Reduction in US carbon emissions attributed to cheaper natural gas

Feb 27, 2012
This map shows the changes in carbon dioxide emissions from the power sector in the nine census regions of the contiguous United States, 2008-2009. Researchers at the Harvard School of Engineering and Applied Sciences have attributed the decrease to the lower price of natural gas. Credit: Image courtesy of Xi Lu

In 2009, when the United States fell into economic recession, greenhouse gas emissions also fell, by 6.59 percent relative to 2008.

In the power sector, however, the recession was not the main cause.

Researchers at the Harvard School of Engineering and Applied Sciences (SEAS) have shown that the primary explanation for the reduction in CO2 emissions from power generation that year was that a decrease in the price of natural gas reduced the industry's reliance on coal.

According to their econometric model, emissions could be cut further by the introduction of a carbon tax, with negligible impact on the price of electricity for consumers.

A regional analysis, assessing the long-term implications for and policy, appears in the journal .

In the United States, the power sector is responsible for 40 percent of all . In 2009, CO2 emissions from power generation dropped by 8.76 percent. The researchers attribute that change to the new abundance of cheap natural gas.

"Generating 1 kilowatt-hour of electricity from coal releases twice as much CO2 to the atmosphere as generating the same amount from natural gas, so a slight shift in the relative prices of coal and natural gas can result in a sharp drop in carbon emissions," explains Michael B. McElroy, Gilbert Butler Professor of Environmental Studies at SEAS, who led the study.

"That's what we saw in 2009," he says, "and we may well see it again."

Patterns of electricity generation, use, and pricing vary widely across the United States. In parts of the Midwest, for instance, almost half of the available power plants (by capacity) were built to process coal. can only switch over to natural gas to the extent that gas-fired plants are available to meet the demand. By contrast, the Pacific states and New England barely rely on coal, so price differences there might make less of an impact.

To account for the many variables, McElroy and his colleagues at SEAS developed a model that considers nine regions separately.

Their model identifies the relationship between the cost of from coal and gas and the fraction of electricity generated from coal.

"When the natural gas prices are high, as they were 4 years ago, if the gas prices come down a little bit, it doesn't make any difference," explains lead author Xi Lu, a postdoctoral associate at SEAS. "But there's a critical price level where the gas systems become more cost-effective than the oldest coal-fired systems.

"If the gas price continues to drop, you'll continue to go down this curve so that you'll knock out not just the really ancient coal-fired power plants, but maybe some of the more recent coal-fired plants."

The model also predicts that a government-imposed carbon tax on emissions from would drive a move away from coal.

"With a relatively modest —about $5 per ton of CO2—you could save 31 million tons of CO2 in the , and that would change the price of electricity by a barely noticeable amount," says McElroy.

The initial model was developed by Jackson Salovaara '11, an applied mathematics concentrator at SEAS. His work was recognized as the "best senior thesis" in the Harvard Environmental Economics Program, earning him the Stone Prize in May 2011.

Since then, the model has been "souped up," incorporating more sophisticated regional data analysis, and producing not just the findings on 2009 but also predictions for more recent years.

"While the data from 2011 are not yet available, based on the gas prices, we're making a confident prediction that there should be a continued shift from coal to in 2011 as compared to 2008," says McElroy.

"That's good news for the atmosphere."

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Xbw
1 / 5 (3) Feb 27, 2012
According to their econometric model, emissions could be cut further by the introduction of a carbon tax, with negligible impact on the price of electricity for consumers.


Not true. When you tax these greedy companies, they find a way to pass it on to the consumer and it gives them another excuse to pull more profit from those of us struggling to pay bills.
eachus
3 / 5 (4) Feb 27, 2012
According to their econometric model, emissions could be cut further by the introduction of a carbon tax, with negligible impact on the price of electricity for consumers.


This is a very stupid statement. Speaking as an economist, carbon taxes on electricity production are a very bad idea. Why? You want the utilities to invest in the most carbon neutral technologies, right?

Yes, but the major lesson of macroeconomics is that you can't do only one thing. A tax on electricity production, no matter how minor will encourage rational consumers to switch to some alternative good.

For example, in home heating, do you choose oil, gas, electricity, or a (gas or electric powered) heat pump? A rational consumer is going to see higher prices for gas and electricity from such a carbon tax, and choose to heat with oil. Not quite the intended result.

Now extend this. There are lots of large buildings where switching from gas to oil heat is cheap compared to the yearly fuel bill...
rubberman
3.8 / 5 (4) Feb 27, 2012
@XBW
Companies aren't greedy. People who run companies are greedy. People who invest in companies perpetuate the greed of the people running the company. If you have an RRSP, some of that money goes to these companies in the form of investment. The only way to not support a "greedy corporation" of any kind is to live completely off the grid and make money by selling something you make or grow with tools/resources made from material that you procured and manipulated yourself. You own a computer, it's plugged in....you're just feeding the machine like the rest of us dude.
Xbw
1.7 / 5 (6) Feb 27, 2012
@XBW
Companies aren't greedy. People who run companies are greedy. People who invest in companies perpetuate the greed of the people running the company. If you have an RRSP, some of that money goes to these companies in the form of investment. The only way to not support a "greedy corporation" of any kind is to live completely off the grid and make money by selling something you make or grow with tools/resources made from material that you procured and manipulated yourself. You own a computer, it's plugged in....you're just feeding the machine like the rest of us dude.

Agreed. And yeah I'm not one of those "down with the man!" types. I just want to minimize their excuses to take more money :)