14
Oct
09

Should oil rich countries be compensated for reducing carbon emissions?

oilSaudi Arabia, along with other petrol producers, could be badly affected by emissions targets.

So, the oil producing country has an idea.

Saudi Arabia wants other oil producers to join it in asking for compensation  from wealthy countries that reduce energy consumption to combat global warming.

So, the rest of the world cuts back on dangerous emissions, and pays the oil-rich countries for the privilege !

The Saudi chief negotiator, Mohammad al Sabban, has described the issue as  “make or break” for his country.

He says:
“Assisting us as oil-exporting countries in achieving economic diversification is very crucial for us through foreign direct investments, technology transfer, insurance and funding,”

American Reality isn’t impressed.
‘I have never been accused of having the world’s greatest memory, so can you tell me how much assistance the Saudis gave us last year when a gallon of gas cost Americans more than four dollars. Given their lack of support for us why should we care so much about them?’

Some bloggers like common sense wonder even suggest that this is an attempt to fund a lavish lifestyle. Other’s like Market Rubbernecker are convinced the proposal will never fly, it’s a just a way of bringing the issue to the negotiating table.

 If a county’s economy depends on a product that the world has used for decades and wants to use less of (in this case it’s oil) should that country be compensated?


31 Responses to “Should oil rich countries be compensated for reducing carbon emissions?”


  1. 1 Nigel
    October 14, 2009 at 12:25

    Maybe hydrocarbon producing countries should be taxed for selling these pollutants.

  2. 2 gary
    October 14, 2009 at 13:46

    So, an updated version of the oil depletion allowance has been suggested. This is as ludicrous now as it ever was. Perhaps I should ask all the WHYS respondents to send their extra monies my way, because surely whatever this is that I do, I will not be able to do it forever🙂
    g

  3. 3 scmehta
    October 14, 2009 at 14:14

    Outrageous! It appears Saudi Arabia and some other oil-producing countries give a damn to the problem of global warming; their this approach, towards the proposed compensation, is cruelly selfish and absolutely illogical. If the global action to reduce carbon-emission does force those countries to reduce production, then side by side, it also helps them, as much as the rest of the world, to benefit from the less polluted and healthier environment; And, by the way, do they not feel proud to be participating in the global efforts, wherein, almost the whole world would be making some sacrifices, in one way or another, to put the brakes on any further warming of the earth’s atmosphere.

  4. 4 jens
    October 14, 2009 at 14:18

    so we should pay them for us using less oil???? they had the gravy train running for decades and made trillions, but wasted those very trillions.

    we are batteling to use less oil so that we are not dependent on them…..

    sure ‘money for nothing and chicks for free”

    • 5 Jessica in NYC
      October 14, 2009 at 17:32

      @ Jens, Be reasonable, the gravy train needs a gold utensils and a fancy bowl decorated with diamonds.

      @Shaimaa Khalil, I’m going to send you my dry cleaning bill for the coffee I spilled reading this hilarious post. Thanks for the joke, I had a good laugh.

  5. October 14, 2009 at 14:25

    The oil producing countries should be fined for past export of their product first and then the same money should be given to them for their loss in the future.

  6. 7 vijay Pillai
    October 14, 2009 at 14:25

    All these rich oil producing countires with their wealth from people who consume oil but when it comes to redcuing co2 ,they can’t dip intom their pocket but find cunning ways to get money from poor countries.Rich oil producing nations are eually guilty of contributing to co2 emmisions and the polluter pay principle applies more to them as well.

  7. 8 Syed Nadeem
    October 14, 2009 at 16:12

    What, No way, these OPEC gang of oil producers must be taxed heavily . I live in Middle East and i know the reasons.
    The ME OPEC countries must be made to invest heavily in education, infrastructure and distribution of countries oil wealth among its citizens and residents.

  8. 9 Tom K in Mpls
    October 14, 2009 at 16:28

    Nobody should be worried about emissions targets related to global warming. Global warming is a bad assumption that has not been proven. Recent evidence shows a cooling trend over the last decade. Now making all processes more efficient in all ways makes economic sense. That is what they need to do, try to make more money by process, not begging.

  9. 10 T
    October 14, 2009 at 16:56

    This is one of the silliest questions WHYS has ever asked. If I drive less, can I get compensated for using less gas? Will the gas station be compensated for selling less gas, junk food and cigarettes to customers as well? What’s next?

  10. 11 Petr
    October 14, 2009 at 17:09

    Should the Saudi Arabia be compensated for holding the civilized world hostage and made obscenely wealthy because of that?
    Is this a question from the April Fool’s Day edition of WHYS?

