Leading the Unwilling: Unilateral Strategies to Prevent Arctic Oil Exploration
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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.
Date: 8 May 2018, 14:30 (Tuesday, 3rd week, Trinity 2018)
Venue: Manor Road Building, Manor Road OX1 3UQ
Venue Details: Seminar Room A
Speaker: Daniel Spiro (Uppsala University)
Organising department: Department of Economics
Organiser: Antonella Surdi (OxCarre)
Part of: OxCarre Seminar Series
Booking required?: Not required
Audience: Members of the University only
Editors: Antonella Surdi, Erin Saunders, Anne Pouliquen, Melis Clark