The Welfare Economics of Oil Exploration

Renaud Coulomb, France D’agrain and Fanny Henriet
Additional contact information
France D’agrain: Mines Paris - PSL (École nationale supérieure des mines de Paris) - PSL - Université Paris Sciences et Lettres, CERNA i3 - Centre d'économie industrielle i3 - Mines Paris - PSL (École nationale supérieure des mines de Paris) - PSL - Université Paris Sciences et Lettres - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique
Fanny Henriet: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

Working Papers from HAL

Abstract: Despite growing calls to phase it out, oil exploration persists, often justified by the natural decline of existing fields and potential efficiency gains from discoveries. This paper quantifies the global welfare and environmental impacts of restricting oil exploration. We develop a global dynamic model calibrated to a granular dataset of 14,637 proven oilfields, accounting for heterogeneity in private extraction costs, capacity constraints, life-cycle carbon intensities of oil barrels, along with exploration dynamics and basin-specific estimates of yet-to-find resources. We find that exploration restrictions are an effective second-best climate policy: in the absence of a global carbon tax, a universal ban increases global welfare by$12.5 trillion due to lower social costs of oil production and use (assuming a social cost of carbon of$200/tCO2eq). A partial ban by OECD and BRICS countries alone captures 66% of these gains. Under optimal carbon pricing, however, a global ban yields a modest $0.3 trillion welfare loss, as it precludes access to lower-social-cost deposits and prevents the easing of short-run capacity constraints.

Keywords: Stranded assets; Second-best; Ban; Carbon tax; Climate change; Oil exploration (search for similar items in EconPapers)
Date: 2025-12
Note: View the original document on HAL open archive server: https://hal.science/hal-05426516v1
References: Add references at CitEc
Citations:

Downloads: (external link)
https://hal.science/hal-05426516v1/document (application/pdf)

Related works:
Working Paper: The Welfare Economics of Oil Exploration (2025)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-05426516

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().