IDEAS home Printed from https://ideas.repec.org/a/spr/jenvss/v6y2016i4d10.1007_s13412-016-0397-2.html
   My bibliography  Save this article

The Carbon Ask: effects of climate policy on the value of fossil fuel resources and the implications for technological innovation

Author

Listed:
  • Peter Linquiti

    (George Washington University)

  • Nathan Cogswell

    (George Washington University)

Abstract

Strong policies to address climate change will almost certainly require that large quantities of oil, natural gas, and coal remain underground. Because these resources have economic value, action to reduce carbon emissions means that fossil fuel owners and producers, and other entities in the fossil fuel supply chain, will experience a reduction in wealth. They will be on the receiving end of what we call the “Carbon Ask.” We compile disparate data sources, make some simplifying assumptions, and approximate the value of the Carbon Ask for the world as a whole. We find that the value of the world’s fossil fuel enterprise in a business-as-usual case, unconstrained by climate policy, is about $295 trillion. In a world with a strong climate policy, the value of these resources drops to about $110 trillion, a decrease of $185 trillion, or 63 %. The Carbon Ask is equivalent to 2.4 years of global GDP. After reviewing the literature on resistance to technological innovation during the past two centuries and examining legal challenges to recent US greenhouse gas regulations, we find it unsurprising that the Carbon Ask creates powerful incentives for many stakeholders—who may be firms, workers, consumers, and governments—to resist policies to speed the development and diffusion of new, more environmentally benign technologies. We also find few precedents for policy-driven, rather than market-driven, technological transformations with a scale and scope similar to decarbonization of the global economy.

