The Willow Project and the Race to Pump the “Last Barrel” of Oil

On Monday, the U.S. government gave final approval for the Willow project, a massive operation that will allow ConocoPhillips to drill for oil on public land in Alaska. If Willow produces as much oil over thirty years as expected, the consumption of that oil would release the equivalent of 277 million tons of carbon dioxide into the atmosphere. That’s about 4 percent of U.S. annual emissions, from one project, at a time when emissions need to fall rapidly for the country to achieve its goal of net-zero emissions by 2050. By approving Willow, U.S. President Joe Biden broke a campaign promise that there would be “no new drilling, period” on federal lands.

No one project will make or break U.S. climate ambitions, and Willow’s story is politically and legally nuanced. Even as the Bureau of Land Management gave Willow the green light, the Department of the Interior said it would restrict future drilling in other parts of Alaska. Alaskan legislators suggested they may challenge those “legally dubious” restrictions on future oil extraction, while environmental groups are preparing lawsuits to try to stop the project.

So although it may say little about the direction of U.S. climate policy, Willow’s approval does reveal much about the global race to pump the “last barrel” of oil.

Governments currently plan to produce twice as many fossil fuels in 2030 as would be consistent with limiting global warming to 1.5 degrees Celsius. Their plans for fossil fuel production also exceed the level that would be compatible with 2 degrees Celsius of warming, the less ambitious target to which they committed themselves in the Paris Agreement. Strictly speaking, the task isn’t to get to the last barrel of oil anytime soon: according to one report, the world could produce 40 million barrels of oil a day in 2040 and still be on track to keep warming to 1.5 degrees. (For context, global production in 2022 was about 100 million barrels a day, a new record.) The idea has always been that some residual oil emissions would be canceled out by negative emissions, such as by capturing carbon dioxide and locking it away underground.

Nevertheless, oil production must decline in the coming decades in order to hit climate targets. Humans can only rely so much on negative emissions, especially since countries currently have “few firm plans” to scale up these projects fast enough to limit warming to 2 degrees. This is the so-called carbon dioxide removal gap. The fossil fuel production side also has a gap between the necessary declines and the actually existing increases in production: twenty of the world’s biggest oil companies are projected to spend $932 billion by the end of 2030 developing new oil and gas fields, and each additional barrel makes the task of removing greenhouse gases from the atmosphere more daunting.

Biden’s failure to restrict the development of domestic fossil fuel resources does not make the United States an outlier. Few countries are willing to do so. Canada and Norway, rich progressive countries with high carbon taxes, continue to approve new oil and gas exploitation. Colombian President Gustavo Petro’s new leftist government has failed to put into writing its promises about halting new oil development amid fears that it couldn’t replace the lost revenue. This also is a reason that coalitions like the Beyond Oil and Gas Alliance, whose members pledge to phase out fossil fuel production, comprise countries with minimal fossil fuel revenues (such as Denmark or Costa Rica).

Climate-conscious governments typically use two different justifications for approving new oil and gas projects. First, they say, other countries would produce the oil if they didn’t. Those other countries may have weaker environmental regulations. Or they may be led by hostile dictators who use their oil revenue to fund invasions or repression. Plus, if the oil is going to be pumped anyway, why not ensure that the jobs and revenues stay at home?

Political scientists certainly have overstated the extent to which climate change is a collective action problem. Governments take some climate action regardless of what other countries do or what the treaties say. Self-interest is already driving humans to add low-carbon energy and technologies—some Chinese industrialists want to export electric cars and ensure their country’s supply of foreign oil can’t be choked off, and Texas executives know that they can get rich by building wind turbines. Yet when it comes to spending money to remove carbon from the atmosphere for no direct benefits, or cutting off existing (and polluting) energy, climate change does resemble a zero-sum game. As U.S. climate envoy John Kerry has told much poorer, lower-emitting African nations, “Mother Nature does not care where those emissions come from.” So why should America not produce the last barrel rather than leaving it for Saudi Arabia or Russia? This argument is most commonly espoused by governments in countries where the opposition eschews climate policy altogether. The thinking is that it’s worth taking one step back to ensure you can take two steps forward later.

