Leading the Unwilling: Unilateral Strategies to Prevent Arctic Oil Exploration

Justin Leroux and Daniel Spiro
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Justin Leroux: Department of Applied Economics HEC Montréal & CIRANO & CRÉ

Working Papers from Oslo Metropolitan University, Oslo Business School

Abstract: Arctic oil extraction is inconsistent with the 2°C target. We study unilateral strategies by climate-concerned Arctic countries to deter extraction by others. Contradicting common theoretical assumptions about climate-change mitigation, our setting is one where countries may fundamentally disagree about whether mitigation by others is beneficial. Arctic extraction requires specific R&D, hence entry by one country expands the extraction-technology market, decreasing costs for others. Less environmentally-concerned countries (preferring maximum entry) have a first-mover advantage but, being reliant on entry by others, can be deterred if environmentally-concerned countries (preferring no entry) credibly coordinate on not following. Furthermore, using a pooling strategy, an environmentally-concerned country can deter entry by credibly “pretending” to be environmentally adamant, thus expected to not follow. A rough calibration, accounting for recent developments in U.S. politics, suggests a country like Norway, or prospects of a green future U.S. administration, could be pivotal in determining whether the Arctic will be explored.

Keywords: arctic region; oil exploration; climate change; geopolitics; unilateral action (search for similar items in EconPapers)
JEL-codes: D82 F50 O33 Q30 Q54 (search for similar items in EconPapers)
Date: 2017-08
New Economics Papers: this item is included in nep-ene and nep-env
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Related works:
Journal Article: Leading the unwilling: Unilateral strategies to prevent arctic oil exploration (2018)
Working Paper: Leading the Unwilling: Unilateral Strategies to Prevent Arctic Oil Exploration (2018)
Working Paper: Leading the Unwilling: Unilateral Strategies to Prevent Arctic Oil Exploration (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:oml:wpaper:201705

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