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Fossil extraction bans and carbon taxes: Assessing their interplay through multiple models

Pietro Andreoni, Lara Aleluia Reis, Laurent Drouet, Oliver Dessens, Panagiotis Fragkos, Robert Pietzcker, Steve Pye, Renato Rodrigues, and Massimo Tavoni (2023)

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The paper uses four Integrated Assessment Models to explore the various implications of fossil fuel extraction bans, noting the growing justifications for using supply-side policies over or with demand-side policies. It uses PROMETHEUS, REMIND, TIAM-UCL and WITCH, all of which have been used in IPCC Assessment Reports. The modelling assesses the effects of bans on hydrocarbon extraction on future emissions and the energy system. 

The paper concludes that fossil fuel bans can only reach the Paris Agreement’s 2°C target at a competitive cost where demand-side measures such as carbon pricing are used in tandem with bans. 

First, the paper finds that extraction bans can effectively reduce emissions where bans are imposed by large producing countries by mid-century. However, it finds that no scenario could achieve a limit of warming well below 2°C after this time using only extraction bans because such supply-side policies do not foster Carbon Capture and Storage, Biomass with Carbon Capture and Storage and Negative Emissions Technologies (NETs) needed to accelerate decarbonisation and offset hard-to-abate sectors.  

The paper also finds that using a combination of demand-side policies like carbon pricing in conjunction with extraction ban results in faster emissions reductions in the first part of the century due to the binding nature of extraction bans (in contrast with carbon pricing merely raising the costs of emitting greenhouse gases). Combining both types of policies thus reduces the need to rely on NETs in the long-term. It also consistently improves decarbonisation in the energy system as supply-side policies carry part of the cost of the energy transition, reducing the carbon price required to reduce demand. 

The paper recognises the importance of multilateral international efforts to trigger a coalition of large-production countries imposing fossil fuel extraction bans. It notes the stronger the demand-side policy, the larger this coalition needs to be to affect international fuel prices.  

Ultimately, the paper supports the call for policies that result in joint implementation of fossil fuel extraction bans and carbon pricing through a multilateral international framework. 

The paper supports using supply-side policies with demand-side policies for climate mitigation. It supports specifically imposing bans on fossil fuel extraction, alongside carbon pricing mechanisms. This can be used to support the justification for rejecting a project, even where that jurisdiction has a carbon pricing regime. 

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