We have more facts to draw upon when assessing the impact of the boom in shale gas on carbon emissions. In the United States, the trends are clear. The advent of shale gas enabled the United States to bring down its emissions to their lowest absolute level in twenty years. Between 2005 and 2015, U.S. CO2 emissions related to the energy sector declined by 12 percent. In 2015, U.S. per capita CO2 emissions were as low as they have been at any point since the early 1960s. As made clear by the International Panel on Climate Change—an organization considered by many anti-fracking activists to be the gold standard—fracking was “an important reason for a reduction of GHG [greenhouse gas] emissions in the United States.” The IEA agreed, declaring in 2013 that “The decline in energy-related CO2 emissions in the United States in recent years has been one of the bright spots in the global picture. One of the key reasons has been the increased availability of natural gas, linked to the shale-gas revolution.”
Why was this the case? The boom in cheap, plentiful American natural gas changed the economics of power plants. Due to the shale gas bonanza, the Henry Hub price of natural gas in the United States dropped from roughly $15 per mmbtu in 2005 to approximately a fifth of that price ten years later. Utilities did what made simple economic sense: they switched from fueling their power plants with coal to firing them up with natural gas, which has only half as many emissions associated with its use.
As a result, coal’s historical dominance in the United States took a beating. After rising consistently since the 1960s, the use of coal began to decline in 2007—and natural gas gobbled up its share. Over the following decade, natural gas usage grew from about a quarter of the overall energy mix to a third, while that of coal decreased from about a quarter to less than one sixth. The shift was particularly dramatic in the generation of electricity, where coal’s supremacy was most marked. In 2005, half the electricity in the United States was generated by coal and only a fifth by natural gas. A decade later, natural gas was virtually tied with coal as the largest source of electricity. The number of American coal mines declined by more than four hundred in the five years before 2015. The industry lost 98 percent of its value from its peak in 2008 until early 2016. Indicative of future expectations for coal, shares in Peabody Energy, the world’s largest private coal company, dropped from a high of $81 in 2008 to just over $2 eight years later. According to David Victor, a professor and energy expert at the University of California, San Diego, the impact of the switch from coal to natural gas on U.S. emissions each year was equal to “about twice the total effect of the Kyoto Protocol on carbon emissions in the rest of the world, including the European Union.” This is no small feat. But the key point to keep in mind is that without the shale gas boom and the subsequent drop in natural gas prices, the market simply could not have driven on its own a shift from coal to gas and, with it, such a dramatic decline in emissions.
Figure 7.1: Annual Share of Total U.S. Electricity Generation by Source, 1950–2016 (percent of total)
Source: Energy Information Administration, “Natural gas expected to surpass coal in mix of fuel used for U.S. power generation in 2016,” March 16, 2016.
Looking beyond the experience of the United States in the past decade, the extent to which the unconventional boom ends up hindering or helping efforts to address climate change depends largely on how two key dynamics play out. The first, the so-called substitution effect, measures the extent to which cheaper oil and gas replace lower carbon energy sources. The second, the “consumption effect,” gauges the extent to which lower-priced energy leads to greater use of more carbon-intensive fuels.
Given the relative newness of the unconventional boom, there is not yet enough actual data for us to conclude definitively whether the consumption effect or the substitution effect will have a bigger impact on overall emissions. But we do have some basis for insight—at least for the question of unconventional gas, if not unconventional oil.
A number of studies have sought to give greater clarity to the vexing question of whether the boom in unconventional gas is a blessing or curse for climate change. After a series of complex computations and modeling efforts, Richard Newell and Daniel Raimi, then both of Duke University, concluded that increased shale gas supply has a positive effect on climate by lowering greenhouse gas emissions in the U.S. economy as a whole. But their study suggests this decrease is extremely small (1.4 percent). (This amount is, however, negligible when compared to the reductions required to avert climate change.) Lower emissions that result from less coal usage are largely—although not completely—offset by the displacement of renewable and nuclear energy and greater overall energy consumption. Interestingly, depending on which figures are used to calculate just how much methane is released into the atmosphere during natural gas production—still a subject of great debate—these results could move in either direction.
