Stranded Resources in the Context of Inclusive Development:
A Multi-layered Research with a Focus on Kenya
Kyra Bos // Supervisor: Prof. J. Gupta
MSc. thesis International Development Studies
Stranded Resources in the Context of Inclusive Development:
A Multi-Layered Research with a Focus on Kenya
MSc Thesis
Kyra Bos
Supervisor: Prof. Joyeeta Gupta (University of Amsterdam) Local Supervisor: Prof. Benedict M. Mutua (University of Egerton) Second Reader: Dr. Mirjam Ros-Tonen (University of Amsterdam)
“I, Kyra Bos, have read and understood the University of Amsterdam plagiarism policy and I declare that this thesis is entirely my own work, all sources have been properly acknowledged, and that I have not previously submitted this work, or any other version of it, for assessment in any other paper.”
Table of Contents
Abstract……….………i
List of Boxes, Figures and Tables….…….. ……….………….………..v
List of Abbreviations……….……….vi
Acknowledgements………..vii
Prologue………viii
1. Stranded Resources, Oil and Inclusive Development ... 1
1.1. Introduction ... 1
1.2. Problem definition ... 2
1.2.1. The issue of Stranded Resources ... 2
1.2.2. Gap in Knowledge ... 3
1.3. Research Question ... 4
1.3.1. Sub-questions ... 5
1.4. Methods ... 6
1.4.1. Introduction... 6
1.4.2. The Literature Review ... 6
1.4.3. Content Analysis of Policy Documents ... 6
1.4.4. The Case Study: Kenya ... 6
1.4.1. Limitations of the data-collection ... 12
1.4.2. Ethical Considerations ... 13
1.5. Structure ... 14
2. Theoretical Framework ... 15
2.1. Introduction ... 15
2.2. Stranded Assets & Resources Literature Review ... 15
2.2.1. Introduction... 15
2.2.2. Literature Review Stranded Assets ... 15
2.2.3. Literature Review Stranded Resources ... 21
2.2.5. Strategies & Lessons Learned in dealing with Stranded Resources ... 25
2.2.6. Conclusion... 27
2.3. Inclusive Development & the Right to Development ... 27
2.3.1. Introduction... 27
2.3.2. Definition and Characteristics of Inclusive Development ... 28
2.3.3. Inclusive Development: at the National Scale ... 28
2.3.4. Inclusive Development: at the Global Scale in Climate Change Governance ... 29
2.3.5. Conclusion... 35
3. Climate Change Governance and the issue of Stranded Resources ... 36
3.1. Climate Change Governance at the National level ... 36
3.1.1. Introduction... 36
3.1.2. Policy documents and regulatory framework of climate change... 36
3.1.3. Awareness of Climate Change ... 37
3.1.4. Challenges ... 37
3.1.5. Adaptation and Mitigation efforts in Kenya ... 40
3.1.6. Renewable Energy Potential in Kenya ... 40
3.1.7. Conclusion... 42
3.2. Climate Change Governance at the Global Level: Stranded Resources ... 43
3.2.1. Introduction... 43
3.2.2. Are Stranded Resources a Risk? ... 43
3.2.3. Stranded Resources and Inclusive Development ... 44
3.2.4. What are the strategies to deal with the issue? ... 49
3.2.5. Conclusion... 53
4. Oil for Development ... 55
4.1. Oil for Development: inclusive development at a national scale ... 55
4.1.1. Introduction... 55
4.1.2. Policy documents and regulatory framework of oil ... 55
4.1.3. Expectations ... 56
4.1.5. Where should the money go? ... 59
4.1.6. Public Participation ... 60
4.1.7. Environmental Safeguarding ... 61
4.1.8. Additional Challenges ... 63
4.1.9. Conclusion... 64
4.2. Oil for Development at the local scale Lokichar (Turkana) ... 65
4.2.1. Introduction... 65
4.2.2. Background information ... 65
4.2.3. Expectations & Hopes ... 66
4.2.4. Challenges ... 66
4.2.5. Distribution of employment opportunities ... 70
4.2.6. Public Participation ... 71
4.2.7. Environmental Safeguarding ... 74
4.2.8. Conclusion... 75
5. Conclusion ... 76
5.1. Inclusive Development at the National and Local Scale in Oil Extraction ... 76
5.2. Inclusive Development at the Global Scale with Stranded Resources ... 78
5.3. Case study design ... 81
5.4. Filling the knowledge gap ... 82
3.1. Future research ... 82
3.2. Conclusion ... 83
Bibliography ... 85 Annex I: Interview sets A & B………..………..I Annex II: Description of the research location in Lokichar...……….……….IV Annex III: Description of citizen participation in the Constitution of Kenya ………V Annex IV: Including developing countries in GHG-emission reduction targets...………..….VI
i Climate change will be a major threat to human development in the next era and global action is urgently needed to avoid the devastating effects of climate change. Moreover, the risks associated with climate change are most hazardous for developing countries (DCs), whereas especially Sub-Saharan Africa is one of the most vulnerable regions to the impacts of climate change.
Meanwhile 191 countries have ratified the United Nations Framework Convention on Climate Change (UNFCCC). They agreed in 2010 to avoid a global average temperature rise above 2°C compared to pre-industrial levels. This 2°C limit is recognized as the limit beyond which interference with the climate system can have unforeseeable, irreversible, and devastating effects on human kind.
The British think tank Carbon Tracker raised the issue of stranded resources in 2011. Their research points out that to remain below the two degrees limit only 20% of all proven fossil fuel reserves can be extracted and the remaining 80% should be left untouched. Hence, when the international community decides to adhere to the 2°C limit, 80% of all fossil fuel reserves become stranded resources and investments already made in these reserves turn into stranded assets. This poses a risk to the global economy and if investments in the fossil fuel sector continue, the problem could even create a carbon bubble.
In addition, the stranded resources issue can put an unevenly heavy burden on DCs with yet untapped fossil fuel reserves and undermine their Right to Development (RTD). Even though current per capita emissions of DCs are still relatively low, their emissions will have to increase to meet development needs, yet future emission-reduction targets could temper their growth. Besides, fossil fuel discoveries are often regarded as resources for development, as is the case in Kenya where the recently discovered oil is seen as a driver of development and prosperity. At the same time, oil can also become a curse to development if the development process only benefits a few and con-cerns also arise over the risk of conflict that oil extraction could ignite. Besides, oil extraction can have serious consequences for the local environment.
These problems can be related to the theory on inclusive development, which calls for an equitable and sustaina-ble development process that incorporates and engages all groups of society and especially demands the inclu-sion of the poor and previously marginalized. Hence, this thesis addresses the question: what does inclusive
de-velopment imply at the global and national level in dealing with stranded resources and oil extraction? In order to
answer this question an additional research question is raised: can a multi-layered case study focussing on
Kenya help to elaborate on this issue?
The issue of stranded resources related to fossil fuel extraction and possible emission-reduction is a novel issue, not reviewed in the literature so far. The amount of literature on the concept of stranded assets is wider than the body of literature on stranded resources, which is rather limited. This research has identified four major gaps in the
ii existing body of literature on stranded assets and stranded resources; (i) a definition of the concept of stranded resources is lacking, (ii) the concept of stranded resources is not linked to climate change, (iii) the literature on stranded assets is only associated with fossil fuels in more recent years, and (iv) a link between stranded assets and stranded resources is not yet established.
