Research
Working papers
The Price of Delay: Infrastructure Lock-in and the Carbon Tax Lock-in Premium in the Oil Sector
Delaying climate policy does more than postpone abatement: it encourages fossil fuel investments whose emissions lock in once capital is sunk. I quantify this using fieldlevel data on around 30,000 oil assets. A 1.5°C-aligned carbon tax delayed from 2016 to 2030 overshoots the oil carbon budget by 33% (19% for an increasing tax). A third stems from oil fields developed during the delay rather than from overproduction. I introduce the carbon tax lock-in premium: the additional tax needed after a delay to offset committed emissions from investments that would not have occurred under timely policy. Though modest relative to the tax itself, ignoring it leaves a residual overshoot of 17–19 GtCOeq, over 10% of the remaining 2030 budget. This cost builds fast: even five years of locked-in investment add over 10 GtCOeq. Because lock-in concentrates in a few deepwater projects, targeted supply-side measures can substantially cut the cost of delay.
Previously circulated as The long-term cost of delaying carbon taxation in the oil sector.
Voice Until the Last Exit: Ownership Structure and the Limits of Voluntary Environmental Commitments
The effectiveness of corporate climate initiatives depends not only on firms’ commitments but also on existing asset ownership structures. We study this question in the context of the World Bank’s Zero Routine Flaring by 2030 initiative, under which oil and gas companies pledge to eliminate routine flaring from their assets. Using asset-level ownership and satellite-based flaring measurements for nearly 20,000 oil and gas assets worldwide (2012–2024), we exploit staggered firm endorsements to study how committed firms navigate the tradeoff between voice, exercising governance influence to reduce emissions, and exit, divesting from assets that are costly to decarbonize. Committed ownership reduces flaring gradually but persistently, reaching approximately 45% below pre-commitment levels after nine years. The persistence of these gains hinges on continued committed presence: when the last committed owner divests, flaring rises by roughly 40% within two years and exceeds 90% within six years, a result we term the “last good owner effect.” Retaining at least one committed voice on the board is both necessary and sufficient to sustain emissions discipline.