Abstract
Implementation of the Kyoto commitments will result in lesser global fossil fuel consumption in 2010 than would occur in the absence of climate policy. The paper explores how the consumption change resulting from climate policy implementation could affect the producer prices of fossil fuels. The conclusion is that the price impact will be insignificant if the climate policy goals are established credibly and in the near future, for that will give rationally behaving fossil fuel producers ample time to adjust production capacity to the changed outlook for future demand. It is argued that as long as capacity develops in line with demand, prices should remain the same, irrespective of the speed and direction of demand change.
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