Hence, this research aims to fill the gap in knowledge by conducting a literature review on the concepts of stranded resources and stranded assets. The relatively large body of literature on stranded assets enabled the identification of the main characteristics of stranded assets and thereby facilitated the proposal of a (emerging) definition on stranded assets.1 This definition informed the proposal of a definition of stranded resources.2 Furthermore, four
trends in the literature on stranded resources and assets were identified; (i) the concept of stranded assets has moved from one sector (the electricity sector) to multiple yet related sectors (e.g. fossil fuels and renewables), (ii) the conceptual coverage of stranded assets is broadening, (iii) stranded assets are increasingly used with reference to future climate change regulation and fossil fuel extraction, and (iv) this research proposes and expects the es-tablishment of a direct relationship between the concepts of stranded resources and stranded assets with reference to fossil fuel reserves in the near future, as obvious from the interrelated definitions.
The methodology to answer the main research question was, first, a literature review on the concepts of stranded assets and stranded resources, and on strategies to deal with the stranded resources issue. In addition, lessons to deal with stranded resources and assets are extracted from practice, from the South (in relation to Reducing Emis-sions from Deforestation and forest Degradation - REDD) and the North (nuclear phase-out in Germany). A litera-ture review was also conducted on the theory on inclusive development and its application at the national (and local) level and at the global level with regard to global climate change governance (GCCG). Additionally, to assess inclusive development at the global level the literature on the discussion on the RTD and the principle of Common
But Differentiated Responsibilities (CBDR) as adopted by the UNFCCC was reviewed. Second, a content analysis
of relevant policy documents governing oil extraction and climate change in Kenya was undertaken. Finally, a global multi-layered case study in Kenya was conducted to assess the perspective of a DC, Kenya.
Kenya is chosen for six reasons, (i) Kenya is a DC according to the World Bank’s classification on basis of Gross National Income per capita (i.e. Low Income Country), (ii) Kenya recently discovered significant petroleum reserves, (iii) the majority of the Kenyan oil deposits are discovered in a previously marginalized, climate vulnerable and conflict-prone region, Turkana (Lokichar) (iv), Kenya is vulnerable to future climate change impacts which may undermine its development prospects, (v) Kenya has adopted a novel governance discourse which resembles an inclusive approach as visible in the new Constitution (2010) and Vision 2030, and (vi) Nairobi, the main research
1 Stranded assets are defined this research as “[assets that lose] significant economic value well ahead of [their] anticipated useful life, as a result of changes in legislation, regu-lation, market forces, disruptive innovation, societal norms or environmental shocks” (Green Foundation, 2013:1).
2 Stranded resources are defined in this research as, resources which cannot be developed or extracted as a result of changes is legislation, regulation, market forces, disruptive innovation, societal norms or environmental shocks.
iii location, is base to many international organizations which increased the feasibility of a global multi-layered case study. In total 34 interviews were carried out with experts from the global, regional (East African), national, county and local level. In addition, 65 members of the local community in Lokichar were interviewed (8 focus groups and 22 interviews) to assess their perspectives on the oil developments in Turkana.
The research reveals that inclusive development calls for the inclusion of local host communities in dealing with oil extraction at the national (and local) level and calls for the inclusion of DCs in GCCG in dealing with stranded resources at the global level.
On a national and local scale with regard to oil extraction, inclusive development suggests six policy ingredients; benefit sharing, ensuring genuine public participation, investing in social inclusion, creating productive employment opportunities, safeguarding the environment, and mitigating against transitory livelihood shocks. Obstacles to achieve inclusive development within oil extraction in Kenya are sharing information and achieving accountability and transparency. For the local context, an extra challenge is the threat of conflict, which could be avoided by adopting an inclusive approach and including host communities in the development process.
At the global level, inclusive development comes with the assumption of the need to include DCs when addressing the issue of stranded resources. This is found in the discussions on the RTD and the CBDR-principle, which advo-cate an equitable and sustainable development process. All countries have a RTD yet the RTD is ‘constrained by sustainability’. Within the stranded resources issue the constraint is the 2°C limit. The case study in Kenya reaf-firmed the need for sustainable development and the need to integrate climate change and development issues.
The case study also reconfirmed the principle of CBDR, yet adds two responsibility dimensions; (i) responsibility of current oil consumption and (ii) responsibility of current oil production. This expanded responsibility-interpretation paves the way to address responsibility to act upon climate change to emerging economies (e.g. China) and the Middle East (i.e. production). Nevertheless, the North’s responsibility to take the lead is also reiterated. There is a need for the global community to commonly address climate change and to include all nations in CCG and emis-sion-reduction targets.
An inclusive approach to deal with stranded resources calls for global emission trading (i.e. creating an equal-level
playing field) with the inclusion of DCs. Yet, in order to address the RTD, DCs should be allowed to increase their
emissions and to use their stranded resources. This implies that the North has to come down in terms of emissions to make space for the South to grow. In addition, a compensation-oriented scheme to deal with stranded petroleum resources issue was evaluated.
iv These results imply that the theory of inclusive development is useful in both addressing the issue of stranded resources such as oil extraction, whereas it ensures that the previously excluded (DCs in GCCG and local host communities) are included and engaged in the development process. It also means that principles of equity and fairness have to determine the development process.
A key question is whether the results from Kenya can be extrapolated to other DCs. The arguments put forward in Kenya with respect to GCCG are in line with the sort of arguments DCs have been making, as also obvious from the discussion on the RTD. Hence, expectations are that the relation will be strong with other DCs. Yet, this as-sumption has to be further examined. The research results for the national and local level may be too specific to extrapolate to other DCs. Yet, the usefulness of the inclusive development approach in guiding both oil extraction and the issue of stranded resources was proved in this thesis.
v
List of Boxes, Figures and Tables
Box 1 Interview questions set B 12
Box 2 Provisions of citizen participation in the Constitution of Kenya (Annex II) V
Figure 1 The Carbon Budget 2
Figure 2 Petroleum Exploration Blocks in Kenya 9
Figure 3 APEI Office in Lokichar 11
Figure 4 Conceptual Framework 14
Figure 5 Theoretical Framework, Box 1: Inclusive Development and Stranded Assets and Resources.
15
Figure 6 Graph showing the total number of documents on stranded-assets 16 Figure 7 Diagram portraying the total number of documents divided into subject areas,
self-generated from Scopus.
16
Figure 8 Graph portraying the total number of documents on stranded-resources 22 Figure 9 Diagram showing the total number of documents divided into subject areas,
self-generated in Scopus.
