Strategic Fossil Expansion and the Timing of the Energy Transition

Fabien Prieur

No 2025.06, Working Papers from FAERE - French Association of Environmental and Resource Economists

Abstract: We develop a dynamic model of exhaustible resource exploitation, with exploration, in which a regulator determines the end date of the fossil regime by trading off industry profits against climate damages. The weight assigned to damages reflects the fossil industry's pre-existing political influence. We compare Nash and Stackelberg interactions between the industry and the regulator. Under Nash behavior, regulation shortens the fossil regime and reduces cumulative emissions relative to the unregulated benchmark. Under Stackelberg leadership, however, a monopoly may increase exploration relative to the Nash outcome in order to delay the transition. Calibrating the model to global oil market data, we obtain that strategic leadership increases reserves by approximately 7% relative to the Nash outcome and delays the transition by about 2-3 years. The analysis thus provides an explanation for sustained upstream fossil fuel investment despite announced net-zero commitments.

Keywords: exploration; energy transition; political influence; Nash vs Stackelberg interaction (search for similar items in EconPapers)
JEL-codes: C73 D72 Q54 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2025-06
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http://faere.fr/pub/WorkingPapers/Prieur_FAERE_WP2025.06.pdf First version, 2025 (application/pdf)

Related works:
Working Paper: Strategic Fossil Expansion and the Timing of the Energy Transition (2026)
Working Paper: Strategic Fossil Expansion and the Timing of the Energy Transition (2026)
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Persistent link: https://EconPapers.repec.org/RePEc:fae:wpaper:2026.05

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