  11. 12 Chintan in Houston
    October 14, 2009 at 18:00

    I would rather see that the emissions that oil producing nations produce be allotted to countries that in turn import the products. Cause if no countries were importing then the emission of oil producing nations would be lower as well.
    So the net oil importing nations do more to reduce their oil consumption.
    This kind of emission transfer can then be applied to all products. If this was done effectively a lot of China and India’s emissions would be transferred to the wealthy western nations which in turn would force them to invest in more energy efficient technologies.

  12. 14 Ibrahim in UK
    October 14, 2009 at 18:03

    Attempt at Devils advocacy:

    Is anyone familiar with game theory? Or Prisoner’s dilemma where the end-turn is known?

    Saudi oil production is artficially high to keep the price of oil reasonably low to satisfy world economies.

    Saudi knows that in (let’s say) 30 years, the demand for oil will fall and it will lose money.
    In order to maximise it’s oil revenues until this event occurs, Saudi will reduce output today and increase the price, giving it around 30 years of high oil revenues to buffer the expected future loss.

    This means that the rest of the world will suffer dramatically higher energy costs for the next 30 years. A disaster.

    So how do we stave off this imminent energy crisis? Either continue high oil consumption, or provide assurances (in the form of compensation/investment etc) that Saudi’s revenues won’t be affected by the long term trend away from oil.

    • 15 Tom K in Mpls
      October 14, 2009 at 20:41

      Two things, first Ibrahim, if production is up, prices stay low. Low energy prices make it less appealing for consumers to adopt/develop alternative sources. This will extend the stated thirty years assuming supply can outlast the development of new technologies. Higher prices will speed the development of new technologies and extend the supply. Neither is a disaster.

      Second, jens, your last statement is not true, but it should be. Or maybe oil companies are short sighted. Oil will eventually run out unless we learn to totally replace it. Either way, oil companies that do not lead in the replacement of their product stand to loose a lot. They have more money available to do this than anyone else. It baffles me that they don’t do it.

    • 16 Jonnan
      October 15, 2009 at 00:19

      Sorry Ibrahim – the typical term I’v seen used to describe that is not ‘Game Theory’, but ‘Extortion by a Cartel’.

      They have a Cartel – We have to live with that. But trying to dress up extortion as some kind of moral crusade? Lemme think . . . ahhh . . . No.

      No the supply is not ‘artificially high’ – the supply is exactly the price they feel get’s them the best return on their investment while not being so high as to drive people en masse to seek alternatives. That point is no more ‘artificial’ than any other point crossing supply and demand they choose to sell at.

      They can of course drive prices higher by lowering supply – and driving countries to alternative sources. The risk/return on that strategy is of course entirely their call.

      But let’s not try and dress this up as a moral imperative or some extraordinary problem in game theory worthy of Nash and Schelling.

      It’s one step removed from Danegeld. Pay it if you choose, but these things never end well.

  13. 17 jens
    October 14, 2009 at 18:42

    ibrahim in the UK,

    what about the saudis invest in their own future? i mean they make a considerable amount of money and will do so for sometime. the y could invest in new technologies, build research facilities etc, BUT no they only see the dollar sign.

  14. 18 Bert
    October 14, 2009 at 19:20

    What’s next? We all pay tax dollars to Phillip Morris, because “too many” people have quit smoking?

    Gimme gimme gimme. There’s always someone out there wanting a handout.

    Here’s the deal. If Saudi oil is kept artificially cheap, then the Saudis are in part responsible for making such oil addicts of westerners, in particular. Maybe they should raise the price and wean us of this thirst.

  15. 19 Jonathan Simeone
    October 14, 2009 at 20:54

    I am the author of the American Reality blog. As I mentioned in my post on this topic when deciding how to respond to this issue we must keep in mind the lack of stability in the Middle East. If countries, like Saudi Arabia, fail because of the lost profits they currently rely on from the sale of oil they will, most likely, be taken over by Muslim extremists. This does not mean we should be paying them forever, but it might be a good idea to have organizations, like the World Bank, assist these nations in developing new economies. These governments are not friends, but what we might face if they fall is something most of us should not want to see.

    • 20 Kevin PE
      October 15, 2009 at 11:48

      So, we pay to prop up regimes that are semi-friendly in order to keep out ones that aren’t. Is this the foreign policy that the west adheres to? I see a problem here – would it not be in that regimes interest to clandestinely support the “radicals” in order to maintain the “threat” and thereby guarantee continued support. In other words if there is no enemy it is necessary to create one. Of course the minor problem of the will of the people is ignored, thereby also insuring discontent and a steady supply of dissidents to keep the wheel of illusion turning.