22
Figure 10 The total share of petroleum production and consumption per region in 2013 45
Figure 11 Tullow Oil Lokichar 64
Figure 12 Nakukulas Village, Lokichar 64
Figure 13 Completed Conceptual Framework 83
Table 1 Classification of countries on GNI per capita basis 8
Table 2 Conceptual coverage and characteristics of stranded assets 20
vi
List of Abbreviations
ADB Asian Development Bank
APEI Alemun Pastoralists Empowerment Initiative
CCG climate change governance
CCRS Climate Change Response Strategy
CDM Clean Development Mechanism
CBDR Common But Differentiated Responsibilities
COP Conference of Parties
CSR Corporate Social Responsibility
DC Developing country
DRTD Declaration on the Right to Development
EIA Environment Impact Assessment
GCCG Global climate change governance
GDP Gross Domestic Product
GHG Greenhouse gas
GNI Gross National Income
GOK Government of Kenya
GNI Gross National Income
GtCO₂ gigaton CO₂ emission
IC Industrialized country
IPCC Intergovernmental Panel on Climate Change KCCWG Kenya Climate Change Working Group
MoE Ministry of Energy
MoEWNR Ministry of Environment, Water and Natural Resources NCCAP National Climate Change Action Plan
NCCFP National Climate Change Framework Policy NCCRS National Climate Change Response Strategy NEMA National Environment Management Authority
LIC Low Income Country
LDC Least Developed Country
PV Photovoltaic
RE Renewable Energy
REDD Reduced Emissions from Deforestation and forest Degradation R&D Research & Development
RDED Rio Declaration on Environment and Development
RTD Right to Development
RTSD Right to Sustainable Development
SDGs Sustainable Development Goals
UN United Nations
UNCED United Nations Conference on Environment and Development UNFCCC United Nations Framework Convention on Climate Change
vii
Acknowledgments
I would like to thank Professor Joyeeta Gupta for supporting me throughout the whole process, for always being available for questions, and especially for challenging me to make the most out of this research. Besides, I am very grateful to Professor Benedict Mutua, from the University of Egerton, for all the help and support he gave me during the field research in Kenya and for giving me the opportunity to discuss the research with students at Egerton. In addition, I would also like to thank Charles and David, who guided me through hot Turkana and who made it possible to sit down with the community in Lokichar and discuss the research. Without you, this research would have never taken the shape it has now. A big thanks goes out to the always smiling June, who helped transcribing the interviews and made me laugh many times.
A huge thank you goes to my friends who came to study together with me in our ‘Akbarhuis’ during the last year and enlightened my day if the journey became difficult. Especially for their willingness to review the thesis, I will be forever grateful. Of course, I cannot forget my family who always supported any decision with love and encourage-ment.
viii
Prologue
In Turkana the nexus between development and climate change, which is the focal point of this thesis, takes shape. On the one hand, Turkana, a previously marginalized area,
can develop through the oil discoveries. On the other hand, Turkana is increasingly vulnerable to the impacts of climate change, largely induced by global fossil fuel
1
1.1.
Introduction
The 5th Assessment Report, Climate Change 2014: Mitigation of Climate Change of the Intergovernmental Panel
on Climate Change (IPCC) is clear on the human influence on global warming and it’s far reaching negative con-sequences when mitigation action remains absent (PwC, 2013:4). Meanwhile 191 countries have ratified the United Nations Framework Convention on Climate Change (UNFCCC). In 2010 they agreed to avoid dangerous climate change by adopting the target of limiting average global temperature rise to below 2°C compared to pre-industrial levels in de Cancun Agreements (UN, 2010; UN, 2014a; Carbon Tracker & The Grantham Research Institute, 2013:4).3 The British think tank Carbon Tracker however argues that when the international community decides to
adhere to the maximum of 2°C, only one fifth of all proven fossil fuel reserves can be burned (Carbon Tracker, 2011:2). This would imply that the bulk of all proven fossil fuel reserves cannot be used, which would implicitly turn them into stranded resources (Ibid.). This could have tremendous impacts on developing countries (DCs), espe-cially those who have recently discovered new fossil fuel reserves, as is the case of Kenya (see 1.4.4.2.2). Since current per capita emissions of developing countries may be still relatively low, their emissions will have to increase in order for DCs to meet development needs (Yang, 2012:111). If DCs’ emissions are constrained in the future, their Right to Development (RTD) (see 2.3.4.1) could be undermined.
This research focuses on inclusive development at three levels; at the national and global level for climate change governance (CCG) and the issue of stranded resources (see 3), and at the national and local level in terms of using oil for equitable and sustainable development (see 4). At the global level, inclusive development assumes that there is a need to include developing countries (DCs) when addressing the issue of stranded resources, as primarily found in the RTD and the principle of Common but Differentiated Responsibilities (CBDR) (see 2.3.4). At the na-tional level, inclusive development advocates a number of policy ingredients to guide the oil developments in order to ensure that the whole society and especially local host communities reap the benefits of development (see 2.3.3). Analysing the usefulness of the inclusive development approach in dealing with the issue of stranded resources and national oil extraction is done by conducting a single multi-layered case study and assessing the perspective of a developing country, Kenya.
This chapter will explain the issue of stranded resources briefly (see 1.2.1), elaborate on the gap in knowledge on the issue of stranded resources (see 1.2.2), identify the main research questions and sub-questions (see 1.3), explain and reflect on the methods used (see 1.4) and provide an overview of the thesis (see 1.5).
2
1.2.
Problem definition
1.2.1. The issue of Stranded Resources
The increase of atmospheric levels of greenhouse gases (GHGs), in particular the concentration of carbon dioxide (CO₂) from the burning of fossil fuels, is seen as the primary cause of global warming (Carbon Tracker & The Grantham Research Institute, 2013:9). The concept of the carbon budget is increasingly used to determinate how much fossil fuels can be extracted while abiding by the 2°C-norm, which “means that for any particular rise in temperature there is a budget for emissions of GHGs, including CO₂, which cannot be exceeded in order to avoid temperature rising above a target threshold” (Carbon Tracker & The Grantham Research Institute, 2013:9, 13).4
The Potsdam Institute has indicated that when the probability of exceeding the 2°C limit is reduced to 20% the carbon budget for 2000-2050 will be 886 gigaton CO₂ emission (GtCO₂) (Carbon Tracker, 2011:2).5 While,
accord-ing to Carbon Tracker the total of all proven reserves of fossil fuels account for some 2795 GtCO₂ (Ibid.).6 When
emissions from previous years (2000-2011) are subtracted the carbon budget for 2050 will only be 565 GtCO₂ (Ibid.).7 A visualization of these numbers is shown in Figure 1 below. Consequently, only 20% of all proven fossil
fuel reserves can be extracted by 2050, while implicitly leaving the remaining 80% in the ground (Carbon Tracker & The Grantham Research Institute, 2013:4). Hence, when the international community decides to adhere to the 2°C limit, 80% of all fossil fuels reserves will become stranded and investments in these reserves are turned into
stranded assets (Carbon Tracker, 2011:2). This poses threats to the global economy and if investments in the fossil
fuel sector continue the problem could even create a carbon bubble, similar to the housing bubble the world expe-rienced earlier (Carbon Tracker & The Grantham Research Institute, 2013:4).
Figure 1. The Carbon Budget. Source: Carbon Tracker, 2011:6.
4 The carbon budget only takes into consideration the budget for CO₂, and does not includes all GHGs, but again “virtually all of the carbon in fossil fuels is ultimately emitted as
carbon dioxide” (Carbon Tracker & The Grantham Research Institute, 2013:9, 13; IPCC, 2014b:9).
5 GtCO₂ stands for the amount of CO₂ released into the atmosphere. 6 Whereas the composition of fossil fuels is: 65% coal, 22% oil & 13% gas.
