To Meet Climate Goals, California Should Cut Oil Production, Report Says

California is in conflict with itself on climate action:  It’s a leader in cutting greenhouse gas emissions—and it's the third-largest oil producer among the states.

California built a reputation launching some of the most ambitious climate policies in the world, but it's also a significant oil producer, with the third largest oil production of any state.

If it were to eliminate even half of that production, it could cut global carbon dioxide emissions by 8 million to 24 million tons per year, the Stockholm Environment Institute says in a new report.  That's equivalent to as much as 5 percent of the state's overall emissions.

It's a supply-side approach to cutting emissions, rather than targeting demand the way the state's cap-and-trade or auto-efficiency rules do.

The authors argue that attacking fossil fuel production at the wellhead is necessary if California—often called the world's sixth-largest economy—is to help meet the goals of the Paris climate agreement.  Studies have found that avoiding the worst risks of climate change means keeping most of the world's fossil fuel reserves—including a third of the oil—in the ground.

"You could in theory do that by reducing demand for fossil fuels," said Peter Erickson, a senior scientist at the Stockholm Environment Institute and co-author of the report.  "But it's not happening fast enough, so that creates a need to limit the supply of fossil fuels."

The researchers used economic models to examine what would happen to global prices, consumption and production if California restricted its output.

Even though other regions would likely increase production somewhat, the authors estimate that global oil use would still drop by 0.2-0.6 barrels for every barrel that California does not produce.

The simplest way for the state to cut production would be to cease issuing drilling permits, the authors say.  California's oil production is already dropping.  This would speed the decline, eliminating an additional 80 million barrels a year by 2030, according to the report.

The authors identify several other ways of cutting production, including implementing a greenhouse gas intensity standard, which would push aside the dirtiest oil, or imposing a severance tax based on the full life-cycle emissions from producing, shipping and burning oil.  In 2016, President Obama's Council of Economic Advisers recommended applying something like this latter approach to federal coal leases.

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