The IEA sought to make a comparable assessment at the international level. In a 2011 report discussed earlier in this book, Are We Entering a Golden Age of Gas?, it compared expected global emissions in 2035 with emissions that would emerge in a scenario in which there was even more extensive global gas development. Natural gas displaces coal worldwide, with nearly half of the coal displaced coming from China. But, similar to the other studies focused on the United States, the net benefit in terms of overall emissions reductions is small, because of a decrease in the deployment of renewable and nuclear energy and an overall rise in energy consumption.
The key takeaway is that the boom in shale gas can in fact be an ally in the battle to combat climate change. But several steps are required in order to ensure that natural gas plays this positive role. Talking with me on the margins of a large energy conference in Houston, Richard Newell, now the president of Resources for the Future, underscored what was needed for natural gas to “be part of the climate solution, not part of the problem.” Perhaps most important, it is essential that natural gas substitute for coal. While this occurred seamlessly in the United States, the market does not necessarily ensure this will always be the case. With abundant natural gas, policies such as a carbon tax or a cap and trade system allowing companies or governments to trade allowances in carbon emissions can be cheaper to realize and can help ensure it is coal—not renewables or other alternative energies—that lose out from a surge in natural gas. Ultimately, technologies such as carbon, capture, and storage (ccs) will be essential if natural gas and other fossil fuels are to remain part of the global energy mix over the longer term; most scenarios depicting a global energy system where the threat of catastrophic climate change has been averted envision a “zero emissions” power sector.
In addition, policy measures can be important in seeing that investment in renewable energy does not flag in the face of cheaper fossil fuels, especially natural gas, which is the obvious substitute for alternative energies. Thus far, there is not strong evidence to support fears that low fossil fuel prices will come at the expense of continued investment in renewables and other alternative energies. While global investment in renewables hit all-time highs in 2015 as oil and gas prices were scrapping lows, the numbers—at first blush—for 2016 were less encouraging; investment in non-hydro renewable energy fell by almost a quarter from the record high of the previous year. A closer look, however, suggests that the cause of this drop is not necessarily cheaper oil and gas, but the sharply declining costs in the renewable energy industry. A report by the United National Environment Program that examined these trends described 2016 as a year of “more for less”; even though overall investment in renewables was down in an absolute sense, the world added a record amount of renewable energy capacity that year. These robust numbers are at least in part a consequence of government policies supporting such investment. For instance, in the United States, a deal forged in Congress at the end of 2015 extended tax credits for renewable energy investment out an additional five years, helping reduce uncertainty associated with these investments.
Figure 7.2: Global New Investme
nt in Renewable Energy by Asset Class, 2004–2016 (billions of dollars)
Source: UN Environment Program and Bloomberg New Energy Finance, Global Trends in Renewable Energy Investment 2017: Key Findings, 12.
In Tension but Not Necessarily in Full Scale Opposition
At the headquarters of the Environmental Protection Agency on the afternoon of March 28, 2017, President Donald Trump was flanked by coal miners. With an air of excitement in the room, he signed an executive order titled Promoting Energy Independence and Economic Growth. The order focused on repealing regulations that, in the words of the president, “threaten(s) our miners, energy workers, and companies” and constitute a “crushing attack on American industry.” The Clean Power Plan—President Obama’s signature effort to regulate greenhouse gases from power plants—was the most prominent, but only one of the regulations the order sought to reverse.
In sharp contrast to the mood at the turn of the century, when Big Oil and environmentalists found common cause, there is an emerging political strain in the United States that perceives a zero-sum game between nurturing the unconventional boom in American oil and gas and protecting the environment and combating climate change. There are some places where the two are in obvious tension—such as with the question over whether federal lands should be open to oil and gas development. But, in general, an approach that sees the two as completely in opposition—and overwhelmingly prioritizes energy development over climate and the environment—is not only misguided, but carries real risks to U.S. interests generally and even to the unconventional boom specifically.
