with inadequate power networks, and significant gaps in technology, capacity and financing that could lock them into costly high-carbon development pathways.

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