Climate activists every few months have been rallying to stop a new “carbon bomb,” a long list over many years that includes the Keystone XL pipeline, the Willow Project and natural gas export terminals like the CP2 in Louisiana.

They’re often met with counterarguments from the right and moderate left, which argue that if the U.S. doesn’t produce fossil fuels, someone else will. Or, in the case of natural gas, it will be replaced by even-dirtier energy created by coal.

So who’s right?

The truth is complicated. Some economists argue that policies that reduce our demand for, rather than supply of, planet-warming fossil fuels are more effective. But such policies are also imperfect and politically difficult.

The use of fossil fuels — coal, oil and gas — is the main driver of climate change, which in turn contributes to more frequent and intense storms and flooding, as well as droughts, fires and food insecurity.

Climate policies can take several forms, including those that try to limit fossil fuel supply and those that try to reduce our need for such energy sources.

Renewable energy tax credits, mandated shifts to climate-friendly power sources and making homes, buildings and transportation more energy efficient reduce the need for fossil fuels.

Limiting supply involves policies such as setting limits on how much fuel can be produced or exported or blocking specific fossil fuel projects.

Reducing fossil fuel production

Supply-side policies are often the ones in the news. Climate activists have excoriated the Biden administration for its approval of the Willow Project, a ConocoPhillips oil drilling venture in Alaska.

The project is expected to produce 576 million barrels of oil — generating 239 million metric tons — over a 30-year period.

On the other hand, climate activists have praised the administration’s move to halt new approvals for some natural gas projects while also saying it should reject a proposed project called Calcasieu Pass 2 (CP2), which could export 20 million tons of natural gas per year, the equivalent of nearly a quarter of the U.S.’s current annual exports.

Shaylyn Hynes, a spokesperson for Venture Global LNG, the company behind CP2, said in an email that the activists opposing the project are “completely out of touch with reality” and said the pause on new gas export approvals would cause “higher global emissions and jeopardize energy security.”

“We are seeing oil and gas production in the U.S. continue to rise under Joe Biden’s administration and young people are … really frustrated to see someone that many of us campaigned for, voted for in 2020, who promised to take action on climate change … oversee a massive boom in oil and gas production,” said Stevie O’Hanlon, communications director for Sunrise Movement, a youth-led climate activist group.

Economists have debated whether and to what extent restricting fossil fuel production in the U.S. benefits the climate.

Brian Prest, an economist and fellow at climate think tank Resources for the Future, argued that generally, limiting fossil fuel production puts a higher price on those fuels, and therefore reduces demand — and emissions.

“Higher prices make, for example, electric vehicles more attractive,” Prest said. “You see substitution away from say, fuel oil for heating to other heating sources, whether it’s heat pumps or gas.”

With oil and gas, he said the substitutes are pretty much guaranteed “to be cleaner than the oil you’re taking off the market or the coal you’re taking off the market.”

“Gas — it’s trickier. It could be cleaner or dirtier,” he said.

There are also questions about how much of the fuel the U.S. takes off the market would be replaced by other suppliers.

Christopher Knittel, deputy director of policy at the MIT Energy Initiative, said oil is particularly replaceable but natural gas is not because “it’s expensive to move and the amount that the capacity of export terminals worldwide is fairly restrictive.”

Another issue related to policies that limit the supply of fossil fuels is that, at least in the short term, they can raise energy prices — and disproportionately impact the poorest people and countries.

“Increases in energy prices are very regressive,” Knittel said. “They impact low-income households, and low-income countries more than high-income households in high-income countries so … if we ban an export terminal that’s a very regressive policy worldwide.”

Reducing fossil fuel consumption

On the other side of this issue are policies that reduce demand for fossil fuels.

Melissa Lott, a professor at the Columbia Climate School, noted that the “only reason” fossil fuels are produced “is because we demand it somewhere in the world that fuel is being demanded.”

“So to really turn and reduce emissions in line with what we need to do to solve climate change we have to change demand for those fuels,” she said.

Policies that improve energy efficiency — such as better building insulation — and incentives for building out renewables can help to fight the warming planet, Lott said.

But these policies also aren’t foolproof.

“​​If we enact policies to reduce our demand of oil, gas [and] coal, here in the U.S., that then is going to drive down the prices of those fuels … and that might encourage more consumption elsewhere,” said Ryan Kellogg, a professor at the University of Chicago Harris School of Public Policy.

Nevertheless, Kellogg said, in addition to emission benefits, policies that curb fossil fuel demand are also important for spurring innovation and making climate-friendly technology cheaper around the world.

“We’ve moved down the innovation curve to make solar panels better, EVs better, batteries better, wind turbines better,” he said. “We’re able to build them more cheaply here, but also, countries with large economies that are lower-income, places like India, can start adopting them too and they actually become cost competitive with fossil fuels.”

Continue reading on The Hill…

Areas of Focus: Energy Markets
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Energy Markets
Well-functioning markets are essential for providing access to reliable, affordable energy. EPIC research is uncovering the policies, prices and information needed to help energy markets work efficiently.
Fossil Fuels
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Fossil Fuels
Under current policies, fossil fuels will play an important role in the energy system for the foreseeable future. EPIC research is exploring the costs and benefits of these fuels as...