How can fossil fuel supplies be constrained?

Carbon Brief

Carbon Brief attended the two days of talks at the “Fossil Fuel Supply and Climate Policy” conference, organised by the Stockholm Environment Institute (SEI), to speak to delegates about what kind of future lay in the pipeline for fossil fuels.

Climate change policy to date has focused heavily on reducing emissions through reducing demand. This includes familiar approaches, such as pricing carbon, increasing renewable energy and boosting energy efficiency.

Discussion on constraining fossil fuel supply has been more subdued. While the Paris Agreement adopted in December 2015 invited countries to say how they would reduce their emissions, it did not broach the subject of how to tackle the central cause of emissions: fossil fuels.

Tactics to constrain fossil fuel supply include removing subsidies, placing moratoria on new coal mines, placing a fee on fossil fuel production, creating funds to prevent fossil fuel development in developing countries, and persuading countries to hold back on approving fossil fuel infrastructure.

A working paper by SEI, released in 2015, outlined three reasons why curtailing fossil fuel supply has been slow to catch on.

First, it is less politically attractive. While politicians are able to sell the idea of demand reduction as enabling new industries to develop, attempts to shrink fossil fuel supplies can be expected to meet resistance from the coal, oil and gas industries.

Second, countries who cut their exports as a result of constraining supply cannot count the emissions reductions as their own. Since emissions are counted on a territorial basis, these reductions will be assigned to the nation that actually cuts their use of fossil fuels.

Third, there is the assumption that the market rules supreme and that only demand can be reduced. As long as there is a large appetite for fossil fuels, someone somewhere will produce the fossil fuels to feed it.

In the video below, Carbon Brief talks to:

• Michael Lazarus, Senior scientist at the Stockholm Environment Institute US Center
• Franz Matzner, Director of the Beyond Oil Initiative at the National Resources Defense Council
• Carlos Larrea, Professor of Social Studies at the Universidad Andina Simón Bolívar
• Frank Jotzo, Associate Professor at the Crawford School of Public Policy, Australian National University
• Richard Denniss, Chief economist at The Australia Institute

Franz Matzner, director of the Beyond Oil Initiative at the Natural Resources Defense Council, challenges the idea that supply-side restrictions are more politically challenging. He tells Carbon Brief:

Here are some ways that people at the SEI conference have proposed constraining fossil fuel supply.

Moratorium on coal

Placing a moratorium on coal mines is one possibility that offers an unlikely opportunity to big coal companies: it raises the price of coal. Richard Denniss, chief economist at The Australia Institute, tells Carbon Brief:

The world has yet to answer the call of Anote Tong, the president of the small island nation of Kiribati, who called for a global moratorium on new coal mines in August 2015. Globally, 357 gigawatts of new coal power capacity was completed in 2014.

However, the idea is not beyond the realms of possibility. In December 2015, Chinaannounced that it would stop approving new coal mines for the next three years. The US followed a month later, announcing that it would halt new coal mining on public land for the next three years, while it undertakes a review of the impacts of coal production.

Protecting biodiversity hotspots

Maria Murmis, a research associate at the Universidad Andina Simón Bolívar, has been working on a proposal that would see countries being paid to keep fossil fuels in the ground in areas of high biodiversity, similar to the Yasuni ITT Initiative in Ecuador.

The Yasuni scheme ultimately failed. But with the Paris Agreement now sealed, Murmis believes it could be time to revive the idea on a global scale. She explains to Carbon Brief how this would work, and how revenues could be raised:

Coal tax

Frank Jotzo, an associate professor at the Australian National University, has another idea for constraining fossil fuel supply: imposing a fee on production.

This would raise coal prices and also provide a new stream of revenue to governments, says Jotzo. He explains to Carbon Brief how it might work:

Equity

Simon Caney is an academic at the University of Oxford who has started to grapple with questions of equity. “We need an ethics for the supply side,” he says.

This could mean giving the right to extract to the poorest, says Caney. However, it’s harder to make this argument than it may first appear, he adds. “This argument only goes if you don’t have access to other sources of energy.” That means, as soon as you take into account a country’s access to sources, such as hydroelectric or solar, the argument becomes less clear-cut.

Historical responsibility could also steer the debate, says Caney — the logical idea that those who have not benefited from the resources in the past should be the ones to benefit in the future. But what this could mean is that countries are due some kind of benefit in the future, but not necessarily the benefits that arise from directly burning fossil fuels.

Greg Muttitt, a senior advisor at Oil Change International, points out further complications in the equity argument. “There’s no right to extract, per se, any more than there are rights to pollute,” he says.

Some countries have simply won the geological lottery, by having large resources of fossil fuels beneath their land. “If we’re talking about equity, why should countries that have resources deserve any benefits from that?” he says.

In addition, fossil fuel extraction doesn’t necessarily lead to a better life for the benefitting country’s citizens. He uses the example of Iraq, which nationalised its oil industry in the 1970s, around the same time as oil prices went up. Saddam Hussein went on to use the revenue for ill. “I wouldn’t look at the Iraqi people as having benefitted from those rents,” he says.

Conclusion

In most cases, the ideas proposed are far from becoming a political reality, as their advocates willingly admit.

“In my country, this is stuff that’s well over the horizon. It doesn’t even cause a stir, because it’s way out there,” says Jotzo, of his idea for a fossil fuel fee.

“Like all of climate mitigation policy, it will be difficult, but I think it’s a fight worth fighting,” echoes Murmis, of her biodiversity hotspots proposal.

In Oxford, the overriding opinion was that the discussion of supply-side constraints on fossil fuels was still at an early stage, but worth having in addition to the more developed ideas on demand reduction.

Christophe McGlade, an oil and gas analyst at the International Energy Agency, tells Carbon Brief that the two discussions have to take place in tandem. He says: