If this stroke of green genius makes it into the policy world, clever countries around the world can sell their oil more than once.
Bård Harstad was recently awarded about $15,000 for a paper suggesting that the best way to combat climate change is to pay countries not to extract fossil fuels. The European Association of Environmental and Resource Economists (EAERE) awarded the money to the Norwegian, impressed by his alternative approach towards curbing global greenhouse gas emissions.
As part of the plan, Harstad proposed that countries should ditch traditional environmental regulations like the EU’s cap-and-trade scheme. But he figures that, if a country is already committed to spending money to curb global emissions, it would be better served buying up fossil fuel resources and sitting on them. The FT explains:
Mr Harstad’s research suggests UN climate negotiators should look at a system in which countries can buy the right to extract fossil fuels such as coal, oil or gas from others, and then conserve the fuel. If a big enough coalition of pro-climate countries did this, the carbon leakage problem could be avoided, his paper suggests.
This is because countries outside the coalition would not be able to dig up fresh deposits of fuel in response to rising global prices, having already sold the extraction rights to their least profitable supplies to other nations. So the greener countries could pare back their own use of fossil fuels without worrying that others would increase their supplies.
As Harstad notes, piecemeal green policies like cap-and-trade hamper economies while doing little to curb net global emissions. Energy intensive industries, the really heavy emitters, simply outsource their production to countries without these green policies, often in the developing world. This process is known as carbon leakage, and it’s one of the reasons the EU has been slow to fix its own broken carbon emissions trading system.
The logic is sound, but the idea is farfetched. Good luck to Harstad in finding a bloc of countries willing to fall on their swords for the sake of the planet. Greens have already wasted years chasing the grand mirage of an effective global climate treaty; this idea looks like yet another unicorn hunt.
One problem with this latest green brainstorm: once countries realize that they can extract money from clueless Euro-greens, the race will be on to find dirty, nasty, sludgy energy deposits around the world. All you have to do is threaten to dig a few holes, and the trembling Europeans will drop bags of money on you to stop you from developing your resources.
These deposits will be even more lucrative than the regular ones. After all, the downside of a conventional oil well is that once you sell its production, the oil is gone. But if this stroke of green genius makes it into the policy world, clever countries around the world can sell their oil more than once.
Step one: find a nasty, hard to exploit hydrocarbon resource. Step two: look as if you were about to bring it into production. Step three: negotiate hard with the green Euro-weenies over the compensation that would cause you to leave the hydrocarbons untouched. (It’s important to negotiate hard, and not just to get a better price. Negotiating hard will make the Europeans think you will actually keep the agreement.) Step four: accept the money and cash the check.
And here’s the genius: step five is… repeat as needed. That oil is still in the ground. You can sell it again and again. You, or your successor, can keep blackmailing the Europeans until the cows come home — or until European greens grow some common sense.