New Approaches to Closing the Fiscal Gap

Global economic development has long been propelled by the mass production and consumption of raw materials—for food, energy, shelter, and all the comforts of modern civilization. Even as the human population quadrupled over the past 100 years, global commodity markets kept the world well stocked and supported poverty reduction and better living standards. Amid overlapping crises over the past two years and the ongoing transition to lower carbon intensity, commodity markets are being reshaped. COVID-19 highlighted the volatility of these markets: global shocks can boost or drop prices sharply and suddenly, with destabilizing consequences for developing economies. The war in Ukraine has made the security of energy and supply chains a more prominent goal, even if it entails higher costs. Efforts to reduce greenhouse gas emissions are shifting demand away from fossil fuels while increasing demand for the metals and materials needed to build solar and wind infrastructure and battery storage. The sudden disruption of natural gas markets, which have often provided electricity base load during peak demand, brought new concerns about grid stability, grid capacity when adding intermittent renewables, and a global return to coal and diesel electricity generation.

This book offers a comprehensive analysis of major commodity markets and analyzes how changes in these markets affect the economies of developing countries. Over the next three decades, the growth of global demand for commodities is likely to decelerate as population growth slows, with many developing economies maturing and shifting their demand mix more toward consumption and services. The energy transition is likely to bring a major boost to metal-producing economies because technologies related to renewable energy tend to be more metals-intensive.