The Geopolitical Externality of Climate Policy
Journal: Econstor (Econstor)
Year: 2025

This paper formalizes the geopolitical externality of climate policy and estimates its plausible magnitudes. Specifically, domestic reductions in fossil fuel demand depress global prices, thereby lowering export revenues for resource-rich autocracies – many of which allocate substantial resources to military spending. As a result, climate policy reduces geopolitical and security burdens on Western democracies, offering a “peace dividend” as a co-benefit. Using the European Union’s oil consumptio