From emission to extraction: The political economy of leaving fossil fuels in the ground

To date, climate policy—both at the global and domestic levels—has focused largely on the demand for fossil fuel energy. Aiming to reduce greenhouse gas emissions from fossil fuel combustion, policymakers have emphasized climate strategies that support low-carbon technologies, such as subsidizing renewable energy and pricing carbon. The role of fossil fuel supply, in particular fossil fuel extraction, has received far less attention, in both policy discourse and research.

At the same time, the evidence is increasingly clear that large parts of the world’s fossil fuel reserves will need to be left undeveloped if the goals of the Paris Agreement are to be met. The very limited “carbon budget” available if global temperature rise is to be kept below 2 ˚C means that some oil and gas reserves might be “unburnable”, leading to financial risks for investors and governments as well as climate-related risks if investment and infrastructure locks in fossil fuel production that is incompatible with the carbon budget.

This situation has led to increased interest in the need for a more active management of fossil fuel supply, and the potential for introducing restrictive climate policy measures on the supply side. There is a need for a better understanding of how supply-side climate policy could be implemented in practice, and the political opportunities and constraints for implementing such policies.

CICERO participates in a project with Stockholm Environment Institute to map the political economy of regulating the supply of fossil fuels. The project will examine global and national scenarios for two case study countries–Norway and South Africa–to better understand the implications of alternative fossil fuel extraction pathways for fossil fuel rents, political interests and greenhouse gas emissions.

Researchers at CICERO are closely following Norwegian political discussions on oil and climate. Through workshops with stakeholders from government, industry and civil society, we work to identify ongoing changes in Norway’s attempts to combine the role as a large oil and gas producer with its aspirations to climate leadership.