One of the greatest benefits of the rapid expansion of American oil and gas production has been in the realm of geopolitics. As discussed in Chapter Six, the shale boom and the consequent decrease in U.S. carbon emissions was essential to America’s ability to re-exert leadership at the global level on climate change. The fact that President Obama was able to approach China with a proven track record of decreasing emissions helped lubricate a U.S.–China climate agreement in November 2014; this bilateral accord was a springboard to the agreement forged at the Paris meeting of the United Nations Framework Convention on Climate Change thirteen months later. In the months that followed, 175 of the 193 UN member states signed the agreement and pledged specific steps to lower their own carbon emissions. Not only did this turn of events provide China and America a rare platform for cooperation, but it generated significant soft power for the United States. In playing this catalytic role on an issue of importance to so many countries in both the developed and developing world, the United States affirmed its interest and its ability to lead globally. These geopolitical gains are at risk since President Trump decided to formally withdraw the United States from the convention. Even if technology and civic activism enable America to decrease its emissions outside the climate agreement, the United States will have still lost the soft power it gained as its champion.
More tangibly, backtracking from the Paris agreement might—perhaps surprisingly—actually have a dampening effect on America’s unconventional boom. Although other countries have pledged to abide by the agreement even in the absence of U.S. leadership, concerns remain that other large emitters such as China, India, and Brazil will walk back their efforts to rein in carbon emissions. Should they do so, the world would consume more coal and almost certainly less natural gas; as discussed earlier, future global demand for natural gas in part depends on the seriousness with which the world approaches the question of climate change. This shift toward a less climate friendly approach could dampen the expected surge of U.S. LNG, the export of which is completely consistent with the Trump Administration efforts to bolster oil and gas production and the number of jobs associated with it. Howard Rogers, a scholar at the Oxford Institute for Energy Studies, demonstrates that should demand for natural gas in Asia be less than anticipated in the five years out from 2017, the market would balance in one of three ways, including the curtailment of U.S. LNG exports.
Those seeking aggressive deregulation in the interest of promoting the oil and gas boom should also keep some other risks in mind. While some regulations of the industry can and should be removed, the industry also needs to maintain a “social license” to operate. This license is not just a formal law or regulation, but is the trust and confidence of the communities in which the companies produce energy. In Europe, companies have essentially lost, or never gained, the social license for fracking and, as a result, European shale gas development is at a virtual standstill. Even in the United States, proposals to severely restrict or ban outright fracking—or the development of infrastructure to transport oil and gas—are on the rise. Thus far, successful statewide bans on fracking have largely been limited to areas where little fracking has yet occurred or where resources are not believed to exist in commercial quantities. Maryland, for example, prohibits fracking although developers have shown little interest in the state. By contrast, New York sits atop part of the prolific Marcellus shale formation, but has never allowed the practice. Yet over the course of 2015 and 2016, a raft of proposals surfaced across the country that, if implemented, would place significant curbs on fracking. A large increase in fracking prohibitions—particularly in resource-rich states or on the national scale—would severely undercut the assumption of a new era of U.S. energy abundance.
The industry could lose its social license to operate in a variety of ways. The first I was reminded of on an October morning in 2016. My handheld Geiger counter was beeping frantically, alerting me to the fact that I was receiving far more than ten times the normal levels of radiation. This was not surprising to me, given that I was standing two hundred yards in front of the metal and concrete “sarcophagus” covering the Chernobyl nuclear reactor in northern Ukraine. More than thirty years after its meltdown, the reactor was still emitting radiation, in part through the cracks and fissures that had emerged in the sarcophagus that was built hastily in 1986—without screws, bolts, or other means of keeping it together. A line of workers formed outside the gate of the reactor, waiting to enter the grounds where they were employed to maintain the existing structure or to build the new one that would be placed over the original just weeks after my visit. Alexey, the Ukrainian guide who accompanied me during my visit, told me that there were fears the aging sarcophagus would collapse, releasing tons of radioactive dust before it could be replaced. But he reassured me the odds of this happening while we were visiting were “extremely remote.”
