Leading the Unwilling: Unilateral Strategies to Prevent Arctic Oil Exploration
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 a...
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ftrepec:oai:RePEc:cir:cirwor:2018s-26 2024-04-14T08:06:07+00:00 Leading the Unwilling: Unilateral Strategies to Prevent Arctic Oil Exploration Justin Leroux Daniel Spiro https://cirano.qc.ca/files/publications/2018s-26.pdf unknown https://cirano.qc.ca/files/publications/2018s-26.pdf preprint ftrepec 2024-03-19T10:29:31Z 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. This is because Arctic oil extraction requires specific R&D, hence entry by one country expands the extraction-technology market, decreasing costs for others. This means that, on the one hand, countries that extract Arctic oil gain if others do so as well. On the other hand, as countries may disagree about how harmful climate change is, they may disagree whether an equilibrium where all enter is better or worse than an equilibrium where all stay out. Less environmentally-concerned countries (preferring maximum entry) have a first-mover advantage but, because they rely on entry by others, entry in equilibrium is determined by the preferences of those who are moderately concerned about the environment. Furthermore, using a pooling strategy, an environmentally-concerned country can deter entry by credibly “pretending” to be environmentally adamant, and thus be expected to not follow. A rough calibration, 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. This Working Paper was published in Resource and Energy Economics. Read the article on Resource and Energy Economics website Ce cahier scientifique CIRANO est maintenant publié dans la revue Resource and Energy Economics. Consulter l'article sur le site de la revue Resource and Energy Economics Arctic Region,Oil Exploration,Climate Change,Geopolitics,Unilateral Action Report Arctic Climate change RePEc (Research Papers in Economics) Arctic Norway |
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RePEc (Research Papers in Economics) |
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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. This is because Arctic oil extraction requires specific R&D, hence entry by one country expands the extraction-technology market, decreasing costs for others. This means that, on the one hand, countries that extract Arctic oil gain if others do so as well. On the other hand, as countries may disagree about how harmful climate change is, they may disagree whether an equilibrium where all enter is better or worse than an equilibrium where all stay out. Less environmentally-concerned countries (preferring maximum entry) have a first-mover advantage but, because they rely on entry by others, entry in equilibrium is determined by the preferences of those who are moderately concerned about the environment. Furthermore, using a pooling strategy, an environmentally-concerned country can deter entry by credibly “pretending” to be environmentally adamant, and thus be expected to not follow. A rough calibration, 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. This Working Paper was published in Resource and Energy Economics. Read the article on Resource and Energy Economics website Ce cahier scientifique CIRANO est maintenant publié dans la revue Resource and Energy Economics. Consulter l'article sur le site de la revue Resource and Energy Economics Arctic Region,Oil Exploration,Climate Change,Geopolitics,Unilateral Action |
format |
Report |
author |
Justin Leroux Daniel Spiro |
spellingShingle |
Justin Leroux Daniel Spiro Leading the Unwilling: Unilateral Strategies to Prevent Arctic Oil Exploration |
author_facet |
Justin Leroux Daniel Spiro |
author_sort |
Justin Leroux |
title |
Leading the Unwilling: Unilateral Strategies to Prevent Arctic Oil Exploration |
title_short |
Leading the Unwilling: Unilateral Strategies to Prevent Arctic Oil Exploration |
title_full |
Leading the Unwilling: Unilateral Strategies to Prevent Arctic Oil Exploration |
title_fullStr |
Leading the Unwilling: Unilateral Strategies to Prevent Arctic Oil Exploration |
title_full_unstemmed |
Leading the Unwilling: Unilateral Strategies to Prevent Arctic Oil Exploration |
title_sort |
leading the unwilling: unilateral strategies to prevent arctic oil exploration |
url |
https://cirano.qc.ca/files/publications/2018s-26.pdf |
geographic |
Arctic Norway |
geographic_facet |
Arctic Norway |
genre |
Arctic Climate change |
genre_facet |
Arctic Climate change |
op_relation |
https://cirano.qc.ca/files/publications/2018s-26.pdf |
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1796302769870602240 |