WORKING PAPERS

• Covert, Thomas R. and Ryan Kellogg, Environmental Consequences of Hydrocarbon Infrastructure Policy, NBER working paper #23855 (revised 2023), revise-and-resubmit at the Journal of Political Economy.
  - Working paper (September, 2023), Original NBER working paper #23855 (with old title 'Crude by Rail, Option Value, and Pipeline Investment') (2017)

  [abstract]

  We study policies that aim to 'keep carbon in the ground' by blocking fossil fuel infrastructure investment. Our analysis relies on a model of hydrocarbon production and transportation, incorporating substitution between pipeline infrastructure and flexible alternatives, like crude-by-rail. We apply the model to the Dakota Access Pipeline (DAPL), which moves oil from North Dakota to Texas and was controversially completed in 2017. Had DAPL's construction been enjoined, we estimate that 81% of the blocked pipeline flows would move by rail instead. This substitution induces both private costs and local environmental damage, since rail transport imposes greater local externalities than pipelines.

• Kellogg, Ryan, The End of Oil, NBER working paper #33207.
  - Working paper (November, 2024)

  [abstract]

  It is now plausible to envision scenarios in which global demand for crude oil falls to essentially zero by the end of this century, driven by improvements in clean energy technologies, adoption of stringent climate policies, or both. This paper asks what such a demand decline, when anticipated, might mean for global oil supply. One possibility is the well-known ``green paradox'': because oil is an exhaustible resource, producers may accelerate near-term extraction in order to beat the demand decline. This reaction would increase near-term CO2 emissions and could possibly even lead the total present value of climate damages to be greater than if demand had not declined at all. However, because oil extraction requires potentially long-lived investments in wells and other infrastructure, the opposite may occur: an anticipated demand decline reduces producers' investment rates, decreasing near-term oil production and CO2 emissions. To evaluate whether this disinvestment effect outweighs the green paradox, or vice-versa, I develop a tractable model of global oil supply that incorporates both effects, while also capturing industry features such as heterogeneous producers, exercise of market power by low-cost OPEC producers, and marginal drilling costs that increase with the rate of drilling. I find that for model inputs with the strongest empirical support, the disinvestment effect outweighs the traditional green paradox. In order for anticipation effects on net to substantially increase cumulative global oil extraction, I find that industry investments must have short time horizons, and that producers must have discount rates that are comparable to U.S. treasury bill rates.

• Covert, Thomas R., Ryan Kellogg, and Richard L. Sweeney, "Auctions vs. Negotiations with Spillovers: Evidence from the U.S. Land Ordinance and the Shale Boom", Work in progress

• Covert, Thomas R., Konan Hara, Ryan Kellogg, and Richard L. Sweeney, "Frack Time versus Slack Time", Work in progress