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Séminaire d’économie de Bordeaux

Renaud Coulomb

(Mines Paris – PSL University (CERNA))

’Bad’ Oil,’Worse’ Oil and Carbon Misallocation

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 historical 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 11.00 GtCO2eq with an environmental cost evaluated at US$ 2.2 trillion (US$ 2018). 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 at about 9.30 GtCO2eq evaluated at US$ 1.9 trillion (US$ 2018) along a future aggregate demand pathway coherent with the objective of net-zero emissions in 2050, and document the very unequal distribution of the subsequent stranded oil reserves across countries.

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