Scandinavian Working Papers in Economics

Memorandum,
Oslo University, Department of Economics

No 34/2003: Does Increased Extraction of Natural Gas Reduce Carbon Emissions?

Finn Roar Aune (), Rolf Golombek () and Sverre A. C. Kittelsen ()
Additional contact information
Finn Roar Aune: Statistics Norway, Postal: Postboks 8131 Dep, 0033 Oslo, Norway
Rolf Golombek: The Ragnar Frisch Centre for Economic Research, Postal: Gaustadalléen 21, N-0349 Oslo, Norway,
Sverre A. C. Kittelsen: The Ragnar Frisch Centre for Economic Research, Postal: Gaustadalléen 21, N-0349 Oslo, Norway,

Abstract: Without an international climate agreement, extraction of more natural gas could reduce emissions of CO2 as more “clean” natural gas may drive out “dirty” coal and oil. Using a computable equilibrium model for the Western European electricity and natural gas markets, we examine whether increased extraction of natural gas in Norway reduces global emissions of CO2. We find that both in the short run and in the long run total emissions are reduced if the additional quantity of natural gas is used in gas power production in Norway. If instead the additional quantity is exported directly, total emissions increase both in the short run and in the long run. However, if modest CO2-taxes are imposed, increased extraction of natural gas will reduce CO2 emissions also when the additional natural gas is exported directed.

Keywords: natural gas; carbon; emissions; Norway; envirnoment; CO2

JEL-codes: D58; Q38; Q48

40 pages, October 4, 2003

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