The second justification for expanding fossil fuel projects is that the right approach is not to go after oil and gas supplies but rather to reduce the demand for them. This rationale also has some merit, since  politicians are reluctant to allow reductions in supply that lead to higher prices and thus reduce demand. In response to the energy shock of 2022, governments doubled fossil fuel consumption subsidies to an all-time high of $1 trillion, U.S. officials called on oil companies to ignore their shareholders and do some patriotic drilling, and European governments reversed plans to stop drilling in the North Sea. In other words, just as high carbon taxes that reduce the demand for oil are difficult to pass, supply restrictions to impose a “shadow carbon price” are scary to countenance.

To be sure, there are real difficulties in managing what scholars such as Emily Grubert and Sara Hastings-Simon call the “mid-transition,” where fossil-fuel and zero-carbon systems have to coexist while constraining each other. Think about a country where 70 percent of the population drives electric cars. Which private company would operate gas stations for the other 30 percent? If some oil and gas companies have gone bankrupt, who is going to maintain their leaky drilling sites?

But it’s worth thinking about the mechanism by which reduced demand is supposed to reduce supply. Lower demand is supposed to translate into lower oil prices, which will make it less profitable to drill for oil. In an economics textbook, oil production would stop first in the countries where producing a marginal barrel was most expensive: higher-cost producers such as Brazil, Canada, and the United States would cede global markets to low-cost producers such as Saudi Arabia and Iraq. In the real world, the Western Hemisphere will not allow Western Asia to produce nearly all of the oil for a much smaller oil market in 2050. Every oil-producing country has its own politics and jobs to worry about, and every oil-producing firm is obligated to pump what it can to make money for its shareholders until the music stops.

Other economic phenomena also militate against demand reductions leading to supply reductions. As cars get more fuel-efficient, people tend to buy bigger cars or drive longer distances—what’s known as the rebound effect. The cheaper it gets for citizens to run a car on fossil fuels, the less attractive it is for governments to spend the money to put in the infrastructure for electric bikes or trains. In the academic world, this is called carbon lock-in, a type of path dependency. And it’s not just about cost: adding another oil field or refinery to the area provides jobs and social acceptance that raise obstacles other than price to quitting oil. Supporters of Willow are now excited that hundreds of locals will get new jobs extracting oil. (This assumes that ConocoPhillips can use enough cooling devices to keep the Alaskan permafrost that supports the drilling equipment from melting—which it must do because of the oil that humans have previously burned.) 

Restricting fossil fuel supply is difficult because various actors want to either make money from selling oil or enjoy low prices when they buy it. Restricting fossil fuel demand is difficult because it requires raising prices through taxes or regulations—and because adding new sources of energy does not automatically displace the old. Last year, the world set a record for coal production, and the United States still gets 5 percent of its primary energy from burning biomass, which humans have been doing for millennia.

There will always be a temptation to approve more Willows, and there are always plausible reasons for doing so. It’s perhaps time for politicians to be more open about the negative emissions or solar geoengineering they are counting on to close the gap between the oil they intend to produce and the level of warming they are prepared to accept. The U.S. Inflation Reduction Act took an important step forward by increasing tax credits for carbon capture, removal, and storage, but government officials could be more clear about the difference between emission cuts and negative emissions—and their separate plans for each. For climate activists, it is time to be more accepting of negative emissions technologies: the risk of moral hazard—of countries delaying emission cuts because they think negative emissions will save them later—is smaller than the risk of not deploying carbon removal technologies at scale.

Given that the Biden administration is neither able to restrict the supply of fossil fuels by blocking drilling nor directly restrict demand by taxing the fuels, it should consider a third route: restricting the supply of the devices that burn fossil fuels. While generally unpopular, taxing or banning the future installation of new fossil-fueled devices, whether boilers or stoves or cars, would be more politically feasible than raising the cost of living for people today. The task is to ensure that when people invest in energy systems, the investment goes in the right direction. Germany and California are trying this with restrictions on future sales of oil-powered cars and gas-powered heating.

Willow is only one project. But if you add up all the individual projects, you get the “existential threat” that is our climate crisis.