Since I believe that global warming would be solved in a matter of weeks if the owner of fossil fuel reserves just understood that they benefit from producing less, I was unhappy with the recent years of OPEC failing at its mission and the resulting low oil prices.
Now Bloomberg reports that OPEC has agreed on a new course of action, introducing meaningful production limits for the first time in years. The main problem was to get Iran and Saudi Arabia to agree. That agreement seems to be in place now.
Phaseout Profit Theory means that oil owners should reduce their production, bringing up price.
That will compensate for the inevitable reduction in demand coming from a larger renewable penetration. It will mean that oil reserves will last longer, leaving more of the treasure for future generations.
And, as a side effect, it will reduce CO2 emissions much faster than will happen anyway.
Since it is not a question of if renewable will replace fossil fuel, but the only question is how fast that happens, this is the important point.
All of this is really simple. The problem lies in the fact that there are multiple owners of oil reserves.
All of them would agree in a heartbeat for other owners to reduce their production, but are not necessarily willing to reduce their own. That’s the basic problem with OPEC, and probably the main problem with Phaseout Profit Theory.
What can be done about that problem?
One idea is to artificially reduce demand by setting up import quotas. The EU is a major oil importer. They could do this immediately. Just put a cap on oil imports and reduce that cap each year, just as the CO2 emission cap is reduced each year by a fixed percentage of 1.74% (Article 9 Paragraph 1 of Directive 2003/87).
Require permits for each barrel of oil imported, and auction off those permits, leaving the allocation of them to the market.
There would of course be the problem of what to do with all the money coming in from these auctions, but I am sure politicians will come up with a way to spend that money. I would prefer to use it for speeding up renewable deployment even more, but that’s just me.