Natural Gas Boon

By 2030, the U.S. power sector must cut carbon dioxide emissions 30 percent from 2005 levels, according to federal regulations announced on June 2. The proposed rule, served up by the Environmental Protection Administration with a generous helping of gravity, is the cornerstone of President Obama’s pledge to combat climate change. The trick will be implementing it without further burdening an already battered middle class with fewer jobs and even slower economic growth.

This is arguably the most significant American environmental rule ever proposed and could transform the power sector. It is largely targeted at cutting pollution from coal-fired plants, which are the nation’s largest source of greenhouse gas emissions.

Coal has had a good run in the United States because it is abundant and therefore cheap. America has far larger reserves than any other country and has been called the “Saudi Arabia of coal.”

The new rule has come under attack from business groups and by Republicans and Democratic lawmakers from coal states. For example, the U.S. Chamber of Commerce claims it would cost the economy $50 billion a year and result in the loss of hundreds of thousands of jobs.

While largely welcomed by environmentalists, not all in the environmental community are on board. Some say the cuts are not aggressive enough; others are concerned that moving to natural gas will slow the transition to renewable power sources such as wind and solar.

Despite concerns about the environmental consequences of natural gas, the President supports development of this resource as a means to combat global warming. In his 2012 State of the Union address he said, “We have a supply of natural gas that can last America nearly 100 years. And my administration will take every possible action to safely develop this energy.”

The President sees natural gas as a useful replacement for coal and a step in the transition to zero carbon-emitting fuels. As he remarked in a speech at Georgetown University last year, “The bottom line is natural gas is creating jobs. It’s lowering many families’ heat and power bills. And it is the transition fuel that can power our economy with less carbon pollution.” The President has promoted increased domestic natural gas production, most prominently through hydraulic fracturing (fracking) with improved federal safety standards.

The fossil fuel natural gas is most frequently compared to is coal. The comparison much favors natural gas. It is the cleanest burning of all fossil fuels and produces the smallest amount of carbon dioxide per unit of energy. Burning natural gas for electricity produces roughly half the carbon dioxide that burning coal does.

Natural gas has been the fastest-growing energy source for electric power generation since the 1980s. Natural gas from shale has grown more than five-fold in the past five years. The domestic boom in shale drilling has led to a glut of cleaner natural gas, lower prices, ease of use and low levels of pollution. By 2012, the amount of natural gas used in electrical generation had grown to 28 percent from 11 percent in 1990.

Low natural gas prices also give a significant boost to the competitiveness of United States manufacturing by driving down electricity generation costs. The abundant supply of natural gas has kept prices so low that it is attracting manufacturing industries from overseas and positioning the United States to become a major player in the emerging globalized natural gas market. It may someday make the United States an important source for countries now dependent on supplies from Putin’s Russia.

As the United States attempts to achieve ambitious greenhouse gas reductions, Americans would be wise to heed the advice all heard countless times from their parents: “Be careful!” In the midst of a still-fragile economic recovery, America cannot afford to make life further hell for the diminishing middle class.

gigliojJoseph Giglio
Senior Academic Specialist and Executive Professor of General Management 

 

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