Scandinavian Working Papers in Business Administration
Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science
No 2025/22: The Shadow of Uncertainty: Climate Policy and the Value of Petroleum Resources
Ingrid Emilie Flessum Ringstad (), Giacomo Benini (), Valerio Dotti () and Kyriaki Tselika ()
Additional contact information
Ingrid Emilie Flessum Ringstad: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Giacomo Benini: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Valerio Dotti: Dept. of Economics, Ca’ Foscari University of Venice, Postal: Ca’ Foscari University of Venice , Department of Economics, Dorsoduro 3246, 30123 Venice, Italy
Kyriaki Tselika: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Abstract: We study how uncertainty about future climate policy affects the valuation of oil resources. Using a structural model of extraction and exploration applied to field-level data from the Norwegian Continental Shelf, we estimate the impact of climate policy uncertainty (CPU) on the shadow prices of both discovered and undiscovered oil. We find that higher CPU lowers these marginal values, especially after the 2015 Paris Agreement, reducing incentives to extract and explore. This decline translates into an implicit carbon cost of $15–$38 per tonne of carbon dioxide emitted. Unlike a Pigouvian tax, this shadow cost does not scale with emissions intensity or generate fiscal revenue. As a result, it reduces production and emissions in a diffuse and economically inefficient manner, without rewarding low emitters or financing green transition policies.
Keywords: Oil Industry; Climate Policy; Decision-Making under Risk and Uncertainty
Language: English
72 pages, July 10, 2025
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