Addressing country-specific challenges and priorities
- Fossil fuel producing countries have the opportunity to develop resilient diversification plans that bring together energy transition and industrial policy, identifying strategic sectors, connecting industries to international value chains, and bringing together horizontal and vertical industrial policies. Countries should also integrate TAFF into existing plans.
- In the short term, all countries should consider making their fossil fuel subsidies transparent, through inventories, mappings, or other transparency mechanisms, identifying which subsidies are inefficient. They should consider reforming inefficient fossil fuel subsidies in the longer term.
- Fossil fuel producing governments have the opportunity to improve domestic revenue mobilisation, such as taxing fossil fuel exports, to pay for economic diversification. They also have the opportunity to strengthen domestic governance and coordination to improve transition readiness.
- Governments that need to diversify their economies should explore new ways to build new industries and attract international investment.
- Donors should explore ways to provide additional support for country-specific challenges, moving beyond talking only about climate to talking more broadly about industrial planning and new growth sectors.
- The Brazil COP30 Presidency TAFF roadmap should not be prescriptive for countries, but rather recognise the need for differentiation and enable countries to place themselves among archetypes.
International support for TAFF
- Donor governments have the opportunity to create a common international framework to coordinate donor approaches and improve alignment, while using the Brazil COP30 TAFF Roadmap process to better coordinate the offer of donor support. Donor support can be shifted towards early-stage project development, not just existing pipelines.
- Producer governments should work with the IMF, MDBs and other IFIs to develop a stronger fiscal and macroeconomic toolbox for managing energy transition risks, such as revenue volatility, debt, subsidy reform, and stranded assets, and to lower the cost of capital in fossil fuel dependent countries. International support needs to move beyond traditional climate finance to also unlock economic diversification. Donors should provide finance for development programs so that recipients can increase their fiscal space for industrial policy. Public finance levels should increase.
- Donors and funds should not impose conditionalities that would override national strategies or impose uniform pathways, but should rather be open to supporting the implementation of national TAFF and development plans.
- Governments should use their bargaining power to create conditions such that the private sector has the incentives for technology transfer.
- IFIs and MDBs should coordinate and align better and engage in transition risk more systematically, moving where pressures will be felt earliest.
- The macroeconomic dependencies and fiscal policy workstream of the Santa Marta forward process, led by IISD, should take into account dependence on fossil fuel revenues, cost of capital issues, and fossil fuel subsidies.
The future of international cooperation on TAFF
- Exporters and importers of fossil fuels should work together to tackle both fossil fuel supply and demand in tandem, to avoid price hikes and unrest. Importers can set very clear policy, regulatory and pricing frameworks that create demand for low or zero emissions fuels. Importers and exporters can jointly derisk low-emission fuel projects through cooperation agreements or cross-border support, to enable scale up of those projects that can help producers maximise the resources that they have and provide an alternative source of revenue.
- The roadmaps workstream of the Santa Marta forward process, led by the NDC Partnership and the Science Panel for the Global Energy Transition, should be country-led in nature, and should not place new burdens on countries to develop a new plan.
- Fossil fuel importing governments should not only decarbonise at home, but send policy signals to coordinate with fossil fuel exporting governments, including demand signalling and consumer-producer dialogue.
- The trade workstream of the Santa Marta forward process, led by the OECD, should look at alternative revenue options for fossil fuel producing countries.
- The COPs 30, 31 and 32 Presidencies should find ways for the conversation about the Brazil COP30 Presidency’s TAFF roadmap to continue beyond COP31 in Antalya.
- More conversation is needed on how governments and international institutions can work with bond markets to better support producers as they transition away from fossil fuels.
- More conversation is needed on multilateral financial solutions to managing potential stranded assets.
- More conversation is needed on how supply chains can be reshuffled to add value closer to where the resources are.