International Energy Resource Markets under Climate Constraints - Strategic Behavior and Carbon Leakage in Coal, Oil, and Natural Gas Markets

The project

Project duration: 2012 to 2015
Funding: German Ministry of Education and Research

The final workshop of the RESOURCES-projects took place on December 14th.
Please, find the program here | PDF, 0.6 MB .

This project is part of the BMBF funding priority "Economics of Climate Change" by BMBF/DLR (

The project investigates the relation between fossil resource markets and climate change. We focus on the resources coal, oil, and natural gas. The issues at heart of this project are climate policies and their effect on supply and demand in energy resource markets, in particular inter-temporal and interregional carbon leakage. This requires in a first step the analysis of the resource markets and especially the suppliers' behavior, before investigating the effectiveness of climate change mitigation measures.

The following issues have to be considered: the strategic behavior of resource owners, but also supply shifts and market effects due to a local demand reduction for fossil fuels induced by local climate policies that may be overcompensated by demand increases in other countries. Such theories are currently discussed in the economic literature and shall be verified empirically in the project. Attempts to estimate the long-term fossil resources base and long term extraction costs have been in the past but an updated and more refined data collection effort is needed. We will apply advanced econometric and numerical modeling methods to better understand the link between these sectors and climate policies, both in Europe and worldwide.

The project is carried out jointly by DIW Berlin (focus on data, numerical modeling, events) and Potsdam University (project lead, focus on empirical analyses, publications). The project is part of the joint research program "Resource markets and policies" carried out by DIW Berlin, Potsdam University and TU Berlin (


Read our latest publications to learn about our research:

On global coal markets and the requirements for CCS deployment in Europe:
Mendelevitch, R. (2014): The Role of CO2-EOR for the Development of a CCTS Infrastructure in the North Sea Region: A Techno-Economic Model and Application. Veröffentlicht in: International Journal of Greenhouse Gas Control :20: 132-159. DOI.  Former version (2013) as  DIW Discussion paper 1308

Oei, P.-Y., Herold, J., Mendelevitch, R. (2014): Modeling a Carbon Capture, Transport, and Storage Infrastructure fo Europe. Environmental Modeling & Assesment. Vol. 19 (2014), pp. 515-531.

Collins, K., Mendelevitch, R. (2015): Leaving Coal Unburned: Options for Demand-Side and Supply-Side Policies. DIW Roundup 87 | PDF, 208.27 KB

Richter, Ph. M., Mendelevitch, R., Jotzo, F. (2015): Market Power Rents and Climate Change Mitigation: A Rationale for Coal Taxes? DIW Discussion Papers 1471 | PDF, 6.7 MB

On current and future trends in the global natural gas markets:
Holz, F., Richter, P. and Egging, R. (2013): The Role of Natural Gas in a Low-Carbon Europe: Infrastructure and Regional Supply Security in the Global Gas Model. Discussion paper 1273 | PDF, 0.84 MB

Richter, P., Holz, F. (2015): All Quiet on the Eastern Front? Disruption Scenarios of Russian Natural Gas Supply to Europe.  Energy Policy 80, p. 177-189

Holz, F., Richter, P., Egging, R. (2015): A Global Perspective on the Future of Natural Gas: Resources, Trade, and Climate Constraints. Review of Environmental Economics and Policy. Vol. 9, No.1 DOI

Neumann, A., von Hirschhausen, C. (2015): Natural Gas: An Overview of a Lower-Carbon Transformation Fuel. Review of Environmental Economics and Policy Vol. 9, Nr. 1 , p. 64-84

Holz, F., Brauers, H., Richter, Ph. M., Roobeek, T. (2015): Shaking Dutch Grounds Won't Shatter the European Gas Market.  Discussion Papers 1516 | PDF, 0.79 MB

Richter, Ph. M. (2015): From Boom to Bust?: A Critical Look at US Shale Gas Projections. Economics of Energy and Environmental Policy. 4 (2015) , 1 , S. 131-151

On market power in the global crude oil market:
Huppmann, D. (2013): Endogenous Shifts in OPEC Market Power: A Stackelberg Oligopoly with Fringe. Discussion paper 1313 | PDF, 0.97 MB

Huppmann, D., Holz, F. (2015): What about the OPEC Cartel? DIW Roundup 58 | PDF, 0.62 MB

On the role of the EU-ETS in the energy system:
Zaklan, A. (2013): Why Do Emitters Trade Carbon Permits?: Firm-Level Evidence from the European Emission Trading Scheme. Discussion paper 1275 | PDF, 0.78 MB

Ellerman, D., Marcantonini, C., Zaklan, A. (2016): The European Union Emissions Trading System: Ten Years and Counting
Review of Environmental Economics and Policy. (2016) , im Ersch. [online first: 2015-10-09]

Zaklan, A., Bauer, B. (2015): Europe's Mechanism for Countering the Risk of Carbon Leakage. DIW Roundup 72 | PDF, 236.19 KB 6 S.

On the impact of environmental regulation:
Kreickemeier, U., Richter, P. (2014): Trade and the Environment: The Role of Firm Heterogeneity. Veröffentlicht in: Review of International Economics 22(2): 209-225. DOI. Former version (2012) as DIW Discussion paper 1214

Richter, Ph. M., Brauers, H. (2015): Climate Negotiations: What Can be Expected from the Climate Summit in Paris? DIW Roundup 86 | PDF, 347.05 KB

On modelling strategic behaviour and fuel substituion in an integrated energy system and resource market model:
Huppmann, D. and Egging, R. (2013): Investigating a CO2 Tax and a Nuclear Phase Out with a Multi-Fuel Market Equilibrium Model.  9th International Conference on the European Energy Market. Link

Huppmann, D. and Egging, R. (2014). Market Power, Fuel Substitution and Infrastructure: A Large-Scale Equilibrium Model of Global Energy Markets. DIW Berlin. Discussion paper 1370 | PDF, 0.91 MB

Huppmann, D., Holz, F. (2014): Modelling the Impact of Energy and Climate Policies DIW Roundup 44 | PDF, 496.81 KB 6 S.

Research partners

Universität Potsdam Anne Neumann

Technische Universität Berlin WIP

NTNU Trondheim, Norwegen NTNU 

University of Maryland, USA Steven Gabriel

Johns Hopkins University, Baltimore, USA Sauleh Siddiqui

Australian National University Frank Jotzo

Tsinghua University EEEI