The shale-gas boom in the United States won't, by itself, keep driving down U.S. carbon-dioxide emissions in the years ahead. That's because, in addition to killing off coal-fired plants, cheap gas will also crowd out cleaner energy sources like wind, solar, and nuclear.
On the other hand, the glut of natural gas from fracking will make the country a bit wealthier and clean up other harmful air pollutants from power plants.
Those are the conclusions of a big new report from Stanford's Energy Modeling Forum, which convened 50 experts and 14 different modeling teams from industry, academia, and government to look at how the surge in natural-gas production could transform the U.S. economy.
Here are four key points:
1) The shale-gas boom will provide a modest boost to U.S. economic growth. On average, the models in the Stanford study predicted that the natural-gas boom would raise GDP by about $70 billion each year over the next several decades (in current dollars). "Although this amount appears large," the report notes, "it represents a relatively modest 0.46 percent of the U.S. economy."
Why so modest? The surge in natural gas is great for the oil and gas industry, and it will certainly help petrochemical firms that use natural gas as a raw material. Yet these industries are just one slice of the broader U.S. economy, accounting for less than 1 percent of employment. And, while cheaper energy costs do benefit consumers, the impact on GDP is relatively small, all told.
Note that separate consultancy studies, such as this one from IHS Global Insight, have found similar GDP effects but even higher savings for consumers (IHS estimates that lower gas prices could save $2,000 per household by 2035). A lot depends on what the price of gas will do — more on that below.
2) The shale-gas boom won't do much to solve climate change — at least not on its own. In recent years, a glut of natural gas has helped displace coal power in the U.S. power sector and reduce carbon-dioxide emissions significantly. After all, burning natural gas for electricity produces about half the carbon dioxide that burning coal does.
Yet many of the experts in the Stanford study don't expect carbon emissions to keep falling — at least not without further policy changes. That's because cheap natural gas is also likely to displace even cleaner sources of energy like nuclear, wind, and solar. What's more, low natural-gas prices will discourage efforts to conserve energy and boost efficiency.
As a result, most models expect U.S. carbon emissions to rise between 2010 and 2035, whether shale-gas production is low (light blue) or high (dark blue). The green bars, by contrast, show the effects of a carbon tax, which would drive emissions down:
A few models do expect overall carbon-dioxide emissions to drop in the coming decades purely as a result of the shale-gas boom (again, these are the blue bars, showing average annual change). But those models are in the minority, and even they predict a modest drop. Bigger cuts in emissions would likely require Congress to place a price on carbon — that's what the green bars show.
Meanwhile, the chart below shows that most experts in the Stanford study expect natural gas to displace coal, nuclear, and renewable energy between now and 2035:
The upshot here is that fracking won't solve climate change on its own. (And note that these models don't take into account methane leaks from natural-gas operations, a potent source of greenhouse gases in their own right.)
3) Natural gas will, however, help clean up other air pollutants. There's some good environmental news here. Natural gas is considerably cleaner than coal when it comes to other types of harmful air pollution, such as sulfur-dioxide and nitrogen-dioxide. These pollutants are expected to drop as shale gas becomes more plentiful.
Cleaner air, in turn, will make the country slightly richer by improving health and extending lives. "average emission damages decline by $1 billion each year (2010 dollars) for sulfur dioxide and by $0.25 billion each year for nitrogen oxides," the study notes.
4) There's a fair bit of disagreement between forecasts. Note that we've mainly been discussing the aggregate conclusions of all these different models. But some of the forecasts do vary significantly.
One key variable is price: Some experts expect natural-gas prices to stay roughly flat between now and 2020, going from $4 per thousand cubic feet today to around $4.03 by the end of the decade. Others expect a sharper jump upward to $6.23 per thousand cubic feet by 2020 and even higher thereafter:
Why so much variation? "Important factors include the costs of developing additional resources, the flexibility by consumers in seeking new applications for natural gas, and policies that affect fuel choice by electric utilities and end users. Particularly important are regulations that facilitate more or less expansion in nuclear, solar, wind or energy-efficiency opportunities."
The price assumptions can make a big difference here. For instance, the study notes that every $1 drop in the price of a thousand cubic feet of natural gas can boost the economy by around $55 billion.
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