Weathervane

Mar01

Fueling the Fleet with Natural Gas

In the latest installment of RFF’s Weekly Policy Commentary, RFF Senior Fellow Alan Krupnick takes a closer look at the economic, energy and environmental benefits of natural gas vehicles. Interest in technologies to run vehicles on natural gas has been replenished recently as projections for recoverable domestic natural gas sources have grown.

According to Krupnick, the transition to natural gas vehicles could help the U.S. cut its dependence on foreign oil, lower greenhouse gas emissions and, given the projected abundance of natural gas, do so in a reasonably affordable manner. He says the heavy-truck fleet could be the right place to start:

Natural gas-fueled heavy-duty trucks could, under certain conditions, become a good deal for society in terms of reducing oil and local pollution emissions with reasonable cost-effectiveness, though they help only modestly with GHG emissions. What could derail the promise of NGVs? Regulations to control water pollution associated with recovering gas shale could raise costs and make gas shale uneconomic. In addition, we have ignored safety concerns with liquefied natural gas (LNG). Such concerns could discourage construction of refueling stations and the widespread use of LNG-fueled trucks more generally.

Read Krupnick’s, "Can Natural Gas Vehicles Make a Difference?” here.

Published: Mar-01-10 | 0 Comments

Feb25

Natural Gas, a Better Bridge than Destination

Natural Gas

As domestic natural gas resources seem to grow with every projection, is this fuel—as Steven Pearlstein said last week in the Washington Post—the silver bullet that could get the U.S. on pace to meet President Obama’s pledge to cut domestic carbon emission by 17 percent in the next 10 years?

Pearlstein’s claim that power plants fueled by natural gas can cut emissions when compared to their coal-fired power plants is valid, simply because CO2 emissions from natural gas use are about 45 percent lower per Btu than coal. But his “modest and focused proposal” to decommission coal plants and replace them largely with existing but underutilized natural gas generators is not a policy. How this all is to come about is not explained beyond offering payoffs to shareholders and workers. Natural gas generators are idle for a reason. They are too expensive to run, even with new and possibly cheaper natural gas resources available, although this situation may change and provide more stimulus to natural gas generation.

The surest and most efficient way to disfavor coal and favor other fuels—natural gas, nuclear or renewable—is to price greenhouse gases and other pollutants through a cap-and-trade or tax system and then let the chips fall where they may.

Indeed, in recent work at Resources for the Future with our version of the Energy Information Administration’s National Energy Modeling System, we find that expanded resources of natural gas provide significant stimulus to gas generation, but can lead to even larger carbon emissions—in the absence of a carbon price—because along with some coal generation, it substitutes for clean energy from renewables and nuclear power and modestly expands electricity generation overall.

The good news is that with a carbon policy in place, the costs of reducing carbon emissions with more abundant natural gas are somewhat lower than they would be without such abundant resources, amounting to about $1 billion in cost savings over the 20-year study period.

Alan Krupnick is research director and a senior fellow at Resources for the Future. His research focuses on analyzing environmental issues, in particular, the benefits, costs, and design of air pollution policies, both in the United States and in developing countries.

Published: Feb-25-10 | 0 Comments

Dec14

Abundant Natural Gas: Two-Edged Sword for CO2 Emissions

Renewables, Cap and Trade, CO2, Natural Gas

As part of the ongoing debate about how best to cut carbon emissions, the buzz about natural gas is growing. Use of natural gas produces CO2 emissions that are about 45 percent lower per Btu than coal and 30 percent lower than oil, making it the cleanest fossil fuel (at least in terms of CO2 emissions). Given its lower carbon content, many see natural gas as a potential bridge fuel for electricity generation between coal and the future use of renewables and other non- or low-carbon sources.

Natural gas offers another key benefit: abundance. The United States has it in droves and can now access it more cheaply than ever thanks to recent improvements in drilling technology. Over the last two years, these improvements—by many accounts—have dramatically lowered the costs of recovering so-called “shale gas” trapped in formations under large swaths of the country. The Potential Gas Committee, which updates its natural gas resource estimates every two years, reports an unprecedented increase in potential shale gas resources between its 2006 and 2008 assessments.

What effect will this vast new supply of natural gas have on CO2 emissions and energy prices? A new Resources for the Future report highlights how more abundant natural gas supplies result in lower gas prices and greater natural gas use in most sectors of the economy, including electricity generation. And with a carbon pricing policy in place (such as a cap‐and‐trade system or a carbon tax), abundant natural gas acts an attractive bridge fuel to a low‐carbon future, lessening the economic cost of reducing CO2 emissions and offering savings of about $1 billion over the 20-year study period.

A key finding of the study, however, is that a carbon pricing policy is crucial to obtaining the benefits of abundant natural gas as a bridge fuel to a low-carbon future. Without such policy in place, increased natural gas supply can actually contribute to an increase (albeit a modest one) in CO2 emissions. Although greater natural gas resources reduce the price of natural gas and displace the use of coal and oil, they also boost overall energy consumption and reduce the use of carbon-free nuclear power and renewables.

Although the resource estimates look promising, considerable uncertainty remains about just how much shale gas the U.S. can recover, how technology will further improve, and at what cost. These uncertainties have significant policy implications. Accordingly, policymakers would be well served to design policies that are robust across different futures. Pricing policies, such as carbon taxes and cap and trade, provide market participants an incentive to seek out the most cost-effective means for reducing CO2 emissions irrespective of how the future turns out.

Kristin Hayes is a Research Associate at Resources for the Future.

Published: Dec-14-09 | 1 Comment