Many federal lawmakers support President Obama in his desire to reduce carbon emissions by imposing the heavy hand of regulation. What they consistently fail to appreciate, however, is that the free market is already curbing energy-related carbon emissions.
The best example of this market-induced transition? The widespread shift from coal to natural gas. Between January of 2007 and April of 2012, many electricity power plants—the largest single source of CO2 emissions—made precisely this shift.
One reason was the exploding supply, and therefore falling price, of natural gas, which bottomed out at $1.86 per thousand cubic feet (MCF) in April of last year.
According to the U.S. government’s Energy Information Administration (EIA), energy-related CO2 emissions fell to a little above the 1995 level and was trending lower, toward early 1990s levels.
The Environmental Protection Agency says that natural gas produces about half of the CO2 emissions as coal. Thus that shift to gas has been helping the president achieve his goal.
Gas is not only cleaner than coal, but the U.S. has become the largest producer of natural gas. So it is in both our environmental and economic interests to see an expansion of natural gas production and use.
But carbon emissions are a global challenge. Worldwide, coal is still the largest source of fuel for electricity power plants. China is the largest consumer of coal, 3.7 billion short tons, releasing 6,946 million metric tons (MMT) of CO2 in 2010. The U.S. comes in second at 1.05 billion short tons, releasing 1,985 MMT of CO2. Most countries use significantly less coal.
Making it easier for not only the U.S. but other coal-using countries, especially China, to shift to natural gas would have a positive impact on energy-related CO2 emissions.
Fortunately, innovation and the free market have produced a solution. The new extracting process known as fracking has dramatically increased U.S. natural gas production—and lowered its price.
But gas isn’t as easy to store or ship as oil and coal, so excess capacity forces gas producers to cut back production, thus raising the price—which has been happening for about a year.
The goal should be to expand the market for U.S. natural gas so that producers will expand their drilling, and that’s where Washington comes in.
The Obama administration has approved two new facilities to export natural gas. These private sector operations will invest billions of dollars to build liquefied natural gas terminals that super-cool the gas, turning it into a liquid, to ship it to other parts of the world. But another dozen or so terminals are seeking Energy Department export permits. Quick federal approval would mean less CO2 emissions in the near future.
Yes, the price of gas would likely be higher than its $1.86 MCF bottom last year, but it would likely also be lower than the current $4.00 MCF range, and production would be much more consistent, stabilizing the price—and creating a boon to the U.S. economy.
With the ability to export cheap natural gas—the price in Europe can be three or four times the U.S. price, and even higher in Asia—it could become a viable global substitute for coal in producing electricity.
Remember, for each megawatt hour generated by natural gas rather than coal, we potentially cut carbon emissions by half. You don’t have to buy into the president’s whole environmental agenda to think that’s a good idea. The changeover won’t happen overnight, but the rate of carbon emissions will decline each time a power plant switches from coal to gas.
Elected officials and environmentally minded regulators don’t need to launch a regulatory assault on electricity power plants. They just need to ensure that gas producers have a market for their product—including overseas. The price will drop as production rises, and power plants will respond accordingly, just as they did between 2007 and 2012.
Generating more power from natural gas will boost the U.S. economy and reduce our energy-related carbon emissions. Washington needs to allow the natural gas industry to flourish.