Restricting new oil frontiers may deepen global inequalities, Coppe study finds

A study led by researcher Rebecca Draeger, from Coppe/UFRJ’s Energy Planning Program (PPE), published in the journal Energy Policy, brings new insights to the debate on global decarbonization and the impacts of the international “no new oil” campaign. The movement advocates ending the approval and licensing of new oil and gas exploration projects on the grounds that they are incompatible with the goal of limiting global warming to no more than 1.5°C above pre-industrial levels.

The research, conducted by scholars from Coppe’s Cenergia laboratory, suggests that restricting investments in new oil frontiers while maintaining only projects already in operation or under development could deepen economic inequalities between high-income and developing countries during the energy transition.

According to the authors, a growing number of technical and academic institutions have been advocating restrictions on new oil frontiers, combined with financial compensation mechanisms for countries that would leave fossil fuel resources unexploited underground. The rationale behind the proposal is to avoid legal risks and the high costs associated with the premature interruption of projects already underway.

Economic impacts: Billion-dollar losses for the Global South

However, the study indicates that such a strategy could generate significant losses for some emerging economies. Estimates show that African countries could forgo approximately US$567 billion in direct government revenues between 2030 and 2050, in addition to leaving 14.5 billion barrels of oil unproduced during the same period.

Meanwhile, regions already consolidated in the oil industry, such as North America, would likely concentrate economic gains. According to the study, maintaining existing contracts effectively “locks in” production in mature oil fields while limiting the development of new frontiers with lower production costs and lower carbon intensity.

An equitable energy transition

According to Rebecca Draeger, the study offers a different perspective from previous research on the subject, which has traditionally focused more heavily on oil demand than on supply-side dynamics and has paid less attention to issues of justice and equity in imposing restrictions on producing countries.

As an example, the researcher points to oil fields in the North Sea, which are already in decline and require significant investments in enhanced oil recovery to extract remaining reserves.

“From a global perspective, why maintain production in these fields if, over their productive lifetime, they will generate increasingly carbon-intensive oil at growing production costs? We argue that it may make more sense to abandon certain mature fields and open space for new frontiers with higher-quality oil and lower carbon intensity,” she explains.

“Our conclusion is that there needs to be a balance between what is already being produced and what may still be produced in the future. The study shows that a blanket policy banning new oil fields could lead to major macroeconomic impacts for developing regions and further increase disparities between high-income and low-income regions.”

She also notes that any global prohibition on new projects would require financial compensation mechanisms for developing countries willing to forgo exploiting their fossil fuel resources — a process that could generate disputes and delays in funding transfers.

Modeling the future of oil production

The study used Coffee (Computable Framework For Energy and the Environment), a global integrated assessment model developed by researchers at Cenergia/Coppe and referenced in the IPCC Sixth Assessment Report. The team analyzed data from more than 100,000 oil and gas assets worldwide to estimate production curves and direct government revenues under different energy transition scenarios.

Rebecca Draeger and her colleagues at Cenergia developed three scenarios to identify and compare potential impacts and adaptation opportunities for the oil and gas sector under varying levels of oil production restrictions, while maintaining the same ambition of limiting global warming to well below 2°C above pre-industrial levels by 2100, in line with the Paris Agreement.

The researchers evaluated three distinct scenarios: one with production restrictions considering fields already operating, under development and discovered; another limited to fields already operating and under development; and an optimal-cost transition scenario without additional restrictions on production expansion.

“The conclusion is that there is a delicate balance between reducing emissions and avoiding severe macroeconomic impacts in low-income regions. Depending on how the transition is conducted, it may further widen global disparities,” Rebecca states.

In addition to Rebecca Draeger, the study was co-authored by researchers Julia Paletta, Luiz Bernardo Baptista and Hugo Mortágua; professors Alexandre Szklo and Roberto Schaeffer; and Pedro Rochedo, from Khalifa University.