Stabilizing global warming at around 2 degrees Celsius by cutting greenhouse-gas emissions from fossil fuels would mean to leave much of coal, gas and oil unused underground.
Yet the instrument of pricing global CO2 emissions could generate a revenue of 32 trillion US dollars over the 21st century, exceeding by far the 12 trillion US dollars reduction of fossil fuel owners’ profits, according to a study now published by scientists of the Potsdam Institute for Climate Impact Research.
The analysis of the interference of CO2 emission pricing with fossil fuel markets adds key information to the debate on macro-economic effects of climate change mitigation.
“Implementing ambitious climate targets would certainly scale down fossil fuel consumption, so with reduced demand their prices would drop,” says Nico Bauer, lead-author of the study. “The resulting profit loss would be overcompensated by revenues from auctioning emissions permits or taxing CO2, which are two of the possible instruments of climate policy.” They would set strong incentives to reduce greenhouse-gases. The present study – for the first time - provides a full characterization of the fossil fuel markets and the impacts of climate policies. “We were surprised to find that in fact revenues from emissions pricing were found to be at least twice as high than the profit losses we estimate for the owners of fossil fuels.”
"There might be many appetites for the money"
Still, this holds at the global level only. On the national level, things look different, the scientists point out. Fossil fuel income depends on natural endowments, which are not distributed equally across the world. The distribution of revenues from emissions pricing depends on how climate policies are implemented on a national and international level. “Moreover, revenues from pricing carbon cannot be simply seen as a compensatory fund for the loss of income from fossil fuels,” says Bauer. “This is because climate policy results in higher energy prices for households and companies, which lead to a – rather small – reduction of economic output. So there might be many appetites for the money raised from CO2 pricing.”
“We know that fossil fuel owners will lose out on profits, but the big question is who will benefit from the new revenues generated by climate policy? It will fall to policy makers and society at large to decide this,” adds Elmar Kriegler, project leader and co-author of the study. “It would be interesting to ask for the effect of using the revenues from carbon pricing to finance infrastructure investments in developing countries.”
Different effects on coal and oil
Under the scenario of climate policy, coal consumption is reduced much stronger than oil and gas consumption. A large share of the coal reserve would never be used, while the use of oil and gas would still exceed their conventional reserves – leaving underground only the vast amounts of unconventional oil and gas resources. However, since coal is plentiful and relatively easy to substitute by other forms of energy, like renewables for power generation, the profit losses from reduced coal use are much smaller than for oil and gas. The highest profit losses occur in the oil market. Oil is relatively scarce and hard to substitute, for instance in the transport sector. So there normally is a lot of money to be made – and hence a lot of money to be lost in the case of effective greenhouse-gas reductions.
The research was performed in the RoSE project (Roadmaps towards Sustainable Energy Futures) supported by Stiftung Mercator.
Article: Bauer, N., Mouratiadou, I., Luderer, G., Baumstark, L., Brecha, R. J., Edenhofer, O., Kriegler, E. (2013): Global fossil energy markets and climate change mitigation – an analysis with REMIND. Climatic Change, online first [doi:10.1007/s10584-013-0901-6]For further information please contact:
Jonas Viering | PIK Pressestelle
A sudden drop in outdoor temperature increases the risk of respiratory infections
11.01.2017 | University of Gothenburg
Urbanization to convert 300,000 km2 of prime croplands
27.12.2016 | Mercator Research Institute on Global Commons and Climate Change (MCC) gGmbH
Researchers from the University of Hamburg in Germany, in collaboration with colleagues from the University of Aarhus in Denmark, have synthesized a new superconducting material by growing a few layers of an antiferromagnetic transition-metal chalcogenide on a bismuth-based topological insulator, both being non-superconducting materials.
While superconductivity and magnetism are generally believed to be mutually exclusive, surprisingly, in this new material, superconducting correlations...
Laser-driving of semimetals allows creating novel quasiparticle states within condensed matter systems and switching between different states on ultrafast time scales
Studying properties of fundamental particles in condensed matter systems is a promising approach to quantum field theory. Quasiparticles offer the opportunity...
Among the general public, solar thermal energy is currently associated with dark blue, rectangular collectors on building roofs. Technologies are needed for aesthetically high quality architecture which offer the architect more room for manoeuvre when it comes to low- and plus-energy buildings. With the “ArKol” project, researchers at Fraunhofer ISE together with partners are currently developing two façade collectors for solar thermal energy generation, which permit a high degree of design flexibility: a strip collector for opaque façade sections and a solar thermal blind for transparent sections. The current state of the two developments will be presented at the BAU 2017 trade fair.
As part of the “ArKol – development of architecturally highly integrated façade collectors with heat pipes” project, Fraunhofer ISE together with its partners...
At TU Wien, an alternative for resource intensive formwork for the construction of concrete domes was developed. It is now used in a test dome for the Austrian Federal Railways Infrastructure (ÖBB Infrastruktur).
Concrete shells are efficient structures, but not very resource efficient. The formwork for the construction of concrete domes alone requires a high amount of...
Many pathogens use certain sugar compounds from their host to help conceal themselves against the immune system. Scientists at the University of Bonn have now, in cooperation with researchers at the University of York in the United Kingdom, analyzed the dynamics of a bacterial molecule that is involved in this process. They demonstrate that the protein grabs onto the sugar molecule with a Pac Man-like chewing motion and holds it until it can be used. Their results could help design therapeutics that could make the protein poorer at grabbing and holding and hence compromise the pathogen in the host. The study has now been published in “Biophysical Journal”.
The cells of the mouth, nose and intestinal mucosa produce large quantities of a chemical called sialic acid. Many bacteria possess a special transport system...
10.01.2017 | Event News
09.01.2017 | Event News
05.01.2017 | Event News
17.01.2017 | Earth Sciences
17.01.2017 | Materials Sciences
17.01.2017 | Architecture and Construction