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The Willow oil project debate comes down to this key climate change question

The Alaskan oil project is a symbol of a larger argument: What matters more, curbing demand or keeping fossil fuels in the ground?

Climate activists hold a demonstration to urge President Biden to reject the Willow project at the U.S. Department of Interior on Nov. 17 in Washington. (Jemal Countess/Getty Images for Sunrise AU)
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When President Biden approved an $8 billion Alaskan oil drilling project on Monday, many reacted with outrage. “Wrong on every level,” Sen. Jeff Merkley, a Democrat from Oregon, wrote on Twitter. “This decision betrays Biden’s own climate promises,” Jeff Ordower, the North America director of the environmental organization, said in a statement.

During the 2020 presidential campaign, Biden had promised to prevent new oil and gas drilling on federal lands — a vow that runs contrary to his administration’s approval of ConocoPhillips’s operation, known as Willow, in the National Petroleum Reserve-Alaska. In the weeks before the decision, environmentalists, activists, and young people united to try to block the project: For weeks, #StopWillow was even a trending topic on TikTok.

But the Willow project, which the Interior Department’s Bureau of Land Management estimates will produce 576 million barrels of oil over the course of 30 years, is a small stand-in for what is actually a much larger debate. In recent years, the Democratic Party — and, by extension, the climate movement — has been divided on a key question. What matters more — cutting fossil fuel demand, by encouraging consumers to shift to things like renewable energy and electric vehicles, or tamping down on supply by preventing oil and gas drilling in the United States?

The Biden administration, with its huge investments in a build-out of clean energy, has largely focused on the former. Activists who paddle their kayaks out to ocean oil rigs or participate in climate marches tend to lean toward the latter. But who is actually right?

The ‘leakage’ argument

On the one hand, there is a kind of intuitive obviousness to the climate benefits of cutting fossil fuel supply: Surely if we don’t dig up oil and gas, no one can burn it and release carbon dioxide into the atmosphere. But the global oil market throws a wrench into that argument. “There’s plenty of oil and gas in the world,” said Samantha Gross, director of the energy security and climate initiative at the Brookings Institution. “If we don’t produce that oil, and there’s still demand for it, someone else will.”

In economics-speak, this is known as “leakage.” The idea is that if there is a decrease in fossil fuel supply — through a ban on drilling in one country, for example — fossil fuel prices will rise, and then another company will expand drilling elsewhere in the world. Simple supply and demand.

This also creates an accounting problem when assessing the project. Activists and opponents referred to the project as a “carbon bomb” — and indeed, according to a federal analysis released last month, the project would produce around 277 million metric tons of carbon dioxide during its lifetime, or around 9.2 million tons per year.

But that number assumes that, if the ConocoPhillips project didn’t go forward, no other oil companies would pick up the slack. Accounting for leakage, the Biden administration’s estimate for the additional CO2 from the project is closer to 70 million metric tons, or around 2.3 million tons per year — not nothing, but significantly smaller. (2.3 million tons would be around 0.03 percent of U.S. emissions in 2021.) The administration also estimates the project would release an additional 60 million tons of CO2 from increased oil consumption overseas.

Those who say supply doesn’t matter much point to these numbers as evidence that the real place to focus attention is on demand — shifting people over to electric vehicles, for example, or rapidly building up renewable energy. If people stop needing fossil fuels, they argue, there will be no need to extract them. “I ultimately think it’s more efficient and effective to go from the demand side,” Gross said.

The counterargument

But there’s another form of economic “leakage” as well. Brian Prest, an economist at the environmental group Resources for the Future, says that policies like electric vehicle tax credits or investments in clean energy can have unintended effects. If the government offers a $7,500 tax credit for electric vehicles, for example, that will push people away from gas-powered cars and reduce demand for fossil fuels — thus lowering the cost of oil and gas. Paradoxically, that can cause more fossil fuel use.

“If we use less gas in U.S. vehicles, that makes it cheaper for folks in other countries to consume more oil,” said Prest. “It’s conceptually symmetric.”

In a report published last year by Resources for the Future, Prest argued that the best approach is “both/and." If the United States encouraged consumers to shift away from fossil fuels, while at the same time taking careful measures to reduce extraction of oil and gas, fossil fuel prices would stay roughly constant — thus preventing “leakage” and leading to lower emissions overall. (His analysis doesn’t include possible external price shocks that could affect the oil market.)

The Biden administration, however, has not taken drastic steps to cut fossil fuel supply, even as the government spends hundreds of billions of dollars boosting clean energy. Some of this is politics: Mary Peltola, the first Alaskan Democrat elected to the House of Representatives in 50 years, supports the project.

Legal considerations also come into play. Once the federal government issues oil and gas leases, it becomes much harder to claw them back, and top administration officials feared that if they denied the Willow project outright they would face a lawsuit from ConocoPhillips, putting taxpayers potentially on the hook for billions of dollars.

So far the Biden administration’s strategy has framed climate change as many carrots and few sticks — cash incentives for clean energy, without halting oil and gas extraction outright. (The president has banned drilling in some places, such as the waters that the United States controls in the Arctic Ocean.)

The debate also shows that the way the world counts carbon emissions matters a great deal. In the days after the decision, many outlets reported that the project’s estimated 9.2 millions tons of carbon dioxide per year were equivalent to adding roughly 2 million gas-powered cars onto the road. That’s true — and also not true. Most emissions are counted at the point of consumption — that is, when drivers put the oil in their cars and burn it for fuel. If we count the emissions both at the point of extraction and at the point of consumption, that amounts to double-counting.

But for activists and environmentalists, any amount of economic discussion doesn’t change a few simple facts: The United States has promised to reach net-zero carbon emissions, but is still extracting oil. Eventually — if the world is really going to stop emitting carbon dioxide — all fossil fuel production will have to halt. If not now, they might wonder, then when?

This piece has been updated.