3 However, action is not only needed to avoid a global carbon bubble in financial terms, global action is urgently needed to avoid the devastating effects of climate change.8 Already in 1990 the 2°C limit was recognized as “an
upper limit beyond which the risks of grave damage to ecosystems, and of non-linear responses, are expected to increase rapidly” (Rijsberman & Swart, 1990:ix). Since levels of uncertainty and unpredictability increase in a non-linear manner after this limit interference with the climate system can have unforeseeable, irreversible and devas-tating effects on human kind (e.g. the effects of sea-level rise, shifts in ocean-circulation or the release of huge methane reserves) (Graßl, et.al., 2003:11-20). Other effects attributed to climate change include desertification, food shortages, more intense cyclones and storms, unprecedented heat-waves and unparalleled droughts and floods (Carbon Tracker & The Grantham Research Institute, 2013:7). Besides, the intensity and frequency of these events will only increase and will be among the primary causes of human suffering in the future. Moreover, the effects of climate change will especially have severe consequence for the world’s poorest and most vulnerable (WB, 2013:xi). In addition, there are substantial socio-economic risks related to climate change, including the po-tential of conflict, mass-immigration, regional instability and the negative impacts on economic growth (Ibid.; Gujba,et.al., 2012:72; Ecofys, 2013:13). The risks associated with climate change are most hazardous for DCs, whereas especially Sub-Saharan Africa is one of the most vulnerable regions to the impacts of climate change (for Kenya, see 1.4.4.2.3) (Gujba,et.al., 2012:72; WB, 2013:xi; OECD, 2012:10).
Nevertheless the world is facing a global commons problem as a stable climate is a global public good, yet actions by different agents, on different scales, affect global GHG-concentrations (WB, 2013:xi). Therefore, collective action and global cooperation is paramount (Ibid.). The climate problem only intensifies, but adequate (global) policy is still lacking (Gupta, 2014). There is thus a high urgency to act for both DCs as well as industrialized countries (ICs). Especially for DCs who have recently discovered potential fossil fuel reserves, as is the case of Kenya, the issue of stranded resources and possible future restrictions on the extraction of fossil fuels could place a burden on their RTD. Consequently, issues of equity, responsibility and justice are at play. There is also urgency to act since ICs are increasingly investing in unconventional fossil fuels (e.g. oil sands or shale gas). The extraction of unconven-tional fossil fuels intensifies the issue of stranded resources, since many unconvenunconven-tional fossil fuels are more car-bon intensive and their reserves add significantly to the conventional fossil fuel reserves (Carcar-bon Tracker, 2011:12).9 If unconventional fossil fuels are included in the carbon budget the implications for what we can use is
less than 20% (Carbon Tracker, 2011:12).10
1.2.2. Gap in Knowledge
This thesis also aims to address a gap in knowledge on stranded resources and stranded assets. I identify four gaps in the existing body of literature on stranded resources and stranded assets; (i) a definition on the concept of
8 Besides, in this thesis I will primarily reflect on the socio-economic and political implications of the issue of stranded resources, which implies that the financial risks inherent in the issue are not discussed.
9 . For instance the carbon factor of shale gas is higher than for traditional gas (Carbon Tracker, 2011:12).
10 Whereas Carbon Tracker did not include some unconventional energy reserves in the analysis, which will only worsen the picture (Carbon Tracker, 2011:12). Looking at for instance shale gas, which created a recent energy revolution in the US, the carbon factor of shale gas is higher than for conventional gas (Ibid.).
4 stranded resources does not exist in the available literature (see 2.2.3.3), (ii) the concept of stranded resources is not yet linked to climate change (see 2.2.3.2), (iii) the literature on stranded assets is only associated with fossil fuels in more recent years (see 2.2.2.2),11 and (iv) a link between stranded assets and stranded resources has not
been established so far (see 2.2.3.2 & 2.2.4). In addition, for both concepts no review articles were found (see 2.2.2.1 & 2.2.3.1). The body of literature on stranded assets is much wider than the body of literature on stranded resources, which is rather limited (see 2.2.2.1 & 2.2.3.1). The relatively large body of literature on stranded assets enabled the identification of the main characteristics of stranded assets and thereby facilitated the proposal for the adoption of an emerging definition of stranded assets, which is used throughout this thesis (see 2.2.2.2 & 2.2.2.3). In addition, this definition informed the proposal of a definition of stranded resources (see 2.2.3.3). Furthermore, four (anticipated) trends in the literature on stranded resources and assets were identified, which reflect upon the expanding conceptualization and increasing adoption of ‘climate change regulation’ into the conceptualization (see 2.2.4).
In addition, this research tries to incorporate and reflect upon a DC’s perspective with regard to the issue of stranded resources, which has not been done yet given the novelty of the issue. This was obvious inasmuch as the issue of stranded resources was not known by respondents in Kenya which also complicated the research to a certain extent since respondents had no prior knowledge on the issue. Consequently, often respondents conceptualized the issue of stranded resources as the ‘urgency of climate change’.12
1.3.
Research Question
The main research questions guiding this thesis are:
What does inclusive development imply at the global and national level in dealing with stranded
resources and oil extraction?
Can a multi-layered case study focussing on Kenya help to elaborate on this issue?
The first and main research question is be answered through the multi-layered case study in Kenya, which implies that the two questions are inseparable. In order to answer the main research question a number of sub-questions are answered, which are portrayed on the following page. The sub-questions either correlate with the concepts in the theoretical framework (see Chapter 2) or are more descriptive questions to better understand different subjects.
11 In general from 2013 onwards.
5
1.3.1.
Sub-questions
1. What are stranded resources and stranded assets?
2. What are the strategies found in the literature to deal with the issue of stranded resources?
3. What are the strategies found in practice to deal with the issue of stranded resources?
4. What is the theory on inclusive development and how can the theory be applied at the national and global level?
4a.What is the theory on inclusive development?
4b. How can the theory on inclusive development be applied at the national level? 4c. How can the theory on inclusive development be applied at the global level?
5. What is the discussion on the Right to Development and how does it link to inclusive development?
6. What is the current state of affairs in national climate change governance in Kenya?
6a. What are the relevant policy documents governing climate change in Kenya?
6b. How do respondents assess the level of awareness of climate change in policymaking in Kenya? 6c. What factors impede effective adoption of climate change issues in Kenyan policymaking?
6d. What are the actions and perceived responsibilities towards climate change adaptation and mitigation in
Kenya?
6e. What is the potential of renewable energy in Kenya?
7. What is the perspective of experts in Kenya on the issue of stranded resources?
7a. What conditions must be fulfilled in order for Kenya to refrain from extracting the oil? 7b. Is the issue of stranded resources regarded a risk?
8. To what principles do experts in Kenya regard the issue of stranded resources regard as a problem?
8a. How is responsibility linked to climate change and the issue of stranded resources? 8b. What are the critiques on inclusion within global climate change governance? 8c. How is the Right to Development linked to the issue of stranded resources?
9. What strategies can be followed in order to deal with the issue of stranded resources?
9a. Would a compensation-based strategy be viable in dealing with the issue of stranded resources? 9b. What other strategies are proposed by experts in Kenya in dealing with the issue of stranded resources?
10. How can the oil contribute to inclusive development in Kenya?
10a. What are the policy documents governing oil development in Kenya? 10b. What are the expectations with regard to the oil discoveries in Kenya? 10c. How are the oil benefits shared among society in Kenya?
10d. Where should the oil revenues be attributed to in order to benefit on development? 10e. How is public participation ensured with regard to the oil developments in Kenya? 10f. How is the environment safeguarded with the oil development in Kenya?
10g. What are additional challenges to development with regard the oil developments in Kenya?
11. How will the oil benefit inclusive development in Turkana?
11a. What are the expectations of the local community in Lokichar with regard to the oil discoveries in Turkana? 11b. What are the challenges to development with regard the oil developments in Turkana?
