Book Chapter
Recognizing the risks

This chapter analyses the risks facing resource-dependent countries. These include: (i) economic mismanagement (the ‘resource curse’); (ii) political mismanagement; and (iii) environmental damage (climate change and the destruction of natural capital). It distinguishes ‘risk’ (which can be addressed probabilistically) from ‘uncertainty’ (infrequent unpredictable events). Mozambique, with its large natural gas resource, provides examples of all the component risks and uncertainties. 

The chapter then explores the risks and uncertainties arising from the global transition away from fossil fuels to renewable energy. This shift could result in ‘stranded countries’ as well as ‘stranded assets’. Finally, the chapter explores the nature of the net-zero transition for metals, including the eventual emergence of new cheaper materials as substitutes for critical, but expensive, minerals. 

Overall, the chapter recommends focusing on a nation’s entire portfolio of natural resources to minimize the impact of shocks, and to mitigate risks and uncertainties.