However, new research from the Kellogg School of Management at Northwestern University suggests that actually buying coal, oil and other dirty fossil fuel deposits still in the ground could be a far better way to fight climate change.
The new study, "Buy Coal! A Case for Supply-Side Environmental Policy," suggests that the single best policy for a multi-national climate coalition is to purchase the extraction rights of dirty fossil fuels in non-participating countries (also called "third countries"), and then conserve rather than exploit the deposits. According to the study's author, Bard Harstad, this would be a radical departure from the traditional view that focuses on reducing the demand for fuel.
"One of the biggest challenges for multi-national climate agreements is the role of non-participating countries. If a climate coalition reduces demand for fossil fuel, the world price of oil goes down and non-participating countries find it profitable to consume and pollute more. Similarly, if the coalition seeks to reduce the supply or extraction of fossil fuels, the world price increases and these countries find it optimal to supply more," said Harstad, associate professor of managerial economics & decision sciences and Max McGraw Chair in Management & Environment at the Kellogg School of Management. "Thus, both on the demand-side and the supply-side the result is carbon leakage, which is an increase in pollution abroad relative to the emission-reduction at home. To limit carbon leakage, the coalition may set up tariffs or other border measures, but this will distort trade."
"In my analysis, I show that by letting coalition countries buy extraction rights in third countries – and preserve rather than exploit the fuel deposits – climate coalitions can circumvent the traditional problems of a demand-side policy," he said.
Harstad explained further that the most intuitive benefit from this policy is that emission is reduced if one buys and conserves deposits. Furthermore, the coalition finds it cheapest to buy the marginal deposits (ie, deposits that are not very profitable to exploit, but still quite polluting when consumed). After selling its marginal deposits, a non-participating country's level of supply will be less sensitive to changes in the world fuel price. Consequently, there is no longer carbon leakage on the supply-side, and the coalition can limit its own supply without fearing that the non-participants will increase theirs.
"This does the trick," Harstad noted. After purchasing marginal extraction rights, the coalition implements its ideal policy simply by reducing its supply, not its demand. Fossil fuel prices are then equalized across countries. Also, the resulting fossil fuel price seems high enough to motivate even non-participating countries to invest effectively in new technologies, such as renewable energy sources. For these reasons, the policy is socially optimal in the analysis, even if some countries do not participate.
Most importantly, Harstad said, "The analysis shows that progress on international climate policy is best achieved by simply utilizing the existing market for extraction rights."
Multi-national companies are already trading extraction rights. "Climate coalitions should, as well," he concluded.
The study will appear in a forthcoming issue of the Journal of Political Economy.
To set up an interview with Professor Harstad, contact Betsy Berger at 847-467-3108 or firstname.lastname@example.org. To learn more about the Kellogg School of Management at Northwestern University, visit www.kellogg.northwestern.edu.
About the Journal of Political Economy
One of the oldest and most prestigious journals in economics, the Journal of Political Economy has since 1892 presented significant research and scholarship in economic theory and practice. The journal aims to publish highly selective, widely cited articles of current relevance that will have a long-term impact on economics research. www.journals.uchicago.edu/jpe
The personality factor: How to foster the sharing of research data
06.09.2017 | ZBW – Leibniz-Informationszentrum Wirtschaft
Europe’s Demographic Future. Where the Regions Are Heading after a Decade of Crises
10.08.2017 | Berlin-Institut für Bevölkerung und Entwicklung
Plants and algae use the enzyme Rubisco to fix carbon dioxide, removing it from the atmosphere and converting it into biomass. Algae have figured out a way to increase the efficiency of carbon fixation. They gather most of their Rubisco into a ball-shaped microcompartment called the pyrenoid, which they flood with a high local concentration of carbon dioxide. A team of scientists at Princeton University, the Carnegie Institution for Science, Stanford University and the Max Plank Institute of Biochemistry have unravelled the mysteries of how the pyrenoid is assembled. These insights can help to engineer crops that remove more carbon dioxide from the atmosphere while producing more food.
A warming planet
Our brains house extremely complex neuronal circuits, whose detailed structures are still largely unknown. This is especially true for the so-called cerebral cortex of mammals, where among other things vision, thoughts or spatial orientation are being computed. Here the rules by which nerve cells are connected to each other are only partly understood. A team of scientists around Moritz Helmstaedter at the Frankfiurt Max Planck Institute for Brain Research and Helene Schmidt (Humboldt University in Berlin) have now discovered a surprisingly precise nerve cell connectivity pattern in the part of the cerebral cortex that is responsible for orienting the individual animal or human in space.
The researchers report online in Nature (Schmidt et al., 2017. Axonal synapse sorting in medial entorhinal cortex, DOI: 10.1038/nature24005) that synapses in...
Whispering gallery mode (WGM) resonators are used to make tiny micro-lasers, sensors, switches, routers and other devices. These tiny structures rely on a...
Using ultrafast flashes of laser and x-ray radiation, scientists at the Max Planck Institute of Quantum Optics (Garching, Germany) took snapshots of the briefest electron motion inside a solid material to date. The electron motion lasted only 750 billionths of the billionth of a second before it fainted, setting a new record of human capability to capture ultrafast processes inside solids!
When x-rays shine onto solid materials or large molecules, an electron is pushed away from its original place near the nucleus of the atom, leaving a hole...
For the first time, physicists have successfully imaged spiral magnetic ordering in a multiferroic material. These materials are considered highly promising candidates for future data storage media. The researchers were able to prove their findings using unique quantum sensors that were developed at Basel University and that can analyze electromagnetic fields on the nanometer scale. The results – obtained by scientists from the University of Basel’s Department of Physics, the Swiss Nanoscience Institute, the University of Montpellier and several laboratories from University Paris-Saclay – were recently published in the journal Nature.
Multiferroics are materials that simultaneously react to electric and magnetic fields. These two properties are rarely found together, and their combined...
19.09.2017 | Event News
12.09.2017 | Event News
06.09.2017 | Event News
25.09.2017 | Physics and Astronomy
25.09.2017 | Health and Medicine
22.09.2017 | Life Sciences