Cutting carbon demand makes fossil fuels cheaper, tempting countries to cheat

Economists have found that policies focused only on reducing demand for fossil fuels can actually make them cheaper. This means countries trying to cut emissions might accidentally make it more attractive for others to keep burning them.

For years, many climate policies focused on making fossil fuels more expensive for consumers, like carbon taxes. This paper shows that approach can backfire by lowering the global price of oil and gas. Governments will now probably consider policies that also limit the actual production of fossil fuels, not just their consumption.