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Carbon Pricing EMF2

Published on October 21st, 2013 | by Guest Contributor

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Study Shows No Long-Term Climate Benefit From Shale Gas Revolution



Originally published on Think Progress
By Joe Romm

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More abundant, cheaper shale gas (dark blue) has little impact on annual growth in U.S. CO2 emissions through 2050 compared to low shale gas case (light blue). This is true for multiple energy-economy models. Deep cuts in CO2 require a rising carbon price (green).

Most claims that shale gas will significantly reduce US carbon emissions in the future are based on little more than hand-waving and wishful thinking. That’s because those claims assume natural gas is replacing coal only, rather than replacing some combination of coal, renewables, nuclear power, and energy efficiency — which is obviously what will happen in the real world.

To figure out what the impact of shale gas is actually going to be, you need an energy-economy model. And since the output of one model depends crucially on the specific assumptions it makes, the best approach would be to look at results of several models. And that is precisely what Stanford’s Energy Modeling Forum does in its new study, “Changing the Game? Emissions and Market Implications of New Natural Gas Supplies Report.”

They “formed a working group of about 50 experts and advisors from companies, government agencies and universities” to study the impact of the North American shale gas revolution:

Modeling teams from 14 different organizations participated in the study. All models integrated information on energy supply and demand to provide prices that reached market balances for each individual fuel. The models used different approaches to determine these prices.

The top figure shows result of the models that extend to 2050 (though the results are not substantially different if the modeling stops at 2035). Note that for most models, CO2 emissions grow in both shale cases. The study points out that “Emission growth rates for the reference case are not shown because they track closely those for the two-shale cases.”

The high shale gas scenario is optimistic about both the ultimately recoverable resource base and recovery rates per well, which reduces natural gas production costs. Yet, averaging over all the models, these optimistic assumptions have little net impact on CO2 growth compared to the more pessimistic low shale gas case.

Why doesn’t abundant and cheap natural gas matter much for long-term U.S. CO2 trends? Over time, and especially post-2020:

… natural gas begins to displace nuclear and renewable energy that would have been used otherwise in new power plants under reference case conditions. Another contributor to the modest emissions impact is the somewhat higher economic growth that stimulates more emissions. Reinforcing this trend is the greater fuel and power consumption resulting from lower natural gas and electricity prices.

A separate study released this week from the International Energy Agency found “low natural gas prices will hamper the U.S.’s incentive to continue spending on energy-efficiency projects.”

From a climate perspective, then, the shale gas revolution is essentially irrelevant — and arguably a massive diversion of resources and money that could have gone into deploying carbon-free sources. Note that the EMF study does not examine the possibility that a high rate of methane leakage is undermining any short-term climate benefit from shale gas.

The EMF model results underscore the key finding from a July study by the Center for American Progress (where I am a senior fellow), concludes: “There needs to be a swift transition from coal to a zero-carbon future by ensuring that the use of natural gas, particularly in the electric-power sector, peaks within the next 7 years to 17 years.”

From an economic perspective, the EMF study finds that the shale gas revolution has a limited and narrow impact. As Energy Wire explains:

Shale development will inject $70 billion into the economy every year for several decades, it found. This amount, though it appears large, forms 0.46 percent of the $15 trillion U.S. economy…. The gains would be in the oil and gas, chemical products and other supporting industries.

The EMF study makes clear a point we’ve made repeatedly at Climate Progress: If your goal is to significantly cut carbon pollution, you need a rising price on carbon pollution — otherwise natural gas is a bridge to nowhere.

The EMF models also examined a case where unspecified programs gradually increase the cost of using carbon intensive fossil fuels:

These programs are implemented in 2013 and are not allowed to cost more than $25 (2010 dollars) per tonne of carbon dioxide emissions. Over time, they become more severe with inflation-adjusted costs that increment by 5 percent per year to reach $75 (2010 dollars) in 2035. These additional costs discourage the use of carbon-intensive fuels but do not transfer funds towards the government.

As the top figure shows, even this moderate carbon price causes a significant and enduring cut in U.S. carbon pollution. It’s time to stop the hand-waving claims that fracking represents a long-term strategy for addressing the climate crisis.

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  • Steeple

    So why would Nat Gas displace Nuclear or Renewable power, both of which have near zero incremental operating costs?

    The Nuclear answer has nothing to do with shale and everything to do with the aging of our nuclear fleet. If we want to replace those plants, there is nothing stopping us.

    How does Nat Gas displace Renewables? Would love to hear that answer. Now if the author means to say that Nat Gas out competes Renewables on a new build basis, that is easily understood. But displaces?

    US Carbon emissions are in decline thanks to nat gas for coal substitution along with better auto fuel economy.

    If Carbon emissions are a problem, go talk to China and India. That’s where the growth is coming from.

    • Matt

      Poorly worded yes, but I think the idea is that with no cost for the externalized cost of carbon. Gas will result in less new renewables being built.

      • Steeple

        It’s not a winning argument for those who advance it to describe low natural gas and power prices as a problem. The average person would prefer to pay less for their utilities, and that’s a good thing for our economy given how anemic the recovery is. Hopefully renewables will rise to the challenge.

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