Calls to reduce the use of fossil fuels are becoming impossible to ignore. At the UN Climate Change Conference in Brazil (COP30), major producers are being asked to start planning for a gradual and orderly phase-out of oil, gas and coal.
For decades, climate negotiations have focused on emissions targets and clean energy pledges, sidestepping the politically explosive question of whether countries should phase out fossil fuels – and how quickly. COP28 broke new ground by introducing the phrase “transition away from fossil fuels,” but real progress remained slow and uneven. At COP30, Brazilian President Luiz Inácio Lula da Silva changed the tone, declaring on the website that “the Earth can no longer support the intensive use of fossil fuels.” And called for a clear roadmap to phase it out.
Resistance to phasing out fossil fuels has historically come from major producing countries and energy companies. But many governments concerned about social justice are also reluctant to support such a move, fearing it would hamper efforts to reduce inequality and fund basic services.
A prime example is Brazil, a rising energy power with huge renewable energy potential, as well as deep poverty and a thriving offshore oil sector. When Lula said that dependence on fossil fuels should be ended “in an orderly and equitable manner,” he signaled that an orderly divestment could support development, not undermine it.
Brazil faces the challenge of strengthening its position in the global market while making the transition to its own energy sector. Lula’s plan to create a national fund that would channel a portion of Brazil’s oil revenues into a green transition reflects this balance: rents from the old economy would be used to build a new one without harming workers and the vulnerable.
This approach is not without precedent. Norway’s sovereign wealth fund, built on decades of oil revenues, has invested heavily in low-carbon sectors around the world and supported initiatives such as the Amazon Foundation. And in Southeast Asia, East Timor, heavily dependent on oil and gas, is pursuing diversification strategies funded by revenues from its own resources.
These examples show that channeling fossil fuel revenues into a green transition is both possible and necessary. For too long, the idea has been considered taboo for climate advocates because of concerns that even discussing oil money could legitimize continued extraction.
But by avoiding the topic, resource-dependent countries are left without the means to finance the transition before their revenues decline. Until climate finance reaches the necessary scale, governments should support fair, justice-oriented energy transitions by channeling fossil fuel revenues through well-managed sovereign wealth funds.
Early efforts to redistribute resource revenues point to broader changes. A decade ago, few governments could envision a future without fossil fuels. But economic realities have changed: renewable energy sources have become cost competitive, clean fuel technologies have matured, and developing countries increasingly see the energy transition as a path to increased productivity, sustainability, competitiveness, and sovereignty.
Growing geopolitical tensions underscore the urgent need to diversify away from fossil fuels. As supply chains are reshaping, competition for global leadership in batteries, green hydrogen, sustainable infrastructure and circular manufacturing is intensifying. At the same time, the International Energy Agency predicts oil demand will reach a plateau by 2035 even without stronger climate action, and OPEC believes demand will continue to grow until mid-century. Whatever the exact timeline, countries that take their time to diversify their economies will be left with unrecoverable assets when global consumption declines.
Internationally, Brazil should use its COP30 presidency to promote a collaborative approach to phasing out fossil fuels. The Beyond Oil and Gas Alliancewebsite – created by Costa Rica and Denmark – has tried to promote supply reduction measures, but major producers have been left behind. Brazil can help bridge the gap by encouraging parties to develop guidelines for an orderly and flexible reduction in fossil fuel production.
These discussions should include a roadmap with clear criteria for setting realistic timelines that reflect national capabilities and historical responsibilities, as well as mechanisms that build on existing institutions rather than creating new layers of bureaucracy. It is equally important that phasing out fossil fuels take center stage in climate negotiations. This would signal that multilateralism still matters; that countries can collectively address even the most politically sensitive issues; that fossil fuels are no longer considered untouchable; and that producer states are willing to engage in a structured cooperative process.
Ultimately, the green transition depends on the issue of fossil fuel revenues being resolutely addressed. Otherwise, climate ambitions will not be reconciled with economic and political realities. Brazil took the bold step of raising the issue at COP30 and framing transition as a socio-economic opportunity, not just an environmental imperative. The challenge now is to turn the resulting debate into a coherent plan – both domestically and globally.
Adriana Abdenour,
Co-President of the Global Fund for the New Economy (GFNE).
© Project Syndicate, 2025.
www.project-syndicate.org
