So far discussion and implementation of climate policies has predominantly aimed at reducing consumption of fossil fuels through demand-side climate policies, for example, under the European Union Emission Trading System (EU ETS). However, a country that produces and consumes fossil fuels can also pursue supply-side policies (constraining production of fossil fuels) as well. The net global effect on GHG emissions of the two different actions depend on the elasticities of demand and supply of fossil fuels. This thesis discusses unilateral actions for contributing to climate change mitigation by limiting own oil extraction. I answer the question, does supply side climate measures belong in the optimal mix? Using field specific data on costs, production, number of wellbores, reservoir depth, water depth and oil prices on 17 oilfields on the Norwegian continental shelf I explore analytically the case of Norway’s unilateral action of limiting oil extraction. The results of the panel data analysis supports previous studies, reveals that supply-side policies belong in the optimal mix and it is cost effective for Norway to pursue a combination of demand side and supply side climate measures than a standalone demand or supply side policies.

M-ECON