Dr Ellen Holtmaat, LSE Fellow in the Department of International Relations, argues that next to limiting emissions, policy should focus on keeping fossil fuels in the ground.
The Paris Climate Accord focuses almost entirely on limiting emissions, with that it misses the advantages of limiting fossil fuel supply. Next to limiting emissions, policy should focus on keeping fossil fuels in the ground.
Governments could for example agree to reduce the supply of fossil fuels by 25% over 8-year periods. Like this, there is time for the economy to adjust and prepare the use of alternative energy sources. Keeping fossil fuels in the ground is a sure way of limiting extra CO2 from entering into the atmosphere and incentives for the use of and investment in non-fossil energy follow automatically and efficiently.
Limiting the supply of fossil fuels has a direct effect. It increases the price. The higher the price, the more interesting it is to reduce its use and maybe replace it with other energy sources.
Limiting the supply of fossil fuels has a direct effect. It increases the price. The higher the price, the more interesting it is to reduce its use and maybe replace it with other energy sources. This reduces the attractiveness of investing in fossil fuels and makes investments in alternative energy more attractive, which improves the technique and makes it more affordable; a vicious cycle in the right direction. Moreover, other policies, except for carbon capture, are only effective if they keep fossil fuels in the ground.
Policy reducing the demand for fossil fuels, on the other hand, may not have the intended effect. Because the demand goes down, it reduces the price of fossil fuels and thus makes its application elsewhere more attractive. Research also shows that simply stimulating alternative energy sources does not lead to a one-on-one replacement of fossil fuel. Often the overall energy use increases as production expands due to an improved efficiency. The alternative energy source is thus more an addition than a replacement.
Keeping fossil fuels in the ground is a direct approach to limiting climate change. Emissions per se are not the problem, because emissions can also be part of a sustainable carbon cycle. Burning fossil fuel, on the other hand, leads to extra emissions – not part of any current carbon cycle. The emphasis on emissions misses this distinction and hinders a more focused approach.
Of course, this measure is politically difficult as mining companies are powerful players – sometimes even owned by governments. This however does not mean that in the public debate we should dismiss this obvious solution. Discussing this solution increases pressure on companies and governments.
It may also be politically difficult where constituencies depend on work in the fossil industry. However, alternative energy sources might need as much if not more labour. Moreover, these jobs lead to knowledge and skills that are of value in the economy of the future.
Policy wise, limiting the supply of fossil fuel is simpler and more efficient than reducing emissions.
Policy wise, limiting the supply of fossil fuel is simpler and more efficient than reducing emissions. Governments only need to reduce the mining of fossil fuels. This leads to less bureaucracy and potential adverse incentives than other proposals like carbon taxes and subsidies for alternative energy. In addition, the policy is much simpler and easier to control. Focusing on emissions, we are dependent on over 200 countries and millions of companies, whereas only a limited number of players is responsible for most fossil fuel mining. Moreover, emissions are invisible, and we are dependent on reporting by actors who have an incentive to under-report. Mining for oil, on the other hand, is directly observable and companies even require permits. Another advantage: many of the largest players are ‘nationals’ of the US, UK and the Netherlands. This puts the ball in the court of relatively powerful countries and reduces the dependence for success on developing and emerging economies.
The general criticism to such a proposal is that we can’t do without fossil fuel. This may be true, however, given we can’t do very well with them either, we’d better set the right incentives to give us the best shot at avoiding even more disastrous climate change. Limiting the supply of fossil fuels addresses the problem at its source, is simple and direct and makes economic forces work in our favour.
This article represents the views of the author, and not the position of the Department of International Relations, nor of the London School of Economics.
Photo by Chris LeBoutillier on Unsplash
This is a positive contribution to the fossil fuel debate. However, it ignores one central point which the bulk of similar articles and papers ignore – the need to cooperate actively with the major oil-producing countries which face the grim prospect of leaving the main source of their natural wealth in the ground forever.
In devising future proposals for climate change, this issue must be placed at the top of the agenda. Otherwise, the oil exporting countries will use every means to prolong the age of oil, including the possibility of lowering oil prices to such levels as to discourage and slow down the move away from fossil fuels. I would refer you to recent comments by the Saudi oil minister in response to a paper by Dr Birol, Head of the IEA urging the world to switch away from fossil fuels. The minister in effect commented that such comments were pie in the sky.
Dear Mehdi,
Thank you so much for your comment! I completely agree.
I think we should strike a deal: pay for keeping the oil in the ground. The US and others can print money almost unlimited, see what they do for wars or covid. They might be able to do the same for oil. Pay the oil states – for the oil states it might be attractive as now they can probably get a better deal than if they wait much longer as sooner or later the transition will happen. This money they can use to transform the economy. It should not be paid at once, but over time, consistent with them keeping oil in the ground.
Happy to hear what you think.
Dear Ellen,
Thank you for your thoughtful reply. The idea of paying oil exporting countries to keep the oil in the ground is an interesting one. However, there will no doubt come a time when anti-pollution regulations against fossil fuels and the falling cost of supply of renewables will together make it very hard if not impossible to revive oil and gas markets globally. That is when such payments could stop. So, in addition to your proposal, the oil producers should be educated into understanding the benefits of clean energy. One thing which they are not lacking, especially in the Persian Gulf region is sun. Just like Morocco, they could create massive photovoltaic farms and export surplus electricity to other countries which are in deficit. Another idea would be to harness the wind which is generally pretty strong in the area’s mountainous regions (Iran and Iraq) and around the Persian Gulf. Such projects would help reduce rising regional gas consumption, eliminate the need to use fuel in power stations and potentially provide an alternative source of foreign currency earnings.
We will always need fossil fuels.
Why do you think so?