11c. How are employment opportunities distributed among the people in Lokichar and Turkana 11d. How is public participation ensured with regard to the oil development in Lokichar? 11e. How is the environment safeguarded with the oil developments in Lokichar?
6
1.4.
Methods
1.4.1. Introduction
Three methods were used to conduct the research; a literature review (see 1.4.2), a content analysis of relevant policy documents (see 1.4.3), and a global multi-layered case study in Kenya (see 1.4.4).
1.4.2. The Literature Review
The literature review consists of three parts. First, the concepts of stranded resources and stranded assets were reviewed in order to assess the baseline of this thesis and to fill the knowledge gap (see 2.2). The method used is explained within the review itself for both stranded assets (see 2.2.2.1) and stranded resources (see 2.2.3.1). Second, and in order to triangulate findings of the first part of the literature review, two lessons in dealing with stranded resources are extracted from practice, one from the South (on Reducing Emissions from Deforestation and forest Degradation - REDD) (see 2.2.5.2), and one from the North (Nuclear phase-out in Germany) (see 2.2.5.3). Finally, a literature review on the theory on inclusive development and the application of the theory on both the national / local scale and on the global scale was conducted (see 2.3).
1.4.3. Content Analysis of Policy Documents
A content analysis of national policy documents consisted of screening all documents relevant for this thesis. The criteria of inclusion were whether the policy documents focus on climate change or oil development strategies or policy. Besides, when possible, only the most recent documents were included. To judge the relevance of the policy documents and to identify other relevant policy documents, the interviews were used for data triangulation. This resulted in identifying two main policy documents on climate change (see 3.1.2) and an outdated one on oil development (see 4.1.2). In both domains the policy frameworks are still being drafted. In addition, the new Con-stitution of Kenya was included since it provides for significant changes in governance structures and processes (see 1.4.4.2.4). Furthermore, ‘Kenya Vision 2030: A Globally Competitive and Prosperous Kenya’ (GOK, 2007) and the corresponding medium-term plans (GOK, 2008; 2013c) were reviewed as they present Kenya’s develop-mental path for 2008-2030 (see 1.4.4.2.4). These policy documents serve as background information and starting point of the research. Besides the national policy documents, I used the Kenyan newspaper (the Daily Nation) to identify other relevant topics and stakeholders (especially for the oil developments).
1.4.4. The Case Study: Kenya
The case study is further elaborated on below. First, the advantages and limitations of having a single case study are discussed (see 1.4.4.1). Second, the selection criteria of choosing Kenya are explained (see 1.4.4.2). Third the data collection process and its limitations are examined (see 1.4.4.3). Fourth, the limitations of the data collec-tion are reflected on (see 0). Finally, ethical consideracollec-tions are deliberated (see 1.4.2).
7
1.4.4.1.
The advantages and limitations of having a single case study
The research design chosen is a single multi-layered case study. With respect to this thesis, there are three main strengths in choosing a case study. First, the ability to study the case in depth by providing context-dependent knowledge which emphasizes on learning (Blatter, 2008:68; Flyvbierg, 2006:221). Since the perspective of a DC on the issue of stranded resources is assessed, the case study design is well suited to trace ideas, perceptions, reasoning and grasp discourses by doing in-depth interviews (Blatter, 2008:68). Second, since case studies are sources of theoretical innovation, the case study design corresponds with the aim of contributing to the knowledge gap (Ibid.). Third, there is a focus towards descriptive-interpretive elements instead of exploring causal relations, for which the case study design is more applicable (Ibid.:68-69). Yet, the case study design has two major limita-tions. First, external validity is an obstacle which raises questions on whether the results can be generalized be-yond the single case (Ibid.:69;Tellis, 1997). This is especially true for generalizations on developing countries, since many respondents only reflected on the Kenyan or (East) African context. However through interpretation of the data more general assumptions can be reached. A second limitation is the possible lack of rigour (Zainal, 2007:5). Since the subjectivity of the researcher may possess a bias (Ibid.) (see 0), this also relates to construct validity, which may become problematic because of subjectivity issues (Tellis, 1997). By triangulating the data and by using multiple sources of evidence (i.e. policy documents and interviews with respondents from various fields and levels) construct validity is enhanced, since ideas and assumptions are verified from a variety of resources.
1.4.4.2.
Criteria of Selection
Kenya is chosen as a case study because it meets three necessary conditions; (i) Kenya it is a developing country (see 1.4.4.2.1), (ii) Kenya recently discovered significant oil reserves (see1.4.4.2.2), and (iii) Kenya may suffer to a great extent from future climate change impacts (see 1.4.4.2.3). Nonetheless, these criteria can be applied to more countries in the region, for instance Uganda and Madagascar have also recently discovered significant pe-troleum reserves and Mozambique and Tanzania have discovered substantial natural gas reserves (KPMG, 2013:13-17; EIA, 2013a). Besides all four countries are characterised as Low Income Countries and are in a similar fashion affected by climate change (WB, 2014; Boko et.al., 2007). However, three favouring criteria point out to the selection of Kenya. First, the oil resources are located in a previously marginalized area (characterized as very climate vulnerable and insecure) (see 4.2.2). Second, the Kenyan government adopted a new governance dis-course that resembles an inclusive development approach as visible in the Constitution and Vision 2030 (see 1.4.4.2.4). Third, Nairobi, the main research location, is base to many international organizations (e.g. UNEP, UNDP) which increased the feasibility of a global multi-layered case study.
8
Differentiation in terms of development
The first necessary criterion is that Kenya is a developing country. To make a differentiation between nations and to distinguish developing countries, the conceptualization of Low Income Countries (LICs) is used. The World Bank differentiates between countries on the basis of Gross National Income (GNI) per capita (see Table 1) (WB, 2014b).13
Low to middle-income countries are referred to as developing countries (WB, 2014b). Yet, classification on the basis of income does not necessarily reflect on specific levels of development (Ibid.). The concept of Least Developed Countries (LDCs) for example reflects upon dimensions beyond GNI per capita by adding a Human Assets Index and Economic Vulnerability Index (UN, 2014b).14 The difference
between the two approaches is obvious when looking at Kenya: according to the income-based classification Kenya falls into the low-income segment, however Kenya is not included in the list of the LDCs (WB, 2014b; UNCTAD, 2013).15 This would imply that Kenya does rather
well in other dimensions as captured in the LDC-indicators. The classification-scheme of the World Bank in terms of income groups presents some additional challenges it does not, for example, reflect on issues such as government capacity, inequality, human development or social exclusion (Kaplan, 2012).
