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New Emissions-Curbing Strategy: Buy Coal in Ground and Lock Up Supply

The most effective strategies to combat climate change do not focus on demand-side solutions such as carbon taxes or emission caps, an economist argues
Open coal mine Garzweiler II



flickr/Bert Kaufmann

A Northwestern University economist who has closely followed strategies for reducing greenhouse gas emissions worldwide has a new recommendation for frustrated climate activists: Buy coal.

In a paper published in the current Journal of Political Economy, Bård Harstad, an associate professor of managerial economics and decision sciences at Northwestern's Kellogg School of Management, argues that the most effective strategies to combat climate change do not focus on demand-side solutions such as carbon taxes or emission caps.

Rather, he argues, climate-concerned governments and nongovernmental organizations (NGOs) should pool their resources and buy up the extraction rights to coal and other fossil fuels from so-called "third countries" that choose not to participate in greenhouse gas-reducing collectives.

The study's title -- "Buy Coal! A Case for Supply-Side Environmental Policy" -- captures the radical essence of Harstad's argument, which he acknowledged will be a tough sell to governments and NGOs that have locked on "demand-side" policies. It may not warm the hearts of those who aim to curb emissions by compelling users of fossil fuels to consume less, or invest billions of dollars in carbon-capture technologies.

But unlike diplomatic efforts thus far, he says, it will have a well-defined and immediate impact:

"By letting coalition countries buy extraction rights in third countries -- and preserve rather than exploit the fuel deposits -- climate coalitions can circumvent the traditional problems of a demand-side policy," said Harstad, who earned a Ph.D. from Stockholm University in Sweden and is a native of Norway.

In a telephone and email interview from Norway, Harstad said he knows of no specific cases in which such approaches are being used by governments or NGOs. But, he noted, "there is already a market for extraction rights, and countries all over the world are already selling or leasing the right to extract their fields to international companies.

"My paper suggests that a climate coalition could benefit vastly by being active in the very same market," he added.

Finding a plug for 'leakage'
Harstad's theory builds upon the concept of "carbon leakage," which holds that countries opting out of climate agreements will produce more greenhouse gases as their neighbors take steps to ratchet down greenhouse gas emissions and regulate the sources of such emissions, like coal-burning industrial plants or motor vehicle fleets.

This pattern is already taking shape around the globe with U.S. and Australian coal companies coping with shrinking domestic markets by planning to export huge amounts of coal to India and China. In the Harstad approach, an international coalition could outbid Asian buyers and remove the coal from the marketplace.

Harstad acknowledged that such an approach would be a "radical departure" from the more popular view, embodied in such agreements as the U.N. Framework Convention on Climate Change, which places much of its focus on end-of-stack emissions. "After purchasing their marginal deposits," he said, "it will no longer be the case that third countries will extract more if the multinational coalition reduces its own supplies of fossil fuel."

"With a better grip on supplies, the coalition would not have to use demand-side policies that invite leakage in the first place," Harstad argues in the paper.

But exactly how such coalitions would look and function remains uncertain. Harstad suggested that governments would have deeper pockets and more political leverage to negotiate with owners of mineral leases, especially in developing countries where natural resources are publicly owned by governments or through tightly held national corporations.

Imaginative, but 'utterly impractical'
But NGOs could also initiate such agreements if frameworks were established to allow for such transactions and willing sellers materialized. There is precedent, he noted, pointing to largely successful efforts by NGOs to preserve South American rainforests by purchasing their development rights and allowing the native trees to stand.

In the United States, he said, land trusts and nonprofits like the Nature Conservancy have purchased millions of acres of land or bought easements that amount to legal barriers that keep the land out of the hands of developers.

To be sure, the buy-coal solution would require a lot of money, but there could be a lot of money on the table. Proponents of demand-side climate action are already talking about a $100 billion climate fund to help poorer nations adapt to the results of global warming.

Still, critics of the supply-side alternative say it is wholly unrealistic to believe the fossil fuel sector -- which drives so much of the global economy -- could be reined in by attempts to "lock up" coal in perpetuity.

Luke Popovich, a spokesman for the National Mining Association, while crediting the paper for its "imaginative approach" to controlling carbon emissions, said the concept was "a thoroughly preposterous and utterly impractical idea."

He noted that it follows a string of unsuccessful attempts by the United Nations and other bodies to reduce greenhouse gas emissions from the global industrial and transportation sectors to little effect.

"There's just no way of getting around the fact that when you attempt to change the behaviors of industrialized economies that rely heavily on fossil energy, what you're essentially saying is you're going to raise the cost of living for a benefit that you may not see, but that exists in a real way to hundreds of millions of people," Popovich added.

"That's just an extremely difficult hill to climb."

Reprinted from Climatewire with permission from Environment & Energy Publishing, LLC. www.eenews.net, 202-628-6500

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