Suggested Citation

  • Peter Linquiti & Nathan Cogswell, 2016. "The Carbon Ask: effects of climate policy on the value of fossil fuel resources and the implications for technological innovation," Journal of Environmental Studies and Sciences, Springer;Association of Environmental Studies and Sciences, vol. 6(4), pages 662-676, December.
    • Handle: RePEc:spr:jenvss:v:6:y:2016:i:4:d:10.1007_s13412-016-0397-2
    DOI: 10.1007/s13412-016-0397-2
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s13412-016-0397-2
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s13412-016-0397-2?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Gernot Wagner & Martin L. Weitzman, 2016. "Climate Shock: The Economic Consequences of a Hotter Planet," Economics Books, Princeton University Press, edition 2, number 10725.
    2. Robert S. Pindyck, 2013. "Climate Change Policy: What Do the Models Tell Us?," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 860-872, September.
    3. World Bank, 2015. "World Development Indicators 2015," World Bank Publications - Books, The World Bank Group, number 21634, December.
    4. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-337, May.
    5. Diego Comin & Bart Hobijn, 2009. "Lobbies and Technology Diffusion," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 229-244, May.
    6. Azam Chaudhry & Phillip Garner, 2007. "Do Governments Suppress Growth? Institutions, Rent‐Seeking, And Innovation Blocking In A Model Of Schumpeterian Growth," Economics and Politics, Wiley Blackwell, vol. 19(1), pages 35-52, March.
    7. Hirth, Lion & Ueckerdt, Falko, 2013. "Redistribution effects of energy and climate policy: The electricity market," Energy Policy, Elsevier, vol. 62(C), pages 934-947.
    8. Malte Meinshausen & Nicolai Meinshausen & William Hare & Sarah C. B. Raper & Katja Frieler & Reto Knutti & David J. Frame & Myles R. Allen, 2009. "Greenhouse-gas emission targets for limiting global warming to 2 °C," Nature, Nature, vol. 458(7242), pages 1158-1162, April.
    9. James A. Robinson & Daron Acemoglu, 2000. "Political Losers as a Barrier to Economic Development," American Economic Review, American Economic Association, vol. 90(2), pages 126-130, May.
    10. Global Energy Assessment Writing Team,, 2012. "Global Energy Assessment," Cambridge Books, Cambridge University Press, number 9781107005198.
    11. Reinganum, Jennifer F., 1989. "The timing of innovation: Research, development, and diffusion," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 14, pages 849-908, Elsevier.
    12. Michael R. Raupach & Steven J. Davis & Glen P. Peters & Robbie M. Andrew & Josep G. Canadell & Philippe Ciais & Pierre Friedlingstein & Frank Jotzo & Detlef P. van Vuuren & Corinne Le Quéré, 2014. "Sharing a quota on cumulative carbon emissions," Nature Climate Change, Nature, vol. 4(10), pages 873-879, October.
    13. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 1, number 1.
    14. Mokyr, Joel, 1992. "Technological Inertia in Economic History," The Journal of Economic History, Cambridge University Press, vol. 52(2), pages 325-338, June.
    15. Dina Balalaeva, 2015. "Political Competition, Agenda Power, and Incentives to Innovate: An Empirical Examination of Vested-Interest Theory," Review of Policy Research, Policy Studies Organization, vol. 32(4), pages 413-442, July.
    16. Global Energy Assessment Writing Team,, 2012. "Global Energy Assessment," Cambridge Books, Cambridge University Press, number 9780521182935.
    17. Kamien,Morton I. & Schwartz,Nancy L., 1982. "Market Structure and Innovation," Cambridge Books, Cambridge University Press, number 9780521293853, December.
    18. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 2, number 2.
    19. Rosenberg, Nathan, 1972. "Factors affecting the diffusion of technology," Explorations in Economic History, Elsevier, vol. 10(1), pages 3-33.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Frank W. Geels & Jonatan Pinkse & Dimitri Zenghelis, 2021. "Productivity opportunities and risks in a transformative,low-carbon and digital age," Working Papers 009, The Productivity Institute.
    2. Rempel, Arthur & Gupta, Joyeeta, 2021. "Fossil fuels, stranded assets and COVID-19: Imagining an inclusive & transformative recovery," World Development, Elsevier, vol. 146(C).
    3. John H. Perkins, 2022. "Climate: change, crisis, and contention," Journal of Environmental Studies and Sciences, Springer;Association of Environmental Studies and Sciences, vol. 12(2), pages 398-408, June.
    4. Hansen, T.A., 2022. "Stranded assets and reduced profits: Analyzing the economic underpinnings of the fossil fuel industry's resistance to climate stabilization," Renewable and Sustainable Energy Reviews, Elsevier, vol. 158(C).
    5. Lukas Folkens & Petra Schneider, 2022. "Responsible Carbon Resource Management through Input-Oriented Cap and Trade (IOCT)," Sustainability, MDPI, vol. 14(9), pages 1-17, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Carayol, Nicolas & Roux, Pascale, 2005. "Self-organizing Innovation Networks: When do Small Worlds Emerge?," European Journal of Economic and Social Systems, Lavoisier, vol. 18(2), pages 307-332.
    2. Jürgen Peters, 2000. "Buyer Market Power and Innovative Activities," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 16(1), pages 13-38, February.
    3. Rajeev K. Goel & Michael A. Nelson, 2021. "How do firms use innovations to hedge against economic and political uncertainty? Evidence from a large sample of nations," The Journal of Technology Transfer, Springer, vol. 46(2), pages 407-430, April.
    4. Mariacristina Piva & Marco Vivarelli, 2007. "Is demand-pulled innovation equally important in different groups of firms?," Cambridge Journal of Economics, Oxford University Press, vol. 31(5), pages 691-710, September.
    5. By Kenneth L. Judd & Karl Schmedders & Şevin Yeltekin, 2012. "Optimal Rules For Patent Races," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(1), pages 23-52, February.
    6. Robin Kleer, 2008. "Acquisitions in a Patent Contest Model with Large and Small Firms," Working Papers 061, Bavarian Graduate Program in Economics (BGPE).
    7. Rajeev Goel, 2007. "Research spending under regulatory uncertainty," The Journal of Technology Transfer, Springer, vol. 32(6), pages 593-604, December.
    8. Dosi, Giovanni & Nelson, Richard R., 2010. "Technical Change and Industrial Dynamics as Evolutionary Processes," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 1, chapter 0, pages 51-127, Elsevier.
    9. Ribas, Aline & Lucena, André F.P. & Schaeffer, Roberto, 2017. "Bridging the energy divide and securing higher collective well-being in a climate-constrained world," Energy Policy, Elsevier, vol. 108(C), pages 435-450.
    10. Martin, Xavier & Mitchell, Will, 1998. "The influence of local search and performance heuristics on new design introduction in a new product market," Research Policy, Elsevier, vol. 26(7-8), pages 753-771, April.
    11. Navas, Jorge & Kort, Peter M., 2007. "Time to complete and research joint ventures: A differential game approach," Journal of Economic Dynamics and Control, Elsevier, vol. 31(5), pages 1672-1696, May.
    12. Herbert Dawid & Marc Reimann, 2011. "Diversification: a road to inefficiency in product innovations?," Journal of Evolutionary Economics, Springer, vol. 21(2), pages 191-229, May.
    13. Alberto Galasso & Mihkel Tombak, 2014. "Switching to Green: The Timing of Socially Responsible Innovation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(3), pages 669-691, September.
    14. Massimiliano Amarante & Mario Ghossoub & Edmund Phelps, 2012. "Contracting for Innovation under Knightian Uncertainty," Cahiers de recherche 18-2012, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    15. Joshua S. Gans & David H. Hsu & Scott Stern, 2002. "When Does Start-Up Innovation Spur the Gale of Creative Destruction?," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 571-586, Winter.
    16. Oleg Yerokhin & GianCarlo Moschini, 2008. "Intellectual Property Rights and Crop-Improving R&D under Adaptive Destruction," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 40(1), pages 53-72, May.
    17. Jia, Hao & Skaperdas, Stergios & Vaidya, Samarth, 2013. "Contest functions: Theoretical foundations and issues in estimation," International Journal of Industrial Organization, Elsevier, vol. 31(3), pages 211-222.
    18. Gilbert, Richard J. & Katz, Michael L., 2011. "Efficient division of profits from complementary innovations," International Journal of Industrial Organization, Elsevier, vol. 29(4), pages 443-454, July.
    19. Claude D'Aspremont & Rodolphe Dos Santos Ferreira & Louis‐André Gérard‐Varet, 2010. "Strategic R&D investment, competitive toughness and growth," International Journal of Economic Theory, The International Society for Economic Theory, vol. 6(3), pages 273-295, September.
    20. Aamir Rafique Hashmi & Johannes Van Biesebroeck, 2016. "The Relationship between Market Structure and Innovation in Industry Equilibrium: A Case Study of the Global Automobile Industry," The Review of Economics and Statistics, MIT Press, vol. 98(1), pages 192-208, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:jenvss:v:6:y:2016:i:4:d:10.1007_s13412-016-0397-2. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.