The case for a supply-side climate treaty

Abstract

The Paris Agreement can be strengthened by a treaty limiting global fossil fuel supply

Curbing fossil fuel supply to achieve climate goals

“…This, in turn, reduces risks of asset stranding if climate or financial imperatives force the early retirement of fossil fuel assets. The combination of supply and demand side measures can help reduce the overall cost of achieving emission reduction goals, and provide an insurance policy if any individual policy measure fails (Asheim et al, 2019;Green & Denniss, 2018). Moreover, constraining supply brings a range of additional sustainability benefits, such as reducing biodiversity loss, and localized pollution and health impacts associated with fossil fuel production (Epstein, 2017;Harfoot et al, 2018;Tudela, 2020).…”

“…Collective action not only increases the scale of action, but also can give countries the confidence and trust that others are taking reciprocal action. Moreover, cooperation can reduce the risk of carbon leakage through the international fossil fuel market (Asheim et al, 2019). International cooperation on supply-side climate policy can further send an important signal to policymakers, investors, companies, consumers and civil society, that the world is moving beyond a fossil fuel economy.…”

Stranded Assets in the Transition to a Carbon-Free Economy

“…In addition, one might have a Coasian supply-side policy where poor countries are "bribed" not to cut down forests in order to preserve carbon sinks (e.g. Harstad, 2012;Asheim et al, 2019), despite such policies coming with the legacy cost of the bribe, reneging on previous commitments, and cutting down forests nonetheless (Belfiori and Iverson, 2019). For both problems the question is how those who gain from climate policy can compensate those who lose from it.…”

Buy Coal, Cap Gas! Markets for Fossil Fuel Deposits When Fuel Emission Intensities Differ

“…Supply-side policies are a promising alternative, or complement, to demand-side policies, and they have recently become a research focus. Asheim (2013) provides a distributional argument in favor of supply-side policies and Asheim et al (2019) propose a complementary supply-side treaty in conjunction with the Paris Agreement. To the best of our knowledge, Bohm (1993) was the first to suggest that countries suffering from emissions could purchase or lease deposits from other countries.…”