IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v108y2017icp143-153.html
   My bibliography  Save this article

Implications for the floor price of oil of aggressive climate policies

Author

Listed:
  • Danny Harvey, L.D.

Abstract

This paper identifies combinations of technical and behavioral measures that lead to progressively lower global demand for oil, culminating with a scenario that eliminates global oil demand by 2060 – in line with the broader requirement that anthropogenic CO2 emissions reach net zero by this date in order to have a 60% chance of staying below a global mean warming of 2°C above the pre-industrial level. The cumulative oil consumption from 2010 to the point when zero oil demand is achieved is compared with a recent oil supply-marginal cost curve. Assuming that oil is consumed in order of increasing extraction cost, the price of oil need not rise significantly above $25–35/bbl. Even substantially less-aggressive efforts to reduce CO2 emissions need not see oil rise substantially above $50/bbl. Under aggressive climate policies, the peak in oil demand occurs before the supply-constrained peak in oil production would occur. This would render expensive oil (>$50/bbl) permanently uneconomic. This includes oil from the Canadian tar sands (currently costing $65–95/bbl for new greenfield developments) and most shale oil (with current average oil-play costs of $48–65/bbl). This in turn implies that governments should not be promoting or permitting development of high cost oil, and also provides a clear warning to private and institutional investors.

