A just compensation for leaving it in the ground: Climate easements and oil development

Abstract

The Paris Climate agreement of 2015 implies that a large portion of the world’s coal, oil, and gas resources must be left non-combusted in order to meet the goal of limiting climate change to 2 °C. As a result of this commitment, some of the national and corporate owners of fossil fuel reserves will be required to leave their reserves in the ground. However, which reserves should be left in the ground, and when and how should reserve-owners be compensated? Using the oil reserves in Uganda’s Albertine Graben as a case study, we show that Ugandan oil development is likely to be cost-effective but unlikely to be consistent with the Paris Treaty commitments. We argue that Western nations should compensate Uganda for their foregone oil revenues and we propose a mechanism called “climate easements” for such compensation.