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Humboldt-Universität zu Berlin | Thaer-Institute | Resource Economics | News Items | Eisenack, Hagen, Mendelevitch, Vogt - Article: Politics, Profits and Climate Policies: How Much Is at Stake for Fossil Fuel Producers?

Eisenack, Hagen, Mendelevitch, Vogt - Article: Politics, Profits and Climate Policies: How Much Is at Stake for Fossil Fuel Producers?



Eisenack, Klaus, Achim Hagen, Roman Mendelevitch, and Angelika Vogt. 2021. ‘Politics, Profits and Climate Policies: How Much Is at Stake for Fossil Fuel Producers?’ Energy Research & Social Science 77 (July): 102092. https://doi.org/10.1016/j.erss.2021.102092 .

 

Stabilizing greenhouse gas concentrations requires that a substantial share of fossil fuel reserves is not combusted. In countries and industries producing oil, coal, or gas, substantial profits are at stake, which are estimated to be up to $185 trillion. In this Perspective, we review the existing estimates in the literature with respect to the approaches used and the underlying assumptions made, and we argue that these figures are misleading without contextualization. Current studies assess those climate policies that target the demand-side of fossil fuels and lead to particularly large estimates. Sound estimates of foregone profits due to climate policies are yet of utmost importance: if estimated losses are large, strong resistance to ambitious climate policies can be expected. For instance, Saudi Arabia has already sought financial compensation for profits foregone due to climate policies. To explain the broad range of numbers and to judge the validity of compensation claims, we present a theorygrounded way for appropriately conceptualizing foregone fossil fuel profits. If previous quantitative estimates are adjusted to account for policy options that target the supplyside and for resulting fuel price changes, they justify much smaller or even negative compensation.