Petroleum Reserves in Kenya
The second necessary criterion for favouring Kenya is the significant amount of oil discovered recently. In Kenya natural gas, coal and oil reserves are found, however since oil is most significant in terms of amounts and value in this thesis I will focus mainly on the oil discoveries (ICES, 2014). Kenya is not currently producing any oil; however given recent developments it became a prospective oil producer (EIA, 2013b; KPMG, 2014:1; Tullow, 2013:19). Oil is mainly found in the North-western and the coastal part of Kenya; these discoveries were made within the last two years.19 Tullow Oil, a British company, is leading exploration activities in the South Lokichar basin (Turkana), where
seven drills proved successful and more than 600 million barrels of oil were discovered (in blocks 10BB & 13T, see Figure 2) (EIA, 2013b; TO, 2014a). However, oil development in Kenya is still in the stage of exploration and oil extraction has not yet taken place.20 The
expecta-tions are that oil production will start within a few years, probably even in 2015/16 (KPMG, 2014:6; ICES, 2014).21 Besides, the Kenyan
government is looking at options to expand an existing pipeline to Uganda and Rwanda (KPMG, 2014:7). Moreover, there are plans to modernize the outdated refinery in Mombasa (GOK, 2007:18).22 The regulatory framework to govern the oil developments is still being
drafted (see 4.1.2), however is expected to be passed possibly within 2014 or early 2015.23
13 These numbers reflect on the 2015 fiscal year..
14 Human Assets Index includes two indicators on health (child (<6) mortality rates and percentage of the population which is undernourished) and two on education (adult literacy rates and secondary school enrolment). The Economic Vulnerability Index uses eight indicators grouped in two categories: shock index and exposure index. 15 List of 2014.
19 Bos, K. (2014) interview A3. 20 Bos, K. (2014) interview A3 & A19. 21 Bos, K. (2014) interview A3, A17 & A26. 22 Bos, K. (2014) interview A12 & A18. 23 Bos, K. (2014) interview A3 & A19.
9
Climate change in Kenya
A third necessary criterion is the expected impact of climate change on Kenya. Kenya experiences a high level of climate change vulnerability and means to cope with climate hazards are generally weak (GOK, 2008:108; 2007:126).29 An apparent signal of climate change is for instance the rapid disappearance of glaciers on Mount
Kenya (GOK, 2008:108). In addition, over 70 percent of all natural disasters in the country are weather-related and in the recent past there is an increase “in the frequency, magnitude and severity of disasters” (GOK, 2007:126). Direct climate variability and/or change effects in Kenya include; more severe and increased frequency of droughts and flooding, unpredictable weather patterns, sea level rise and an average increase in temperature.30 Especially
droughts and floods have the most severe impact on Kenya.31
Climate variability and change can significantly slow down Kenya’s economic growth since the economy heavily depends on climate-sensitive sectors such as agriculture, tourism, forestry and fisheries (GOK, 2007:126; GOK, 2008:108).32 Interrelated consequences of climate change are the impact on food security, whereas Kenya heavily
29 Bos, K. (2014) interview A29.
30 Bos, K. (2014) interview A7, A11, A18 & A23. 31 Bos, K. (2014) interview A8.
32 For instance, the production of coffee and tea (Kenya’s major export commodities) will be affected, whereas due to climate change effects production already decreased in 2013 (Bos, K. (2014) interview 28). Or regarding tourism, (on which Kenya’s economy is largely dependent) certain species are at risk of becoming distinct due to climate change (GOK, 2007:124; Bos, K. (2014) interview 29).
10 depends on rain-fed agriculture, which is negatively affected by the increased variability of rain-patterns.33 In
addi-tion, the livestock is affected due to droughts, floods and the spread of diseases.34
Other indirect effects of climate include infrastructural destruction due to flooding and the re-location and migration of people due to droughts or floods.35 Besides climate change effects will put extra pressure on the budget of the
government (e.g. in providing food relief or due to infrastructural destruction).36 Moreover, the poorest in Kenya will
bear the burden of climate change since they depend on the environment for their survival (GOK, 2007:124; UNEP, 2009:1).37 Turkana, for example, one of the most marginalized areas in Kenya, will be highly affected by climate
variability and change (see 4.2.2).38 For Kenya, sustained economic growth will thus largely depend upon the ability
to adapt to climate variability and change and to protect the environment (UNEP, 2009:1).
Vision 2030 & the Constitution
An additional condition favouring the selection of Kenya relates to a new governance discourse that resembles an inclusive development approach (see 2.3.2) as found in Vision 2030 and the Constitution.
Vision 2030, the country’s development blueprint for 2008-2013 aims at transforming Kenya into “a newly
industri-alising, middle income country providing a high quality of life to all its citizens in a clean and secure environment” (GOK, 2007:i-vii). Vision 2030 is based on three pillars; an economic, social and political pillar, which are connected to each other by the environment (Ibid.:i).39 A guiding principle is “creating a cohesive, equitable, and just society
based on democratic principles and issue-based politics grounded on our rich and diverse cultures and traditions” (Ibid.).40 Besides, sustainable use of the country’s natural resources and the environment are regarded essential
in determining Kenya’s growth (Ibid.:124).
In addition, in 2010 a new Constitution entered into force, which also reflects upon inclusive development aims, by providing a legal framework for public participation (see Annex II) and establishing a system of devolved govern-ment (GOK, 2010a).41 Public participation is required at all levels of government and includes civil society groups
as part of the public (Ibid.).42 Moreover, the Constitution established the system of devolved government in order
to benefit previously marginalized areas and to bring leadership to a lower level (i.e. county and local). 43 The
Constitution created forty-seven counties and the county governments distribute resources and draft regulations
33 Bos, K. (2014) interview A7, A8, A11, A17, A18 & A28. 34 Bos, K. (2014) interview A8.
35 Bos, K. (2014) interview A7, A8 & A11. 36 Bos, K. (2014) interview A8. 37 Bos, K. (2014) interview A15. 38 Bos, K. (2014) interview A8.
39 The oil discoveries are not yet mentioned in Vision 2030.
40 ‘Inclusive’ aims are recurring throughout Vision 2030, as obvious from the focus on; equitable and just social development (GOK, 2007:vii,xi, 152, 156), the previously marginalized, poor and vulnerable (Ibid.:vii,xi-xii, 155-156), public participation (Ibid.:158-159), equality of opportunities (Ibid.:152), reducing inequalities and poverty (Ibid.:152, 155-156), more evenly distribution of growth (Ibid.:3, 155) and sustainability (Ibid.:xi).
41 Processes of participation are referred to in the Constitution as stakeholder consultation, the right to consultation’ or ‘mandatory public participation’. 42 Bos, K. (2014) interview A16 & A26.
11 within their jurisdiction (Ibid).44 Besides, in order to advance (previously) marginalized areas a system of
preferen-tial distribution is installed, whereas some ‘underdeveloped’ counties are given more resources than other more developed counties.45
1.4.4.3.
Data collection of the case study: the interviews
In addition to a national literature review and content analysis of national policies, two sets of interviews were conducted, a set of expert-interviews (set A) and a set of interviews with the local community in Lokichar (set B). An (anonymized) overview of all respondents for both sets is found in Annex 1. For the analysis of the interviews I both used Microsoft Excel and colors on the printed transcripts to categorize and cluster arguments made by participants.
