Greg Muttitt has published a chapter on “What role for OPEC in the last generation of oil” in the 2020 “Handbook of OPEC and the Global Energy Order” which is available behind a paywall of GBP 175.
Muttitt kindly mailed me his contribution, so I was able to read it before buying the book (I intend to do so later).
As is clear from the public blog abstract here, the author shares my opinion that production limits are one way to solve the climate emergency. OPEC is in the business of limiting oil production over quotas. So it was interesting for me to learn from a specialist in the field.
The picture is not pretty. OPEC has tried to delay climate policy, even denying the science at earlier stages. They do not have much power to solve the problem by themselves, since many oil producers are not members and many members depend massively on the oil export revenue.
The article does contain some good news. OPEC has evolved their positions. And there may be hope they adopt a reasonable policy.
But what might that be? What could OPEC actually do about reducing supply?
There is one thing that all OPEC members and all oil producing non-members can easily agree upon: Reducing production is a worthwhile goal and someone else should reduce. The trick is to agree about who needs to cut how much.
Recent unfortunate developments of the oil price showed that the need to reduce production in order to sustain price may be even more urgent than the need to reduce it for climate protection. The climate emergency will only end human civilization a couple of decades later, while an oil price collapse may have very severe consequences for producers immediately.
So how should the burden of reducing production quotas be allocated? Obviously OPEC alone can’t solve that, since OPEC controls only a part of the market.
It was also interesting to note that the Ecuador Yasuni-ITT proposal of leaving oil in the ground in exchange of receiving international assistance worth half the value of the resource was resisted by Germany, and failed for that reason. If so, that may make it difficult to just sell non-production assurances on the market, because no such market exists.
As noted earlier, my solution to this problem is to have a market for production quotas which would work over a new cryptocurrency pegged to bitcoin mining. We know that bitcoin mining reliably reduces the mined amount by half every four years. We know that there is no need to trust any organization like OPEC to achieve that. We know that it would be very easy to allocate the production quotas over normal market forces.
I have no idea if this would actually work. But reading this chapter has confirmed me in my opinion that any solution based on OPEC does not have much of a chance either.