Dieter Helm, writing in the Oxford Review of Economic Policy, offers the counter-argument to the point made recently by Andy Dessler that the peak and inevitable decline of fossil fuels may put some sort of upper limit on our ability to to put carbon dioxide into the atmosphere:
Some argue that, however intense the dash-for-resources, China (and others) will fail because they will run out. In other words, what will decarbonize the world economy is that there will not be enough carbon resources left to deplete. A particular version of this argument is called ‘peak oil’. It is argued that the peak of conventional oil production has been already reached, and that production will decline over the coming decades, just as demand rises. Prices will, therefore, increase very sharply, setting off a significant substitution effect. From a climate-change perspective, it is argued that this would be good news, but there
are major weaknesses with the peak-oil hypothesis. There may well be lots more resources to discover, notably in an increasingly ice-free Arctic Ocean, and then in Antarctica (as well as elsewhere). Existing ‘depleted’ oil wells typically retain over half the initial reserves, and new technologies (not least using CO2 to increase pressure through oil-enhanced recovery) may be effective. Then there are many near substitutes which may be available, notably tar sands. Once these are included, Canada, for example, becomes one of the top three oil-reserve countries. These sources may be even more polluting than conventional ones. There is also lots of coal.
(Thanks to David Zetland for bringing this paper to my attention.)