For interview set A the perspectives of Kenyan (national and sub-national), regional (East African) and global experts are incorporated. In total 34 expert-interviews were conducted. They can be categorized according to; the global (8), regional (2), national (20), county (2) and local level (2). The experts were found in different spheres; the civil society (14), academic circles (8), government, government agencies or inter-governmental organizations (10) and the private sector (2). Interviews were either done in the Netherlands, on through Skype or in Kenya; in Nairobi, Nakuru, Lodwar and Lokichar.46
The method of purposive sampling was used initially to identify participants whereas the sub-questions gave an indication which experts (from which field of expertise) could be considered as interview-respondents (Bryman, 2012:416). Respondents were thus sampled in a strategic way given their relevance for the research. In addition, an effort was made to include a variety of perspectives from experts working in different fields (Ibid.:418). In addi-tion, I used snowball sampling, where the initially identified group of people identified other respondents (Ibid.:418-424). The interviews were done in a semi-structured manner and an interview guide was
conducted with a list of questions applicable to most of the interviews (Ibid.:470-471). The advantage of this method is the space it leaves for flexibility within the interviewing (Ibid.). Therefore, the interview questions may be altered during the interviews depend-ing on the respondent’s field of expertise or interest. All interviews were recorded and were transcribed either by myself or by a Kenyan economics student, June.47
In Lokichar, Turkana County, interview set B was conducted to assess the expectations and perspectives of the local community towards the oil developments (for a description of the area, see 4.2.2). Here 65 people were interviewed by means of 8 focus groups
44 Bos, K. (2014) interview A5, A10, A12 & A15. 45 Bos, K. (2014) interview A10 & A21.
46 However the majority of the interviews were done in Nairobi.
47 However due to a technical failure with the recording device five interviews were not (fully) recorded (A2, A3, A4, A7, A5). This issue was solved by recalling the interviews on the basis of the interview notes, where after I send the document to the respective respondent for their approval.
Figure 3. APEI Office in Lokichar.
12 and 22 interviews. This set of data-collection was done in collaboration with two employees, Charles and David, of a local community-based organization, the Alemun Pastoralists Empowerment Initiative (APEI) (see Figure 3). Charles and David proved to be valuable partners given their local expertise. They helped in selecting the research locations, provided information and facilitated and translated the interviews and focus groups. Besides, since they are trusted by the community entrance to the community was very easy.
In consultation with David and Charles three main research locations within Lokichar were chosen; the main village, Nakukulas village and the Internally Displaced People Community (IDPC) (see Annex 1). Random sampling was used; in principle, everyone had the same chance of being included in the sample (Morgan, 2008a:725). We also constantly moved around the research locations to enhance the chance of random selection. In order to avoid possible biases on key characteristics we also ensured that both women and men, and both elder and younger community-members, were included (Morgan, 2008b:722-723). In adittion, we purposively approached some groups, as for example the community elders, who are regarded as valuable sources of information, to participate in the research. Moreover, in order to obtain information on employment opportunities for the local community it was necessary to speak to younger community-members.
We used semi-structured interviews and asked all participants five open-ended questions (see Box 1). Charles and David contributed to the formulation of the questions to ensure
that we shared the same interpretation, since they would be translat-ing. However, in some cases the answers of the respondents led to clarification or follow-up questions. I chose to do interviews instead of surveys since with interviews the perspectives of the respondents are more elaborated and therefore an in-depth view of their opinion can be assessed. The focus groups all emerged as a natural process, given the communal nature of the community, people would often already be together and thus commented as a group on
the questions.
1.4.1. Limitations of the data-collection
Yet there are three limitations linked to both sets of interviews. First, my own subjectivity in the research should be recognized forasmuch my own values and personal views may have entered the research agenda. For instance, especially in Lokichar I experienced difficulties in obtaining a balance between engagement with and distance to the respondents (Thompson, 1996). The hardships of the local community posed a barrier to objectivity since I often felt involved with the challenges of the community. For interview set B I tried to contain this ‘proximity bias’ by asking a fixed set of questions which would reflect on both negative as well as positive impacts of the oil devel-opment. Second, for both sets first-level analysis may have taken place in the sense that June (set A) or Charles or David (set B) may have interpreted the data while transcribing/translating. Finally, for interview set A, a main bias is the overrepresentation of national respondents and the large underrepresentation of the private sector.
Interview Questions Set B
(i) What do you expect from the oil discoveries? (i) What harm does the oil exploration do to your life and the community?
(iii) How will your life improve because of the oil discoveries?
(iv) How are you engaged in the process of oil de-velopment?
13 Regarding the private sector, only two respondents were interviewed, which implies that the incorporation of the view of the oil sector is in general lacking. I especially experienced a great difficulty in reaching Tullow Oil, one of the major stakeholders within the research topic, whereas numerous phone calls, e-mails, and visits to the Tullow Oil office in Nairobi remained unanswered. Yet, the two respondents, especially one respondent from an oil com-pany, did provide valuable information on the private sector outlook.
For interview set B there are three additional limitations and possible biases. First, I gave respondents some pro-visions (i.e. tea, sugar and/or tobacco) after the interviews. This was deliberated on with Charles and David and was done on moral grounds and on the basis of community norms and expectations. However, by ‘compensating’ respondents a bias could be introduced forasmuch people may be motivated to participate in order to be provided with these commodities (Thompson, 1996; Crow, 2008:740). I tried to circumvent this possible bias by not men-tioning or showing the provisions and only handing them out after the interviews. Besides, we made sure to move around the research locations constantly in order to obtain ‘fresh data’. Nonetheless, in one case a respondent deliberately wanted to participate in order to be provided with these goods. This interview is not included since the contribution can be flawed. In general, it is hard to assess whether the ‘compensation’ made a difference to the data obtained. I can only argue that I felt that the community-members were more motivated by the opportunity to express their views on the oil development than by the possible provisions. This is also reflected in the variety of answers showing both positive as well as negative attitudes towards the oil development. Second, given the com-munal base of the community, it was difficult to isolate people and have one-on-one conversations. Therefore, it could be possible that the respondents could not fully express their opinion on issues that are sensitive (e.g. criti-cising their own leaders). Yet, I felt that people were comfortable enough with the surrounding crowd to speak their minds. Finally, the sample size may not be representative for the whole community which could limit absolute generalization possibilites (Morgan, 2008a:725). Nothwithstanding, we experienced a certain degree of data saturation especially while conducting the last few interviews when no new (or relavant) information was raised by the respondents. This data saturation can thus be a critera of justification of the sample size (Morgan, 2008c:798; Given & Saumure, 2008:195-196). Besides, there is no aim of transferring the data obtained beyond the community. Since the aim of the interviews in Lokichar was to provide an in-depth and contextualized understanding of how the oil discoveries are currently affecting the local population.
1.4.2. Ethical Considerations
Considering research ethics, this research adheres to the principle of informed consent whereas “consent should be both informed and voluntary” (Hay & Israel, 2008:431-432). Respondents were all made aware of the research’s aim, topic, method, and the research’s use before participation. Besides, confidentiality is respected as the inter-views of set A have been anonymized to protect the privacy of the participants and to avoid harm that could arise from the disclosure of their identity. The identifying information is removed from the transcripts and list of respond-ents and is stored separately. For interview set B only first names are used which the respondrespond-ents agreed upon.
14
1.5.
Structure
The conceptual framework of this research is portrayed in Figure 4 below and displays the structure of the research. Chapter 2 provides the theoretical framework guiding this thesis [Box 1]. First, a literature review on the concepts of stranded resources and stranded assets is presented (see 2.2). Second, strategies on dealing with stranded resources are extracted from literature and practice (see 2.2.5). Finally, the theory on inclusive development and the discussion on the Right to Development is examined (see 2.3).
Chapters three and four reveal the data-collection of the case study and will fill boxes 2, 3 and 4. Chapter 3 exam-ines climate change governance from a national (Kenyan), regional (East African) and global perspective. First, the current state of affairs of national climate change governance in Kenya is assessed [Box 3B] (see 3.1). Next, the issue of stranded resources and climate change governance at the global level are examined [Box 2A & 2B] (see 3.2). Chapter 4 evaluates the inclusive development approach with regard to the oil developments in Kenya from a national and local perspective. First, the national context of oil for inclusive development is assessed [Box 3A] (see 4.1). After, the local context of oil and inclusive development (Lokichar) is elaborated on [Box 4A] (see 4.2).49 Chapter 5 summarizes the findings of the data-collection and concludes with recommendations for theory
and policy. Furthermore, the completed conceptual framework will be provided in the last chapter.
