The Economics and Politics of Phasing Down Fossil Fuel Production

On November 3rd Wageningen University organised an online workshop. Here you can find a summary of the workshop, together with a description of the program and the speakers.

Organised by Edwin van der Werf (ENR), Stephan Slingerland (SPA Sustainability and IVM/Vrije Universiteit Amsterdam), Josephine van Zeben (LAW) and Hans-Peter Weikard (ENR)

Tue 3 November 2020 13:00 to 16:30


Harro van Asselt, Bard Harstad, Josephine van Zeben, Laurie van der Burg, Marcel Beukeboom, Hugo Brouwer, Karine Nyborg, Peter Newell, Richard Folland.

Background of the workshop

To meet the international climate goals of the 2015 Paris Agreement, most fossil fuel reserves will have to remain in the ground (Meinshausen et al., 2009; McGlade and Ekins, 2015). Existing climate policies focus primarily on climate change mitigation by targeting the demand for fossil fuels, specifically by making fossil fuels less attractive for consumers through the pricing of carbon emissions and by supporting the technological development of alternative technologies.

These policies are yet to result in meaningful changes to the economic and energy systems that would ensure a global emission path consistent with the goals of the Paris Agreement. Additional policies are therefore needed. As existing policies are mainly aimed at the demand for fossil fuels, novel policies could be aimed at reducing their supply. Such supply-side policies can help ensure a managed rather than disordered decline of fossil fuels.

The current shock to oil and gas markets caused by the COVID-19 pandemic shows that a sudden collapse of the industry is particularly damaging for government budgets, jobs and communities. In the short term, supply-side policies are likely to negatively affect a range of stakeholders, from large multi-national companies to local mining communities. It is therefore important to examine what barriers and short-term interests withhold countries and companies from participating in a process towards phasing down global fossil fuel supply, and whether there are incentives, instruments and conditions that would make it attractive for stakeholders to participate in a negotiated phasing down of global fossil fuel production.

Currently, at least two strands of literature are developing on this issue. One is rooted in economics and uses mathematical models to assess the conditions under which owners of resource stocks may be persuaded in an efficient way not to exploit their fossil fuel reserves (e.g. Harstad, 2012; Eichner and Pethig, 2017; Asheim et al., 2019). A second branch is rooted in the field of international relations and international law and uses a descriptive-normative approach and case studies on related issues (e.g. a Fossil Fuel Non-Proliferation Treaty) to study the opportunities and distributional issues of phasing down fossil fuel extraction (e.g. Erickson et al., 2018; Lazarus and Van Asselt, 2018; Muttitt and Kartha, 2020).

In order to find concrete and actionable options for a coordinated approach to phasing down fossil fuel production in line with the Paris Agreement’s goals, with an acceptable level and distribution of monetary and non-monetary costs, these strands of research should be brought together.