Template-Type: ReDIF-Paper 1.0
Author-Name: Justin Leroux
Author-Name-First: Justin
Author-Name-Last: Leroux
Author-Workplace-Name: Department of Applied Economics HEC Montréal & CIRANO & CRÉ
Author-Name: Daniel Spiro
Author-Name-First: Daniel
Author-Name-Last: Spiro
Author-Workplace-Name: Oslo Business School, Oslo Akershus University College of Applied Sciences & CREE
Title: Leading the Unwilling: Unilateral Strategies to Prevent Arctic Oil Exploration
Abstract: 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. Arctic extraction requires specific R&D, hence entry by one country expands the extraction-technology market, decreasing costs for others. Less environmentally-concerned countries (preferring maximum entry) have a first-mover advantage but, being reliant on entry by others, can be deterred if environmentally-concerned countries (preferring no entry) credibly coordinate on not following. Furthermore, using a pooling strategy, an environmentally-concerned country can deter entry by credibly “pretending” to be environmentally adamant, thus expected to not follow. A rough calibration, accounting for recent developments in U.S. politics, 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.
Classification-JEL: D82, F50, O33, Q30, Q54
Creation-Date: 2017-08
File-URL: https://www.cesifo.org/DocDL/cesifo1_wp6629.pdf
File-Format: Application/pdf
Keywords: arctic region, oil exploration, climate change, geopolitics, unilateral action
Handle: RePEc:oml:wpaper:201705