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Climate policies in a fossil fuel producing country demand versus supply side policies

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  • Taran Fæhn, Cathrine Hagem, Lars Lindholt, Ståle Mæland, and Knut Einar Rosendahl

Abstract

In absence of joint global climate action, several jurisdictions unilaterally restrict their domestic demand for fossil fuels. Another policy option for fossil fuel producing countries, not much analysed, is to reduce own supply of fossil fuels. We explore analytically and numerically how domestic demand and supply side policies affect global emissions, contingent on market behaviour. Next, in the case of Norway, we find the cost-effective combination of the two types of policies. Our numerical results indicate that given a care for global emissions, and a desire for domestic action, about 2/3 of the emission reductions should come through supply side measures.

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  • Taran Fæhn, Cathrine Hagem, Lars Lindholt, Ståle Mæland, and Knut Einar Rosendahl, 2017. "Climate policies in a fossil fuel producing country demand versus supply side policies," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    • Handle: RePEc:aen:journl:ej38-1-faehn
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    2. Vogt, Angelika & Hagen, Achim & Eisenack, Klaus, 2020. "Buy coal, cap gas! Markets for fossil fuel deposits when fuel emission intensities differ," Working Paper Series 304708, Humboldt University Berlin, Department of Agricultural Economics.
    3. Aune, Finn Roar & Grimsrud, Kristine & Lindholt, Lars & Rosendahl, Knut Einar & Storrøsten, Halvor Briseid, 2017. "Oil consumption subsidy removal in OPEC and other Non-OECD countries: Oil market impacts and welfare effects," Energy Economics, Elsevier, vol. 68(C), pages 395-409.
    4. Eichner, Thomas & Pethig, Rüdiger, 2017. "Trade in fossil fuel deposits for preservation and strategic action," Journal of Public Economics, Elsevier, vol. 147(C), pages 50-61.
    5. Gavenas, Ekaterina & Rosendahl, Knut Einar & Skjerpen, Terje, 2015. "CO2-emissions from Norwegian oil and gas extraction," Energy, Elsevier, vol. 90(P2), pages 1956-1966.
    6. Thomas Eichner & Gilbert Kollenbach & Mark Schopf, 2018. "Buying versus leasing fuel deposits for preservation," Volkswirtschaftliche Diskussionsbeiträge 186-18, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
    7. Day, Creina & Day, Garth, 2017. "Climate change, fossil fuel prices and depletion: The rationale for a falling export tax," Economic Modelling, Elsevier, vol. 63(C), pages 153-160.
    8. Suphi Sen & Marie-Theres von Schickfus, 2017. "Will Assets be Stranded or Bailed Out? Expectations of Investors in the Face of Climate Policy," ifo Working Paper Series 238, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    9. Mark Schopf, 2016. "Unilateral Supply Side Policies and the Green Paradox," Working Papers Dissertations 28, Paderborn University, Faculty of Business Administration and Economics.
    10. Day, Creina, 2018. "Slowing resource extraction for export: A role for taxes in a small open economy," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 408-420.
    11. Taran Fæhn, Cathrine Hagem, Lars Lindholt, Ståle Mæland, and Knut Einar Rosendahl, 2017. "Climate policies in a fossil fuel producing country demand versus supply side policies," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    12. Thomas Eichner & Rüdiger Pethig, 2015. "Buy coal to mitigate climate damage and benefit from strategic deposit action," Volkswirtschaftliche Diskussionsbeiträge 177-15, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
    13. Finn Roar Aune & Ann Christin Bøeng & Snorre Kverndokk & Lars Lindholt & Knut Einar Rosendahl, 2017. "Fuel Efficiency Improvements: Feedback Mechanisms and Distributional Effects in the Oil Market," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(1), pages 15-45, September.
    14. Philippe Le Billon & Berit Kristoffersen, 2020. "Just cuts for fossil fuels? Supply-side carbon constraints and energy transition," Environment and Planning A, , vol. 52(6), pages 1072-1092, September.
    15. Sen, Suphi & von Schickfus, Marie-Theres, 2020. "Climate policy, stranded assets, and investors’ expectations," Journal of Environmental Economics and Management, Elsevier, vol. 100(C).
    16. Philipp M. Richter & Roman Mendelevitch & Frank Jotzo, 2018. "Coal taxes as supply-side climate policy: a rationale for major exporters?," Climatic Change, Springer, vol. 150(1), pages 43-56, September.
    17. Peter Erickson & Michael Lazarus, 2018. "Would constraining US fossil fuel production affect global CO2 emissions? A case study of US leasing policy," Climatic Change, Springer, vol. 150(1), pages 29-42, September.

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