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'Bad' Oil, 'Worse' Oil and Carbon Misallocation

Renaud Coulomb (), Fanny Henriet () and Léo Reitzmann ()
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Renaud Coulomb: University of Melbourne
Fanny Henriet: PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Léo Reitzmann: PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: Not all barrels of oil are created equal: their extraction varies in both private cost and carbon intensity. Using a rich micro-dataset on World oil fields and estimates of their carbon intensities and private extraction costs, this paper quantifies the additional emissions and costs from having extracted the 'wrong' deposits. We do so by comparing historic deposit-level supplies to counterfactuals that factor in pollution costs, while keeping annual global consumption unchanged. Between 1992 and 2018, carbon misallocation amounted to at least 10.02 GtCO2 with an environmental cost evaluated at 2 trillion US dollars (2018 US dollars). This translates into a significant supply-side ecological debt for major producers of dirty oil. Looking towards the future, we estimate the gains from making deposit-level extraction socially-optimal, and document the very unequal distribution of the subsequent stranded oil reserves across countries.

Keywords: Misallocation; Carbon mitigation; Oil; Climate change; Stranded assets (search for similar items in EconPapers)
Date: 2021-06
New Economics Papers: this item is included in nep-ene and nep-env
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-03244647
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