  16. 21 Alex
    October 14, 2009 at 21:26

    What have the Saudis been doing with their oil revenues for the past 40 years? Maybe they should take a look across the border to UAE or Qatar and invest in their own post-oil future instead of wasting money on obscene luxury for the royals and exporting hate by funding madrasas and islamic terror all over the world.

  17. 22 jens
    October 14, 2009 at 21:30

    Jonathan,

    the saudis themselves have actually supported the fundamentalist for decades by giving the wahabis a sanctuary in return for them supporting the house of Saud 70 plus years ago. they ahve only themselves recently woken up to the problems they created themselves.

    in addition, i would hardly call saudi arabia a country that needs economic support. the problems they have a re all self generated, since they had a very short term high gain policy. nobody invested in R&D, universities etc. i have no sympathy for the oil countries. once the power of oil is gone, and that will happen, who cares if they are ruled by zelots. given the advances in defense technologies we will be able to defend ourselves, without caring what lunatic fringe is ruling in the middle east.

  18. 23 Jonnan
    October 15, 2009 at 00:26

    If they have not chosen to invest their oil wealth in their own economies to create a middle class but rather create a society holding the extremes of wealth and poverty . . .

    What make you think more easy money from the world bank would assist in changing this point of view?

    Seriously, if there is a way to assist in the creation of a burgeoning middle class, I’m all for it, but they have to choose to prioritize that first. If they do – they have a significant portion of the world economy passing through their hands to do it with and don’t need extra funds (Though I’m perfectly willing to assist in providing them if they’ve a specific long term goal that requires extraordinary short-term investment), if they don’t, no extra funds will really help.

    Jonnan

  19. 24 Mashrur
    October 15, 2009 at 01:58

    if saudi is using this as a ‘make or break’ situation they should seriously consider cutting down of buying lucury items for their so called BOSSES to some extents and focus on turning whatever they have in personal assets from the politicians (cuz i’m sure they have alot although they might say otherwise) use it.

    Rather than begging other nations to use less oil and even pay them more….is that too sweet a deal to ask for…..WAKE UP BUDDY….

  20. 25 Abram
    October 15, 2009 at 05:05

    I think it’s too late for countries like Saudi Arabia to do something about their land environment — as they’ve abused mother nature in a greedy and tragic manner for quite a long time. Besides, you can’t buy everything with money!

  21. 26 Roy, Washington DC
    October 15, 2009 at 08:13

    They want us to pay them more, for using less of their product? That’s not how capitalism works.

  22. 28 Nate, Portland OR
    October 15, 2009 at 09:36

    Ibrahim,

    Its far more complex than that. If, say, OPEC reduces output too much the world economy could tailspin and reduce demand to the point that OPEC profits go down well below current levels. And/or it might accelerate alternate energy development and again reduce demand, but this time for the long term.

    In any case, the oil producing countries cannot just turn down the taps and necessarily reap greater profits for the long term.

  23. 29 Ibrahim in UK
    October 15, 2009 at 10:04

    Hi Tom,

    True, lower prices would normally keep demand high beyond the example 30 years. But if the restriction on emissions and adopting alternatives are imposed externally, everyone’s demand for oil would be reduced, ceteris paribus (woohoo I never thought I’d use that word). So the incentive to develop energy alternatives is not only the price, but mainly emission agreements. That’s the end date of the game.

    • 30 Tom K in Mpls
      October 15, 2009 at 17:14

      You are assuming two things. One that both national and international politics stay static (hasn’t happened yet ). And second, capitalistic motives will not outpace government imposed standards.

      For the second part, look at the performance increases of engines over the last ten years. How about the last four! This was to give the most possible road shredding power while maintaining reasonable mileage. Coincidentally, this also reduces emissions. If I remember right, the last US standards were imposed in the early 90s.

      Groups all over the world try to influence to their advantage, but capitalism always wins in the long run.

  24. 31 robert
    October 16, 2009 at 09:21

    “If a county’s economy depends on a product that the world has used for decades and wants to use less of (in this case it’s oil) should that country be compensated?”

    No, a country should never become so depentant on a single resource that it ends up in this situation.
    We as customers shouldn’t have to pay for the suppliers mistakes.

    Oil rich countries are not going to run out of oil tomorrow. They still have plenty of reserves (both cash and oil) to invest into making their future. They have to understand that they need take a relatively small hit in todays revuenue and invest for the future.

    If these countries opened up their own markets to foriegn investment, then it might be another situation worth considering, but what amounts to bail outs with no return are not.


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