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Climatic Change

, Volume 150, Issue 1–2, pp 57–72 | Cite as

Testing supply-side climate policies for the global steam coal market—can they curb coal consumption?

  • Roman MendelevitchEmail author
Article

Abstract

The achieved international consensus on the 1.5–2 °C target entails that most of current fossil fuel reserves must remain unburned. A major contribution has to come from coal as both the most abundant and the most emission-intensive fuel. Currently, a majority of climate policies aiming at reducing coal consumption are directed towards the demand side. In the absence of a global carbon-pricing regime, these policies are prone to carbon leakage and other adverse effects. Supply-side climate policies present an alternative and increasingly discussed approach to reduce the consumption of fossil fuels. In this article, I employ a numerical model of the international steam coal market to examine two supply-side policies that are currently discussed in academic literature and by policy-makers, alike: (1) a production subsidy reform introduced in major coal-producing countries and (2) a globally implemented moratorium on new coal mines. The model simulates global patterns of coal supply, demand, and international trade, with endogenous investment in coal production and transportation capacities. I find that mere production subsidy removal, while associated with a small positive total welfare effect, leads to a minor reduction of global emissions. By contrast, a mine moratorium induces a much more pronounced reduction in global coal consumption by effectively limiting coal availability and strongly increasing prices. Depending on the specification of reserves, the moratorium can induce a coal consumption path consistent with the 1.5–2 °C target.

Notes

Acknowledgements

I would like to thank Christian von Hirschhausen, Franziska Holz, Jasper Meya, Pao-Yu Oei, and Fabian Stöckl, as well as the participants of the DIW Brown Bag Seminar and the International Conference on Fossil Fuel Supply and Climate Policy, Oxford, 2016, for helpful discussions and feedback. Moreover, I would like to thank three anonymous referees for their valuable critique and suggestions.

Tim Scherwath provided excellent research assistance. All remaining errors are with the author.

Supplementary material

10584_2018_2169_MOESM1_ESM.docx (351 kb)
ESM 1 (DOCX 350 kb)

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Copyright information

© Springer Science+Business Media B.V., part of Springer Nature 2018

Authors and Affiliations

  1. 1.Humboldt-Universität zu Berlin, Resource Economics GroupBerlinGermany
  2. 2.German Institute for Economic Research (DIW Berlin)BerlinGermany

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