49 Climate change at the local level [Box 4B] is not covered separately within this research.
15
2. Theoretical Framework
2.1.
Introduction
Within this section Box 1 of the conceptual framework will be further explored (see Figure 5). The first section elaborates on the issue of stranded assets and stranded resources [Box 1B & 1C]. First, sub-question 1 is answered, what are
stranded resources and stranded assets? (see 2.22.2). Then sub question 2 is
answered, what are the strategies found in the literature to deal with the issue
of stranded resources? (see 2.2.5.1). Finally, an answer is given to
sub-ques-tion 3, what are the strategies found in practice to deal with the issue of
stranded resources? (see 2.2.5.2 & 2.2.5.3)
The second section deals with the theory of inclusive development [Box 1A] and the discussion around the RTD. Sub-question 4 is answered, what is the
theory on inclusive development and how can the theory be applied at the na-tional and global level? (see 2.3). In tandem with applying the theory on
inclu-sive development at the global scale an answer will be given to sub-question 5,
what is the discussion on the Right to Development and how does it link to in-clusive development? (see 2.3.4).
2.2.
Stranded Assets & Resources Literature Review
2.2.1.
Introduction
Throughout this section I will answer sub-question 1 by conducting a literature review on the concepts of stranded assets and stranded resources. First, the method of the literature review is discussed (see 2.2.2.1 & 2.2.3.1). After, all articles that deal with the concept of stranded assets and stranded resources are reviewed in terms of their subject coverage (see 2.2.2.1 & 2.2.3.1) and characteristics (see 2.2.2.2 & 2.2.3.2). Next, a definition is proposed for both concepts (see 2.2.2.3 & 2.2.3.3). Lastly, the trends in literature regarding stranded resources and assets are reflected on (see 2.2.4).
2.2.2.
Literature Review Stranded Assets
2.2.2.1.
Methodology and Concept Coverage
For the literature review on stranded assets I used the Web of Science (WoS), ScienceDirect and Scopus in a systematic way. Besides Google Scholar and Google Search was used selectively to identify remaining relevant literature. Important to note here is that no review-article on the concept of stranded assets was found. For stranded
Figure 5. Theoretical Framework, Box 1:
Inclusive Development and Stranded Assets and Resources.
16 assets WoS gave 2 results, ScienceDirect 5 and Scopus 33 results and all of these articles were subsequently reviewed.50 Since the articles with a conceptual definition of stranded assets were limited, I expanded the search
from ‘abstract, title and keywords’ to ‘all fields’ in ScienceDirect which found 1840 results. Excluding irrelevant categories, the search revealed 1462 results.51 These articles were only reviewed when they either give a definition
on stranded assets or used and explained the concept. To cover the literature more broadly and to capture a more comprehensive picture of the concept Google Scholar and Google search were included to find articles on stranded assets from NGOs, think thanks and other organizations. However, a selection was made as to whether they define stranded assets and to what extend it was relevant to the thesis subject (dealing with fossil fuels or climate change). With Scopus a graphical representation of the 33 results is made according to the time span of the concept (Figure 6) and according to subject area (Figure 7).
50 WoS (title & topic) gave 2 results for stranded assets (‘stranded-assets’; all years:1975-2014) and ScienceDirect (abstract, title, keywords) gave 22 results (‘stranded-assets’; all years 1823-2014), but when excluding irrelevant fields of science it gave 5 results. Irrelevant fields were in this case: Biochemistry, Genetics and Molecular Biology, Computer Science, Immunology and Microbiology, Medicine and Dentistry, Neuroscience, Nursing and Health Professions, Pharmacology, Toxicology and Pharmaceutical Science, Physics and Astronomy, Veterinary Science and Veterinary Medicine, Psychology and Chemistry. Scopus (title, abstract, keywords) gave 33 results (‘stranded-assets’; all years: 1995-2014).
51 Within these results 427 articles are found under the publication title: ‘The Electricity Journal’, and 111 under Energy Policy. Other categories were excluded (e.g. Orbis, telecommunications).
Figure 6. Graph showing the total number of documents on stranded-assets (title, keywords, abstract) by year,
self-generated from Scopus.
17
2.2.2.2.
Characteristics of Stranded Assets
Below the concept of assets is explained more generally by a definition of the Green Foundation, which enables to understand the concept better (2013:21):
“In order to understand the implications of a scenario in which assets can be stranded, it is helpful to go back to first principles. At the simplest level, a company purchases an asset with a view to that asset supporting its generation of profits over a certain time frame. The asset may help increase revenues, reduce costs, or both. As an asset’s value is reduced precipitously over a short period of time, that can have a negative impact on a company’s valuation. In some instances, as is the case with utilities and oil
and gas exploration and production companies, the majority of a company’s valuation can be attributed to its assets, which in turn can be particularly prone to carbon stranding scenarios.”
Table 2 shows all characteristics found to typify stranded assets. It portrays the sectors to which the concept of stranded assets is applied to or to which topics it relates. Stranded assets can be both financial (e.g. contracts) or physical assets (e.g. plants or equipment) (Crew & Kleindorfer, 1999:64).52 And the concept of stranded assets is
mostly found in literature relating to the utility industry, and more specifically to the electricity industry (Roper et.al., 2006:2). Moreover, stranded assets are mainly found in the literature on electricity generation and power plants, whereas natural gas and nuclear plants are most common (Briddell, 1996:20; Stern, 2010:21). In addition, stranded assets in general occur mostly in regulated industries (Crew & Kleindorfer, 1999:63-64).
Obvious characteristics of stranded assets are:
investments made in the previously regulated environment (Price, 1999:ii; Blumstein & Bushnell, 1994:24), unrecoverable investments (Strachan, 2001:9),
premature retirement (Babiker et.al., 2006:2),53
“unanticipated [..] write-offs” (Ansar et.al., 2013:9),
a loss of economic value (e.g. devaluation), “[f]or an asset to be considered stranded, it must incur a significant loss in value” (Crew & Kleindorfer, 1999:63), and
“one that has a book value that exceeds its market value” (Blumstein & Bushnell, 1994:24). And stranded assets are typically caused by:
“[unforeseeable] legislative, government or regulatory changes” (Crew & Kleindorfer, 1999:63-64),
52 Stranded assets are also used to describe sunk costs (Krishnan & Sharma, 2002:321; Madian, 1997:71), inefficient generating assets (Falkowitz, 1998:71) or uneconomic units (Blumstein & Bushnell, 1994:24), and are typified by some as unrecoverable (Blacconiere et.al., 2000:257), under-utilized (Roper, et.al., 2006:v), unusable (Ibid.; Gelder et.al., 2014:5,7, 10) or unburnable (Carbon Tracker & The Grantham Research Institute, 2013:17; Ellis & Lee, 2013:5, 13). However, these characteristics were not included in the table given their limited adoption in other articles.
53 For example natural gas or coal-fired plants may become stranded since they are “too old or not suited for CCS technology and therefore have to shut down before their actual period of operation has ended” (Uibeleisen, 2011:266).