That prospect should have terrified me, but I was thinking of something else entirely: how an environmental disaster can derail the prospects of a new and promising energy source. The Soviets had planned to build twelve nuclear reactors at Chernobyl. Less than two miles away an entire town, Pripyat, had been constructed in 1970, explicitly for those who worked at the nuclear plant. The Soviets expected the town to boom in subsequent years. Instead, driving through it now, we saw eerie streets overgrown with vegetation, and schools, apartment buildings, and civic centers hurriedly evacuated and never reinhabited. The Ferris wheel in Pripyat’s amusement park—opened the day before the town was evacuated—still stands almost intact, in poignant tribute to a future abandoned.
Pripyat and Chernobyl—ghost town and ghost reactor—remind us powerfully never to take for granted the growth and uninterrupted expansion of a promising new energy source or technology. John Deutch, a former director of the CIA and emeritus professor at the Massachusetts Institute of Technology, does not see any possibility of a physical “disaster” comparable to Chernobyl or Fukushima. Yet, he did express concern to me that “if industry and government regulators do not pay attention to the major environmental impacts of unconventional oil and gas production, it is possible that public opinion will turn against the practice—just as inattention to safety, proliferation, and waste management has turned the public against nuclear power.”
Fracking has in many ways already tried the patience and risk tolerance of some American communities. Just ask the residents of Sp
arks, Oklahoma, whose Saturday night on November 5, 2011, was interrupted by an earthquake—later attributed to the disposal of waste water from fracking—that registered 5.6 on the Richter scale. Or solicit the views of Hugh Fitzsimons, a bison rancher in Dimmit County, Texas, who attributes the two-thirds drop in his well water that occurred from 2009 to 2012 to the large volumes of water used for fracking operations in neighboring counties. Or you may wish to talk to Mike Lozinski, an air traffic controller in Denver, who complains that the noise from local fracking operations has disturbed his sleep so fundamentally that he is sometimes no longer capable of doing his job safely. Or even chat with the residents of Pavillion, Wyoming, who in 2010 were told by the federal government not to shower without proper ventilation while it investigated concerns that fracking had caused serious water contamination.
Even as the benefits of the energy boom to the United States have mushroomed, public discomfort with fracking has increased. Many question whether any amount of regulation can make the practice safe. Others, such as “Keep It in the Ground” environmental groups, seem less interested in this question, focusing instead on stopping the production of fossil fuels regardless of the alternatives. They have grown in strength and prominence, successfully influencing policymaking and public opinion at both the national and subnational levels.
This activism will increase with the drive to deregulate the energy sector. Under the Obama Administration, many environmental activists felt that the federal government generally was looking out for their interests; they believed they had an advocate for their views at the highest levels of government. The reversal of regulations on the energy industry—while welcomed by the oil, gas, and coal industries—has had the opposite effect on environmental communities. No longer confident that the federal government is protecting and advancing their interests, environmental and other such groups are likely to be much more active at a local level, seeking not only to hold companies accountable to higher levels of conduct, but also to disrupt the production of fossil fuels as a goal in and of itself; depriving companies of their social license to operate is the objective of many of these groups. In 2016 and into 2017, Americans were captivated by news stories of the members of a Sioux Native American tribe and thousands of others who joined them in enduring sub-zero temperatures, tear gas, and other affronts in order to protest the construction of the Dakota Access Pipeline near the Standing Rock Indian Reservation. This dramatic standoff between law enforcement, the courts, and indigenous people could be the harbinger of future confrontations across the country.
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