• 04.30.12

To Combat Climate Change, Buy More Coal

If the developed world uses less coal, it makes it cheaper for everyone else, which makes emissions skyrocket. To really stop climate change, says one economist, we need to buy all the coal and oil. And then not use it.

Countries interested in limiting the use of coal, oil, and other dirty energy sources have been working together to try and limit the total amount consumed. To do so, these climate-coalition partners have created complicated cap-and-trade rules and taxation systems to discourage anyone from using the stuff, but one researcher has done the math and believes that such systems only end up making things worse. Instead, he says, countries with means should buy up coal, oil, and other deposits while they’re still in the ground–then leave them there.


The problem says Bård Harstad, an economist at Northwestern University in Chicago, is that when some countries decrease their use of fossil fuels, the decreased demand leads to decreased prices. And cheaper fuel means that non-climate coalition countries–which are then buying dirty fuel at lower cost–have no incentive to invest in alternative energy technologies like solar and wind. As a result, their carbon emissions actually increase, a problem known in the field as carbon leakage.

Some of these fuels, such as coal and oil from tar sands, have an extraction process that is so costly and energy intensive that the extraction rights themselves tend to be pretty cheap in order to compensate for the slim profit margins. Without actually mining the fuel or refining the tar sand, purchasing just the rights or even the land itself would be relatively inexpensive. “What the coalition could do is buy some of those deposits very cheaply and take them out of the market by not extracting the fossil fuels,” Harstad says. “We already have an international market for this: Different countries are exercising their extraction rights–China and India are purchasing rights from Africa, for example. What’s new would be to utilize this market as a climate policy.”

Harstad was pondering the problem of carbon leakage when he thought about the solution that had worked for tropical rain forest deforestation. “People were so concerned about deforestation that they boycotted certain products. But the same thing happened as is happening with carbon leakage: Countries that weren’t boycotting could buy the products even cheaper,” Harstad says. In response, the World Bank, together with the United Nations, created their REDD program–Reducing Emissions from Deforestation and Forest Degradation–which, by offering money and other incentives to developing countries in return for the preservation of their forests, created a financial value for the carbon contained in the forested land.

Some worry that buying up fossil-fuel extraction rights could end up being far more expensive than buying a plot of trees, but Harstad believes that the cost could remain fairly low (PDF). “I’m not talking about buying profitable fuel deposits–only the ones that have a low profit margin if it’s exploited.” The ones that go cheap. “It depends on how much you want to decrease worldwide pollution. If you really want to do it, this is the cheapest way. It’s cheaper for coalition countries to buy extraction rights than to force a decrease in consumption.”