Unburnable Fossil Fuels and Climate Finance: Compensation for Rights Holders

Martí Orta-Martínez; Lorenzo Pellegrini; Murat Arsel; Carlos Mena; Gorka Muñoa

doi:10.1162/glep_a_00688

Unburnable Fossil Fuels and Climate Finance: Compensation for Rights Holders

Martí Orta-Martínez, Lorenzo Pellegrini, Murat Arsel, Carlos Mena, Gorka Muñoa

Research output: Contribution to journal › Article › Academic › peer-review

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Abstract

To limit the increase in global mean temperature to 1.5°C, CO₂ emissions should be capped at 440 gigatons. To achieve this, about 89 percent, 59 percent, and 58 percent of existing coal and conventional gas and oil reserves, respectively, need to remain unburned. This implies an economic cost for fossil fuel rights owners, and any successful climate policy will rely on resolving the distributional challenge of how to allocate the right to use the remaining burnable reserves. We discuss the possibility of compensating rights holders of unburnable oil and gas reserves, producing the first estimates of the financial resources needed to secure full compensation. We estimate that approximately US$ 5,400 billion (10⁹) would be needed. Despite the vast amounts required, compensation is nevertheless economically feasible. We suggest a Keynesian “whatever it takes” approach for climate action, combining partial compensation for unburnable fuels and investment in low-carbon technologies to drastically reduce emissions in the rapidly closing window of opportunity before 2030.

Original language	English
Pages (from-to)	15-27
Number of pages	13
Journal	Global Environmental Politics
Volume	22
Issue number	4
DOIs	https://doi.org/10.1162/glep_a_00688
Publication status	Published - 10 Nov 2022

Bibliographical note

Funding Information:
This work was supported by two grants from the Spanish Ministerio de Ciencia, Innovación y Universidades—RYC-2016–21366 (MCIU/AEI/FSE, UE) and RTI2018-095949-BI00 (MCIU/ AEI/FEDER, UE)—and by the All Eyes on the Amazon program. We are thankful to the editors of Global Environmental Politics, Steven Bernstein, Matt Hoffmann, and Erika Weinthal, and to managing editor, Susan Altman, for their support and guidance.

Publisher Copyright: © 2022 by the Massachusetts Institute of Technology.

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Cite this

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abstract = "To limit the increase in global mean temperature to 1.5°C, CO2 emissions should be capped at 440 gigatons. To achieve this, about 89 percent, 59 percent, and 58 percent of existing coal and conventional gas and oil reserves, respectively, need to remain unburned. This implies an economic cost for fossil fuel rights owners, and any successful climate policy will rely on resolving the distributional challenge of how to allocate the right to use the remaining burnable reserves. We discuss the possibility of compensating rights holders of unburnable oil and gas reserves, producing the first estimates of the financial resources needed to secure full compensation. We estimate that approximately US$ 5,400 billion (109) would be needed. Despite the vast amounts required, compensation is nevertheless economically feasible. We suggest a Keynesian “whatever it takes” approach for climate action, combining partial compensation for unburnable fuels and investment in low-carbon technologies to drastically reduce emissions in the rapidly closing window of opportunity before 2030.",

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Unburnable Fossil Fuels and Climate Finance: Compensation for Rights Holders

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