Suggested Citation

  • Danny Harvey, L.D., 2017. "Implications for the floor price of oil of aggressive climate policies," Energy Policy, Elsevier, vol. 108(C), pages 143-153.
    • Handle: RePEc:eee:enepol:v:108:y:2017:i:c:p:143-153
    DOI: 10.1016/j.enpol.2017.05.045
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421517303300
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2017.05.045?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Plötz, Patrick & Funke, Simon & Jochem, Patrick, 2015. "Real-world fuel economy and CO2 emissions of plug-in hybrid electric vehicles," Working Papers "Sustainability and Innovation" S1/2015, Fraunhofer Institute for Systems and Innovation Research (ISI).
    2. Hymel, Kent M. & Small, Kenneth A. & Dender, Kurt Van, 2010. "Induced demand and rebound effects in road transport," Transportation Research Part B: Methodological, Elsevier, vol. 44(10), pages 1220-1241, December.
    3. Kenneth A. Small & Kurt Van Dender, 2007. "Fuel Efficiency and Motor Vehicle Travel: The Declining Rebound Effect," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 25-52.
    4. Harvey, L.D.D., 2013. "Global climate-oriented transportation scenarios," Energy Policy, Elsevier, vol. 54(C), pages 87-103.
    5. Moshiri, Saeed & Aliyev, Kamil, 2017. "Rebound effect of efficiency improvement in passenger cars on gasoline consumption in Canada," Ecological Economics, Elsevier, vol. 131(C), pages 330-341.
    6. Aguilera, Roberto F., 2014. "Production costs of global conventional and unconventional petroleum," Energy Policy, Elsevier, vol. 64(C), pages 134-140.
    7. Oh, Yunjung & Park, Junhong & Lee, Jong Tae & Seo, Jigu & Park, Sungwook, 2016. "Development strategies to satisfy corporate average CO2 emission regulations of light duty vehicles (LDVs) in Korea," Energy Policy, Elsevier, vol. 98(C), pages 121-132.
    8. Sorrell, Steve & Miller, Richard & Bentley, Roger & Speirs, Jamie, 2010. "Oil futures: A comparison of global supply forecasts," Energy Policy, Elsevier, vol. 38(9), pages 4990-5003, September.
    9. Steren, Aviv & Rubin, Ofir D. & Rosenzweig, Stav, 2016. "Assessing the rebound effect using a natural experiment setting: Evidence from the private transportation sector in Israel," Energy Policy, Elsevier, vol. 93(C), pages 41-49.
    10. Bishop, Justin D.K. & Martin, Niall P.D. & Boies, Adam M., 2014. "Cost-effectiveness of alternative powertrains for reduced energy use and CO2 emissions in passenger vehicles," Applied Energy, Elsevier, vol. 124(C), pages 44-61.
    11. Harvey, L.D. Danny, 2014. "Global climate-oriented building energy use scenarios," Energy Policy, Elsevier, vol. 67(C), pages 473-487.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dimitropoulos, Alexandros & Oueslati, Walid & Sintek, Christina, 2018. "The rebound effect in road transport: A meta-analysis of empirical studies," Energy Economics, Elsevier, vol. 75(C), pages 163-179.
    2. Moshiri, Saeed, 2020. "Consumer responses to gasoline price and non-price policies," Energy Policy, Elsevier, vol. 137(C).
    3. Chen, Zhenni & Du, Huibin & Li, Jianglong & Southworth, Frank & Ma, Shoufeng, 2019. "Achieving low-carbon urban passenger transport in China: Insights from the heterogeneous rebound effect," Energy Economics, Elsevier, vol. 81(C), pages 1029-1041.
    4. Jihye Byun & Sungjin Park & Kitae Jang, 2017. "Rebound Effect or Induced Demand? Analyzing the Compound Dual Effects on VMT in the U.S," Sustainability, MDPI, vol. 9(2), pages 1-10, February.
    5. Proost, Stef & Van Dender, Kurt, 2012. "Energy and environment challenges in the transport sector," Economics of Transportation, Elsevier, vol. 1(1), pages 77-87.
    6. De Borger, Bruno & Mulalic, Ismir & Rouwendal, Jan, 2016. "Measuring the rebound effect with micro data: A first difference approach," Journal of Environmental Economics and Management, Elsevier, vol. 79(C), pages 1-17.
    7. Yoo, Sunbin & Koh, Kyung Woong & Yoshida, Yoshikuni & Wakamori, Naoki, 2019. "Revisiting Jevons's paradox of energy rebound: Policy implications and empirical evidence in consumer-oriented financial incentives from the Japanese automobile market, 2006–2016," Energy Policy, Elsevier, vol. 133(C).
    8. Krupa, Joel & Harvey, L.D. Danny, 2017. "Renewable electricity finance in the United States: A state-of-the-art review," Energy, Elsevier, vol. 135(C), pages 913-929.
    9. Rivers, Nicholas & Schaufele, Brandon, 2017. "Gasoline price and new vehicle fuel efficiency: Evidence from Canada," Energy Economics, Elsevier, vol. 68(C), pages 454-465.
    10. Whistance, Jarrett & Thompson, Wyatt, 2014. "The role of CAFE standards and alternative-fuel vehicle production credits in U.S. biofuels markets," Energy Policy, Elsevier, vol. 74(C), pages 147-157.
    11. Creutzig, Felix & McGlynn, Emily & Minx, Jan & Edenhofer, Ottmar, 2011. "Climate policies for road transport revisited (I): Evaluation of the current framework," Energy Policy, Elsevier, vol. 39(5), pages 2396-2406, May.
    12. Moshiri, Saeed & Aliyev, Kamil, 2017. "Rebound effect of efficiency improvement in passenger cars on gasoline consumption in Canada," Ecological Economics, Elsevier, vol. 131(C), pages 330-341.
    13. Sun, Shanxia & Delgado, Michael & Khanna, Neha, 2017. "Hybrid Vehicles and Household Driving Behavior: Implications for Miles Traveled and Gasoline Consumption," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258502, Agricultural and Applied Economics Association.
    14. Wang, H. & Zhou, P. & Zhou, D.Q., 2012. "An empirical study of direct rebound effect for passenger transport in urban China," Energy Economics, Elsevier, vol. 34(2), pages 452-460.
    15. Su, Qing, 2011. "Induced motor vehicle travel from improved fuel efficiency and road expansion," Energy Policy, Elsevier, vol. 39(11), pages 7257-7264.
    16. Lin, Boqiang & Chen, Yufang & Zhang, Guoliang, 2017. "Technological progress and rebound effect in China's nonferrous metals industry: An empirical study," Energy Policy, Elsevier, vol. 109(C), pages 520-529.
    17. Han, Hongyun & Zhou, Zinan, 2024. "The rebound effect of energy consumption and its determinants in China's agricultural production," Energy, Elsevier, vol. 290(C).
    18. Anas, Alex & Hiramatsu, Tomoru, 2012. "The effect of the price of gasoline on the urban economy: From route choice to general equilibrium," Transportation Research Part A: Policy and Practice, Elsevier, vol. 46(6), pages 855-873.
    19. Shaw, Charles, 2020. "Econometric Analysis of Demand for Petrol in India, 1966-2019," MPRA Paper 104797, University Library of Munich, Germany.
    20. Sylvain Weber & Mehdi Farsi, 2014. "Travel distance, fuel efficiency, and vehicle weight: An estimation of the rebound effect using individual data in Switzerland," IRENE Working Papers 14-03, IRENE Institute of Economic Research.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:108:y:2017:i:c:p:143-153. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.