U.S. shale production is expected to continue to soar well into the 2020s. And that is a major problem.
Over the past decade, U.S. oil production has more than doubled, surging from 5 million barrels per day (mb/d) to close to 12 mb/d today. Natural gas also rose significantly, rising from 21 trillion cubic feet per year (Tcf/y) in 2008 to 29 Tcf/y in 2017.
Natural gas has been likened to a “bridge fuel,” allowing the U.S. to lower greenhouse gas emissions (GHG) while it transitions to cleaner energy. Cheap shale gas has killed off a lot of coal plants, and with a GHG-profile half that of coal, the switch has been a boon for the fight against climate change.
That narrative, to be sure, remains up for debate. Shale gas operations emit methane, and at some point high volumes of fugitive methane emissions completely offset the benefit that gas has over coal. Various studies, for and against, argue over exactly how much methane is and has been emitted.
But there are other reasons why the coal-to-gas narrative has been oversold. Billions of dollars of investment in gas drilling and gas-fired power plants sucks capital away from renewable energy. Cheap shale gas has also killed off nuclear power, the largest source of carbon-free electricity.
More to the point, new power plants are long-lived investments, and their owners expect to be using them for decades to come. In other words, the U.S. has been locking itself into gas, even though the science dictates a relatively short timetable for the energy transition.
Still, knocking off coal does have its benefits, and the case against gas isn’t exactly clear cut.
However, what about crude oil? The surge in oil production in the U.S. and the resulting impact on greenhouse gas emissions has not been studied all that much. A new report from Daniel Raimi of Resources For the Future (RFF) studies the impact on GHG emissions from a variety of future oil production situations. Raimi is the author of the very even-handed book, “The Fracking Debate.”
Raimi laid out several scenarios looking at the GHG impact of U.S. oil and gas production (higher or lower production; more or less stringent climate policies; assumptions about methane) and found that GHG emissions are the highest in all scenarios in which the U.S produces more oil relative to the EIA’s baseline reference case.
Notably, even climate policy was outweighed by the precise level of oil and gas production. The Obama administration’s Clean Power Plan, which required a significant overhaul of the electricity sector and would have shut down a number of coal-fired power plants, was a landmark policy and one of the most significant efforts by the government to accelerate the energy transition. The CPP was stayed by the Supreme Court and is being replaced by the Trump administration.
However, according to Raimi’s study, even if we assume the full implementation of the CPP, emissions are still higher in the “high oil production” scenario, even when compared to the no CPP but lower oil and gas production.
“In other words, low levels of oil and natural gas production do more to reduce emissions than implementation of the CPP,” Raimi concluded, noting that the only caveat that undercuts this conclusion is if methane estimates have been vastly overstated.
The conclusion is worth repeating. The Obama-era CPP – President Obama’s signature climate policy, and the one at the core of the U.S.’ participation in the Paris Climate Agreement – is of less consequence to GHG emissions than the precise level of oil and gas production.
Put another way, the climate penalty in an aggressive scenario in which U.S. shale production continues to rise over the next decade more than offsets the benefit of shutting down a bunch of coal plants.
The main reason for this is not CO2, but methane. It’s not people burning more gasoline in their cars because of higher oil production. Demand is relatively inelastic in the U.S.
Instead, the major climate penalty comes from higher methane emissions associated with upstream production. CO2 emissions remain enormous and a massive problem to tackle, but these emissions don’t change all that much. Methane emissions inordinately jump relative to the reference case if oil and gas production exceeds the baseline.
“Under a scenario with high levels of oil and natural gas production, increased methane emissions are likely to swamp the GHG effects of policies such as the CPP unless methane emissions are dramatically reduced below current levels,” Raimi warned.
Meanwhile, higher U.S. oil production has global effects, lowering prices and boosting demand. The effects are more difficult to tease out, but by 2030, the world could consume 1.6 mb/d more than it otherwise would under the high U.S. production scenario. U.S. oil is exported abroad, lowering prices and boosting demand.
The world then ends up emitting 200 to 50 MMT of CO2 more than it otherwise would, according to RFF. For context, Brazil emitted 417 MMT in 2016. In other words, higher U.S. oil and gas production could add another Brazil’s-worth of greenhouse gases by 2030.
There are plenty of uncertainties and assumptions built into any model, and that needs to be kept in mind. But the RFF study offers a stark warning. In short, the ongoing U.S. shale bonanza is calamitous for the fight against climate change.
A report last month from Oil Change International was more direct. The U.S. oil and gas industry “is gearing up to unleash the largest burst of new carbon emissions in the world between now and 2050.”
By Nick Cunningham of Oilprice.com
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