Carbon Risk as an Institutional Challenge: The Case of Norway

Guri Bang

Norwegian welfare and prosperity has thrived in step with a growing petroleum sector. However, new knowledge about the limits of the world’s “carbon budget” and how this might render some fossil fuel reserves “un-burnable” (McGlade and Ekins 2015) now presents carbon as a potential risk. Carbon risk may be climatic (extraction could affect global greenhouse gas emissions) or economic (current investments might end up as “stranded assets” in a world seeking to move beyond oil). It may even be cultural, as a threat to the Norwegian reputation and self-perception as a climate policy front-runner. Exploring this fundamental change in the understanding of fossilized carbon from benevolent to risky, a key question is how governance structures currently managing Norwegian fossil fuel extraction respond: Will institutions established to manage oil as welfare contribute to inertia in the shift towards understanding oil as risk? What barriers to institutional change exist? Based on an analysis of the institutions and main stakeholder groups in Norwegian petroleum policy, we identify three potential responses to carbon risk as an emerging factor in Norwegian oil extraction politics. The paper draws on structured workshops with a wide range of stakeholders and institutions, supplemented by interviews and document analysis. Download full paper PDF »

What does “keeping in the ground” mean for current fossil fuel producers, dependent on the jobs and tax revenue? An approach to developing a transitional industrial policy package using the Canadian provinces as examples.

Chris Bataille

From the perspective of a “green(er)” fossil fuel producer, a natural response to the 1.5-2C global carbon budgets1 is to point at the demand side.  “We (the producer region) accept climate change is real, and our industrial foundation will change someday, but the logical course for us is to reduce GHG intensity and compete to be the last producer, not to “keep it in the ground””.  To change this paradigm, not only does a positive option need to be offered (a plausible alternative economic structure), but a consideration of the full spectrum of impacts needs to be considered.  For example, where will tax revenue for public services come from? What will people do for a living?  How is the transition approached? In this presentation, using concrete examples from the Canadian provinces of Alberta, Saskatchewan, British Columbia and Newfoundland & Labrador, all major fossil fuel producers today, we will put ourselves in the shoes of the provincial and federal governments trying to run a long term stakeholder visioning process to build the necessary “buy-in” in order to establish a policy package. Considering critical social needs (e.g. revenue for public services, employment) and regional competitive advantages, using standard policy formation criteria we will assemble and describe a “strawdog” policy package to enable the provincial governments to stop offering new extraction licences and retire inactive ones, and to re-orientate effort to building a very low or negative carbon industrial structure, measured from both the up- and down-stream perspective.

The implications of the Druridge Bay opencast coal-mine decision for UK policy on fossil-fuel extraction

Naomi Luhde-Thompson, Simon Bullock, and John Barrett

The UK has world-leading legislation to tackle climate change – the Climate Change Act 2008, which legally binds the Government to deliver at least 80% cuts in 1990 greenhouse gas emissions by 2050. But this Act, and the strategies and policies to meet it, by definition do not cover “supply-side” issues such as the climate impact of what type of fuels are extracted and produced by the UK for use in the UK or global economy. Concurrently, there is growing acceptance that at least 70-75% of the world’s existing and recoverable fossil fuel reserves cannot be burned to stay within internationally agreed climate targets. Historically, the UK Government’s approach to fossil-fuel extraction and production has been to state that the climate impacts are minimal due to the relatively low emissions associated with their extraction and to argue that the fuels would merely be substituting for otherwise imported oil. Therefore, it has been argued that new fossil fuel extraction in the UK would not lead to additional emissions globally. Although the Government accepts the “unburnable carbon” argument – agreeing that 70-75% of the world’s existing fossil fuel reserves need to stay unused to keep to a 2 degree warming goal , it has not yet assessed the implications of this analysis for UK policy . However, a landmark UK Government decision in March 2018 has re-opened this issue of fossil fuel extraction. The Government has refused a planning application for a new opencast coal mine at Druridge Bay in Northern England, with climate change for the first time cited as one of the main reasons for refusal of a fossil-fuel infrastructure project . The issue of greenhouse gas emissions was a central argument within the application’s weeks-long public planning inquiry. This paper explores the implications of this decision for UK planning law, and for broader UK Government policy on fossil fuel production. It outlines the arguments presented at the Public Inquiry and evaluates the justification for the UK’s Government decision. Finally, the paper outlines the potential implications for future planning considerations in the UK.

Revoking Coal Extraction Rights: An Economic and Legal Analysis

Ryan Rafaty, Sugandha Srivastav, Björn Hoops, and Cameron Hepburn

To mitigate climate change impacts as agreed under the Paris Agreement, the world needs to rapidly transition away from coal-fired power generation. However, governments in numerous coal-producing jurisdictions have in recent years prolonged coal development with supply-side permitting decisions that contradict Paris commitments. We assess the economic rationales and legal avenues for implementing a restrictive supply-side climate measure — specifically, the revocation of active coal extraction permits. Taking the illustrative case of permits granted by the German government to RWE Power AG to deforest more than 40 km2 and mine from the 1.4 billion tonnes of lignite remaining in the 12,000-year-old Hambach Forest, we estimate that halting planned operations at the Hambach opencast mine alone would reduce Germany’s total CO2 emissions by up to 7 percent and avoid approximately €326 billion in health-related air pollution costs, €34 billion in CO2 emission costs, and €19 million in lost carbon sequestration over a 35-year period, assuming a constant discount rate of 3 percent. Assessing the legal avenues through which active lignite extraction and power plant permits may be revoked in Germany, we find that German law does not necessarily pose a barrier to the proposed measure; the legal case is in fact bolstered when going beyond arguments that strictly relate to global climate change and taking into account the localized air pollution damages and losses to ecosystem services resulting from mining and deforestation. Our findings indicate that revoking coal extraction rights is a legally plausible and economically sound means of expediting the coal phaseout and may be more efficacious than alternative demand-side policies. This is an especially compelling result when one considers that Germany has recourse to other energy sources that are significantly less emissions-intensive than lignite. Download PDF of full paper

The political dynamics of policies tackling fossil fuel supply in Ireland, from fracking to licensing

Cliona Sharkey

Ireland is a full of contradictions when it comes to climate change.  The ‘green’ nation is 88% dependent on fossil fuel imports, and is planning to continue extract and burn peat – a highly inefficient indigenous fuel that is also a carbon sink – until 2030. It is one of only a handful of EU Member States that will fail to deliver on its EU 2020 climate action targets, and the only one where emissions are set to continue to rise.   Surprisingly however, the Irish Parliament has progressed three separate pieces of legislation over the last 18months that tackle fossil fuel supply. A law to ban fracking in Ireland was passed in June 2017.  A bill to divest Ireland’s sovereign wealth fund from fossil fuels is at an advanced stage in the legislative process, and a bill to end licensing for fossil fuel exploration and extraction was voted through to Committee stage by a majority in the Parliament in February 2018.  This presentation will share the story of how minority politics and developments in the civil society movement in Ireland in recent years have contributed to these surprising steps forward and the challenges that have been faced, many of which are still in play.