Estimating the emissions reductions from supply-side fossil fuel interventions

Abstract

Supply-side interventions that retire highly emitting fossil fuel assets have received increased attention from policymakers and private actors alike. Yet concerns about market leakage—wherein reduced supply from one source is partially offset by increased production from other sources—have raised questions about how much emissions reductions they can achieve. In this paper, we estimate the effects of these supply-side interventions on global emissions, accounting for both market leakage as well as the relative greenhouse gas (GHG) intensity of different sources of supply. We account for uncertainty in market leakage rates and the emissions intensities of the curtailed and substitute sources of supply through a Monte Carlo analysis, drawing on supply and demand elasticities from the economics literature and emissions intensity data from the state-of-the-art Oil Climate Index plus Gas (OCI+) dataset on 586 oil and gas fields around the world. We find a rough band of central estimates for life-cycle emissions reductions from permanent and additional supply-side interventions in the range of 40–50% of the gross life-cycle emissions of each barrel curtailed, depending on the relative emissions intensity of the curtailed and substitute sources of supply. Further, across all of 1.53 million Monte Carlo simulations we conduct, we find very high confidence of net emissions reductions from supply-side interventions (nearly 99% of cases). Finally, targeting the most emissions-intensive sources of oil supply could achieve yet further emissions reductions. How one compares methane and CO2 emissions also has important consequences for which sources to target. Importantly, all estimated emissions reductions we estimate hinge upon a given supply-side intervention being credibly permanent and additional, and our estimates do not assess the uncertainties of those criteria being met due to the idiosyncratic nature of those assessments.